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Jim Flaherty: A Tough Fiscal Conservative With a Big Heart

04/14/2014 12:29 EDT | Updated 06/14/2014 05:59 EDT
Bloomberg via Getty Images
James 'Jim' Flaherty, Canada's finance minister, smiles while speaking during a press conference after releasing the 2014 Federal Budget on Parliament Hill in Ottawa, Ontario, Canada, on Tuesday, Feb. 11, 2014. Flaherty ramped up efforts to return the country to surplus in a budget that raises taxes on cigarettes and cuts benefits to retired government workers while providing more aid for carmakers. Photographer: Cole Burston/Bloomberg via Getty Images

Jim Flaherty, at 5'3" was a towering figure both at home and abroad.

Perhaps Flaherty's greatest success was charting and sailing Canada safely through one of the most dangerous recessions in modern times: The recession of 2008.

When destiny called, Flaherty responded with calm determination, incredible single-mindedness, supreme confidence, toughness and above all, clear-eyed pragmatism. And in the process, he even surprised his most critical political foes with his smooth Gretzky-like stick handling of Canada's economy.

Flaherty was born and bred for this career-defining role.

Flaherty was one of eight children from an Irish Catholic home raised in the tough blue collar community of Lachine, in southwestern Montreal.

Flaherty was no trust fund kid. If he wanted a new pair of skates, he had to earn it himself.

I never saw Flaherty play hockey at Bishop Whelan High School or Loyola College.

But my Westmount friends used to play competitive hockey against the tough Irish boys from Lachine.

Even in those days, Flaherty was known as a very scrappy but skillful player, with steel cojones.

He was fearless.

He was the Irish Pocket Rocket, who split the defense and always beat you up in the corner for the puck.

The test of a true Montreal-born hockey player.

And then Flaherty made the leap from the mean streets of Lachine to the ivy-covered walls of Princeton as a true scholar-athlete.

Then an Osgoode Hall law grad, then founder and partner of his own thriving law practice.

Then a leap into provincial politics with the Mike Harris government and the Common Sense Revolution.

At that time, Ontario was reeling from the profligate Peterson Liberals and the tax and spendthrift NDP Rae. (Much like today's Ontario, under the deficit-loving Wynne.)

Then, (as now) Ontario was on the verge of pulling a "Greece" (and I'm not talking about the Travolta/Newton-John musical).

Ontario was hitting a debt wall. Lenders were threatening to pull the plug. Government spending was out of control. Deficits were soaring.

Harris won an overall majority to stop the economic insanity. Together Harris and Flaherty, as his finance minister, took an ax to Ontario's bloated and unaffordable health/education/welfare system.

As a result, Flaherty, a true hard-nosed fiscal conservative, was responsible for the closing of hospitals, schools, and removing thousands from welfare.

Teachers and nurses rebelled. The public railed against the slash and burn Flaherty. But Flaherty stood firm and tall against the slings and arrows of liberal/leftist arrogance and myopia.

Flaherty took no joy in shutting down hospital beds, turfing nurses or expelling teachers. But the sorry state of Ontario needed radical surgery, and Flaherty was the man. The patient was saved.

But Flaherty was tarred with the rep of being a cold-hearted Harrisite.

Even by his fellow provincial Tories, who preferred the Tory-lite Ernie Eves and John Tory as their leaders, as opposed to the far more competent Flaherty.

How did that work out, by the way?

I am sure Flaherty identified with Oscar Wilde's classic aphorism, "no good deed goes unpunished."

Fortunately for Canada, Flaherty did not flee to the private sector, after his two leadership defeats.

Harper and the federal Conservatives needed someone of Flaherty's experience and stature to guide Canada's financial ship.

Once again, Flaherty "manned up" and responded to the call for public service.

The American writer F. Scott Fitzgerald wrote that, "there are no second acts in American lives."

Clearly, Fitzgerald had never met the feisty Flaherty, who in his third act, became Stephen Harper's finance minister.

Together Harper and Flaherty, formed the dynamic duo of tough fiscal conservatism.

With Harper by his side, Flaherty attempted to reduce the size of the federal government by reducing the GST (from 7 to 5 per cent). He reduced corporate taxes (from 22 to 15 per cent). His overall goal was balanced budgets and stable and sustainable growth. While finance minister, Canada's economy did outperform the average of the G7 major industrialized countries every year but one.

But in 2008, when Canada and the world's economies were faced with a potentially catastrophic financial melt down, Flaherty showed Canadians and the world that he was no ideological hard-ass.

Contrary to his own principles and hard right fiscal Conservative orthodoxy, Flaherty threw out the deficit-cutting playbook. Instead, Flaherty pumped $40 billion worth of stimulus in the ailing Canadian economy. He bailed out the auto sector, saving thousands of jobs.

