On Saturday, Jim Flaherty will mark his fourth year as Finance Minister. But measured by job creation, it's as if time stood still.
In 2007, when the policies from Mr. Flaherty's initial budget began to influence the economy, about 16.9 million Canadians were working, according to the International Monetary Fund. The number of jobs at the end of 2009: about 16.9 million.
The state of Canada's labour market is a reminder that the budget Mr. Flaherty is now preparing will be much different than his first in 2006.
Back then, he and Prime Minister Stephen Harper had a surplus of more than $13-billion, a substantial cushion with which to test their general philosophy that the surest way to a thriving economy is lower taxes and minimal intervention. But along with destroying more than 300,000 jobs, the financial crisis also has wrecked the country's finances. The surplus is gone, replaced by a record deficit of $56-billion.
Those conditions make Mr. Flaherty's March 4 budget his most challenging yet.
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A self-proclaimed and proud fiscal conservative, Mr. Flaherty's instinct is to retrench in order to reverse the deficit and resume paying off debt.
Yet the recovery is built on the shaky foundation of public spending and rock-bottom interest rates. Complicating matters further, industry groups and economists have a growing sense of anxiety about Canada's ability to keep pace in a post-crisis global economy where growth is centred in China and other Asian nations.
Those competing imperatives make choosing a theme for the budget difficult. There is sympathy for Mr. Flaherty's budget constraints, yet few want the government to retreat from the economy simply for the sake of a balanced budget.
"The time now is to be careful," said Rob Hilborn, president of Toronto-based Darcor Casters Ltd., who was in Ottawa this week with other manufacturers to nudge officials to help smaller companies with growth potential get better access to capital. "In a period where we see the recovery is still on the horizon, it isn't time to throttle back either."
There was a broad consensus among the world's biggest economies that spending the equivalent of at least 2 per cent of each nation's GDP was necessary to avoid a depression. Mr. Flaherty did his part - Canada spent more than 2 per cent of GDP on stimulus, among the highest rates by G20 nations.
The stimulus appears to be working. Canada's gross domestic product will increase 2.6 per cent this year, according to the latest average estimate of 15 private sector forecasters, with whom Mr. Flaherty met yesterday in Ottawa. That's an improvement from September, when the consensus was for growth of 2.3 per cent, and from last year's contraction of 2.5 per cent.
Still, economies normally rebound much faster from recession. Canada is suffering from its traditional reliance on the United States, where consumers are spending considerably less as they rebuild lost savings; a trade policy that only recently put serious emphasis on the fast growing markets in Asia; and innovation and productivity rates that continue to lag its peers.
These are long-standing concerns. Nevertheless, Mr. Flaherty suddenly finds himself under pressure to address them.
Under the premise that the aftermath of the financial crisis is a turning point in the development of a new global economy, the Canadian Manufacturers & Exporters, the country's main industrial lobby, held a conference in Ottawa Tuesday to stir debate on what the group says is a badly needed industrial and trade policy.
On Wednesday, Canada 2020, an Ottawa-based public policy group, hosts a panel discussion on similar themes that is scheduled to include John Manley, the former deputy prime minister and finance minister, and Scott Clark, a former deputy minister at the Finance Department.
"This should be one of the most difficult budgets in recent memory," said Mr. Manley, who is now the president of the Canadian Council of Chief Executives.
Canada's economy averaged growth of 3.3 per cent a year in the decade to 2007. Finance's latest survey of private sector economists, which the government uses as the basis for its budgeting, predicts growth will average 2 per cent between 2009 and 2014.
The fragility of the rebound has some calling for more fiscal stimulus.
"It should always be a goal," Douglas Peters, a PhD economist and former junior finance minister in Jean Chrétien's government, said of the need to balance the budget. "But when you are digging yourself out of deep hole, you better get out of the hole first."
Mr. Peters's is the minority view. Reflecting the more common view, Stéfane Marion, chief economist at National Bank Financial, said before the meeting with Mr. Flaherty on Tuesday that Canada will benefit from balancing the budget through cheaper borrowing costs.
All Mr. Flaherty is saying about this financial plan is that he will allow stimulus spending to run its course until 2011, with no plans for a second round of stimulus; that he will include a plan to narrow the deficit once the recovery resumes; and that he will "lay the foundation" for future economic growth.
Mr. Flaherty also appears sympathetic to the idea that the crisis has created an important moment for Canada's economy.
"This is our opportunity to gain market share," he told the exporters' conference. "We intend to do that."
With files from Bill Curry and Jeremy Torobin in Ottawa and Tavia Grant in Toronto