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(Clay Stang)
(Clay Stang)

One day, we'll look back and thank Jim Flaherty Add to ...

"I've seen first-hand how Jim has grown, especially on the international front," says Rick Waugh, chief executive officer of Bank of Nova Scotia. "He certainly has grown in terms of his understanding of the issues. He understands those policy issues, he is strong enough that he can hold his own, and he does."

Almost since Flaherty got the Finance job, there have been rumours that the Prime Minister was poised to replace him. But after 4 1/2 years in Ottawa, Flaherty is entering the ranks of the longest-serving of Canada's 46 finance ministers, and he has tabled more budgets in a minority government than any other. And the second half of his track record looks decidedly more legacy-worthy than the first.

Miles, who has known Flaherty since he went to work for him in 2001, says his former boss is indeed concerned about legacy-not because he is looking for a place in history, but because it would represent a job well done. "Legacy comes with accomplishments," says Miles. "He is very attuned to that."

It counts that Flaherty coaxed British Columbia and Ontario to take the politically fraught step of aligning their sales tax regimes with Ottawa's, a long-standing goal of the Finance Department that eluded Martin, John Manley and Ralph Goodale. And it may count that Flaherty is tantalizingly close to establishing a national securities regulator. The financial crisis exposed Canada's web of 13 provincial and territorial authorities as a systemic weakness because there was no one person to whom Flaherty, Carney and banking superintendent Julie Dickson could turn to consult when things really got bad.

Many of Flaherty's predecessors have talked about the need for a single regulator, in part to improve Canada's dodgy record on prosecuting securities fraud, only to chicken out when faced with provincial opposition over jurisdiction. Like that determined, undersized forward at Loyola that helped his school win a city championship, Flaherty set his sights on the goal and has defied all attempts to knock him off the puck. "It's been an impressive, persistent approach to an important piece of policy," says Harold MacKay, a Regina lawyer who led a study of the issue for Manley. "It's not evident there is a single vote to be had by championing it."

But what counts most of all in the end is the handling of the recession. Flaherty's 2009 stimulus program was the opposite of conservative-rather, it was a textbook demonstration of how Keynesian economics can still be effective.

Unlike the Obama administration, which used a significant amount of its stimulus program to buoy state budgets, Flaherty plowed most of his money into enhancing unemployment benefits and construction projects. It wasn't fancy, but it worked. In June, Canadian employers created more than 93,000 jobs, the second-most in any month on record. The biggest monthly total-109,000-was registered two months earlier, in April. Heading into the summer, virtually all the jobs lost during the recession had been replaced. Canada's economy, according to the IMF, was poised to expand 3.6% in 2010, faster than any other country in the G7.

Flaherty was hardly alone in rescuing the Canadian economy, but he deserves his share of the credit. Scotiabank's Waugh compares him to the general manager of a sports team. "He's steered the ship," says Wesley Sheridan, the Liberal Finance Minister of PEI. "It's pretty easy to say that this was on autopilot. It wasn't."

As good as Flaherty looks now, he looked ridiculous on the eve of the crisis. On Nov. 27, 2008, Flaherty released an update that predicted Canada would avoid a budget deficit in defiance of virtually every private forecaster. That he had the flexibility of mind to recover and change course augurs well for his record-and specifically for his claim that he is no hidebound ideologue.

"When he came out with that economic statement, I thought he was trying to beat out Michael Wilson as Canada's worst finance minister ever," says Peters, recalling the man his government blamed, if only rhetorically, for the drastic spending cuts they were forced to implement after taking power in 1993. In PEI, Sheridan was equally stunned. He was planning a stimulus plan and, based on his discussions with Flaherty, was under the impression that Ottawa was set to do the same.

That economic statement, which included a move to eliminate federal subsidies for political parties, sparked a political crisis that forced Harper to prorogue Parliament to head off manoeuvres by the Liberals, the New Democratic Party and the Bloc Québécois to form a coalition. Flaherty admits that this was a low point for the Harper government. But he suggests that it was also a time of reflection that resulted in a more serious approach to governing. "We had to make a big U-turn at the end of 2008 and the beginning of 2009 in the 2009 budget," he says. "I'm proud of the fact that we did it and the Prime Minister went along with it."

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