Flaherty sees a $1-billion boost in Tory fortunes

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Julian Beltrame's story about the federal financial picture and how rapidly it has been improving is one of the more important pieces of news coming out of Ottawa this week, it seems to me.

(The manufactured culture war over the proposal of a manufactured culture war has some entertainment value, especially for Conservatives who like it better than the busty hookers and cocaine story. But from where I sit, it's hard to see how either will be defining moments in the political life of our country)

What may well have the most important, if subtle, impact on the next electoral contest, is the report out of the Finance Department about Ottawa's fiscal healing. With one month left to go in the fiscal year, it looks as though Jim Flaherty will not only beat his fiscal estimate, he will crush it.

Back in the days when Paul Martin was finance minister, he was regularly excoriated for predicting tough numbers and then beating his estimates. Conservatives thundered that he was low-balling to achieve political upside. How did Canadians feel? Like they had rolled up the rim and won. The number of people who were happy about the windfall was enormous compared to the number who were angry that the forecasts were wrong.

Heading into this recession, the Conservatives seemed to struggle to find a policy mix and a communications theme that met the needs of the economy, the goal of building a larger electoral coalition, and feeling comfortable in their skins. How much to stimulate, how quickly, and how quickly to withdraw the spending would have been tough questions for any government, but I suspect this Conservative Prime Minister was grinding on these choices a lot more. He may be a hard man to read, but I'm pretty sure he didn't get into politics thinking he would preside over the biggest deficit in Canadian history.

So, for a moment, let's assume that the numbers released this week show a real trend, rather than an aberration. What do they mean politically?

First, it will become a lot more challenging for the Liberals to score points over the government on fiscal management. Voters typically don't get to worked up over problems, however large, if they think those problems are going away over time anyway.

Second, the fiscal good news stems significantly from recovering revenues, as corporations are seeing revenues and bottom lines recover. If it continues, this will firm up optimism about the economy, and reduce fear of unemployment. The political stakes around management of the economy will shift from Liberal opportunity to Conservative opportunity.

Finally, absent a strong rise in revenues, the Harper Conservatives were heading for a series of brutal choices about where to cut massive chunks out of federal spending. Every unexpected $1-billion in revenue, means a $1-billion easing of that pressure.

There's a lot of ways to figure that April's been a rotten month for the Tories. But there's at least a few billion reasons it hasn't been all that bad.