When the credit markets seized up, Flaherty pro-actively intervened in the capital markets and had the federal government buy up billions of dollars of CMHC-insured pooled mortgages,which kept liquidity in the system and sustained both lending and borrowing.

In order to keep the Canadian economy afloat during this period of private sector panic, Flaherty engaged in deficit-financing budgets, which added about $162 billion to the total federal debt.

However, in the last five years, Flaherty determinedly returned Canada to annual balanced budgets.

Also in the early days of the 2008 international financial crisis Flaherty showed decisive leadership. He was credited with convincing his fellow finance ministers to enact a concrete five-point plan, which calmed the global markets. As a result, Canada and the world avoided a calamitous financial breakdown.

For me, Jim Flaherty exemplified the rare fiscal conservative who was also truly compassionate. Flaherty will also be remembered for creating the registered disability savings plan, which was designed to meet the needs of people with physical, developmental and psychiatric disabilities. He was an active supporter of the Special Olympics. But more importantly, Flaherty used his political clout to promote the inclusion of people with disabilities in the workplace and in other aspects of everyday life.

Jim, we salute you.

We salute you for your tremendous personal sacrifice, your service to Canada, your humility, your strength of character and above all, your work on behalf of the vulnerable in society.

We you wish all the best, in this, your final act.

Skate free, skate hard, and forever, skate long.

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  • He steered Canada through the Great Recession
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    Flaherty balanced stimulus programs and fiscal management in efforts to keep Canada on an even keel during the financial crisis of 2008-2009. Canada emerged from that crisis as a bastion of economic stability among its G8 peers.
  • He got rid of the penny
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    The ever prudent finance minister said the penny would be no more during the delivery of his 2012 budget speech,saying the move would save Canadians some $11 million a year. “The penny is a currency without any currency in Canada,” he said in the speech.
  • He reduced the GST
    Flaherty cut the GST rate twice during his time as finance minister, first cutting it from seven per cent to six per cent in the 2006 budget. He cut that rate again in 2008 to its current five per cent.
  • He balanced the budget (after unbalancing it)
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    The Conservatives, who inherited budgetary surpluses from the Liberals, fell into the red when they introduced a host of stimulus programs that helped the country bounce back from recession. Flaherty promised incessantly that his government would be able to fix the books by the 2015 election. In the delivery of his 2014 budget speech, he announced that the country was technically out of deficit, taking into account the $3-billion contingency fund.
  • He reined in mortgages
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    Flaherty took measures four times in four years to rein in Canada’s overheated housing market to bring it back from the brink of a bubble. He publicly took on banks that he felt were exercising what he believed to be irresponsible lending practices and made it harder for people to take on mortgages that could leave them in over their heads.
  • He fought corporate Canada over income trusts
    CP
    In 2006, Flaherty made a controversial move to end tax exemptions for income trusts and said they’d be taxed the same way as corporations. In doing so, he broke a campaign promise to corporate Canada, who thought they had found a new shelter in trusts. The TSX lost more than 10 per cent of its value in the ensuing months.
  • He helped transform Ontario in the 1990s
    CP
    Before his time in federal office, Jim Flaherty was a soldier in Ontario’s Common Sense Revolution under Premier Mike Harris. He held various roles including labour minister, attorney general and finance minister, during a time of tense union politics.
  • He launched Tax-Free Savings Accounts
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    The Whitby-Oshawa MP introduced the popular Tax-Free Savings Accounts, giving Canadians another incentive to save for retirement. The program was lauded when launched in the 2008 budget and Flaherty promised to double the contribution limit once the budget was balanced.
  • He launched the Registered Disability Savings Plan
    Getty
    Flaherty was instrumental in the 2007 introduction of the Registered Disability Savings Plan, a long-term plan to help Canadians with disabilities and their families save for a secure future. The usually stoic politician was emotional during a 2011 announcement of a government review of the program. His son John suffers a learning disability and has participated in the Special Olympics.
  • He introduced the Home Renovation Tax Credit
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    The tax back plan was introduced in the recession-era budget of 2009 to put a little more cash in consumers’ wallets and stimulate the all-important housing and construction industries.
  • He questioned a key Harper promise
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    Flaherty’s memorable moves are not all in the past. During his last days in office he very publicly and candidly questioned a Conservative election promise to introduce a tax policy would allow one spouse to transfer part of their income to a lower earning partner in order to avoid falling into a higher tax bracket. He asked whether the Conservative campaign pledge to allow income splitting would benefit all Canadians, a question that is sure to be central to the next election campaign in 2015, given critics' assertions that income-splitting would mostly benefit the wealthy.