The West Block
Episode 2
Sunday, November 13, 2011
Host: Tom Clark
Guests: Jim Flaherty, Joe Oliver, Steve MacKinnon, Gerry Caplan
Location: Ottawa Studio
Tom Clark:
Hello and welcome to The West Block. I’m Tom Clark and welcome to our new studio. As you can see, we’re just steps away from Parliament Hill.
Well, on the show this week, world leaders are in Honolulu Specific Rim Apex Summit. Prime Minister Harper and President Obama are there and the two of them will meet in private today. Among the issues on their plate, Europe, a crisis still being felt around the world and in Canada, it has meant the government will not eliminate the deficit as promised.
We’ll talk to Finance Minister, Jim Flaherty and the two leaders will talk about our relationship. The relationship with the US took a huge hit when the Obama administration threw the future of the Keystone Pipeline into doubt.
The Minister of Natural Resources is just back from China. Is that country our newest best friend? And what’s in a name. We take you to behind the scenes to explain why we chose The West Block as our show title.
First, we’re going to Honolulu, where Finance Minister, Jim Flaherty is standing by and Mr. Flaherty. Thanks very much for joining us here on The West Block.
Jim Flaherty, Minister of Finance:
Good morning Tom.
Tom Clark:
You were at the Apex Summit but the top of everyone’s mind is still the situation in Europe and I guess the question is this, do you think after everything you’ve seen in the last couple of weeks that the euro zone in its present form can survive or is it time to redraw the boundaries?
Jim Flaherty, Minister of Finance:
I think it can survive but its only going to survive if the euro zone members who are in decision-making positions ensure that those that have large sovereign debts carry through on their fiscal balance, fiscal consolidation plan; that’s number one. And number two: that they ensure in the euro zone that they build a strong overwhelming firewall around those countries so that there isn’t a bank contagion into all of the banks in the euro zone and then into the United States and ultimately affecting the entire world.
So there are two big ifs there.
Tom Clark:
I want to bring this a little bit closer to home now because we know that what’s happening in Europe has had an affect here in this country, but I want to talk specifically about our budget. We’ve been going through the public accounts and I’ve come across something that’s interesting to say the least. It’s simply this, that in 2009, you had 6.3 billion dollars that was approved by Parliament but that was not spent. The next year, it was 9.4 billion, and this year, it has ballooned to 11.2 billion dollars, again money that was approved and allocated, but that you couldn’t get out the door; money for green structure, money for the troops, all this sort of thing. What’s going on? Why is this problem getting worse and why did it happen in the first place?
Jim Flaherty, Minister of Finance:
Well part of it is with the Armed Forces, is that we have a very large program going on to rebuild our Canadian Armed Forces, and they have found repeatedly actually, they have found that they can’t get as much done in a given year as they perhaps thought they were going to, but that’s a function of course of the president of the Treasury Board and the Treasury Board itself to watch the cash flow of government. So what happens at the end of the year is we look at what is happening with the departments. We let them carry over some cash from year to year, but its limited because we don’t want to create that kind of expectation that if you don’t use the money that’s allocated to it; you get to use it the next year.
Tom Clark:
But help explain this to me, because if, you know, for three years, this has been a problem that has been growing every single year. We’re now up at 12 billion. The biggest money that’s been left on the table or on the floor has bee in infrastructure spending in this country, something that provides jobs, but if this money that’s been approved isn’t spent, how can that happen? I mean, surely this is a problem that if it’s been happening in the past should have been corrected by now, no?
Jim Flaherty, Minister of Finance:
Yeah, well you raise an important point about infrastructure. As you know, we permitted the infrastructure money, a good portion of it, to fall over into this fiscal year from the last two fiscal years. The original plan was that we were going to confine that infrastructure spending to 2009/10 to 2010/11. We allowed an extension into the end of October this year to allow more projects to get completed and use more of that money. So that was a good reason to let some of that money roll over into this fiscal year.
Tom Clark:
yeah but it’s not just a roll over. There’s still money that’s being allocated for specific projects that aren’t going out the door and this has been happening now for three years. Is some of this money then being repatriated to pay down the deficit?
Jim Flaherty, Minister of Finance:
Yep, some of the money comes back into the consolidated general revenue fund, to the general revenue fund of the government. We look at the end of the year, as we go through the budget process, at every department of how much they want to roll over to the next year, and how much it is reasonable to do that. Sometimes there are good reasons, as there were in the infrastructure situation because of the extension, but sometimes there aren’t so that money comes back and is taken out of their budgets.
Tom Clark:
You know, earlier this week, you said that you’re not going to be able to make your deficit reduction targets; you’re going to put it out by an extra year. When you combine that though with the law on fixed election dates, what you’re really saying is that in this, your mandate, your majority mandate, you’re not going to be able to balance the budget, and that means that at least four of the promises that were made during the election campaign, specifically things like income splitting not going to happen because they were all dependant on a balanced budget. So it puts you into a position, I guess, of having made these promises back in April, during the election campaign and now on October/November those promises are not operative anymore.
Jim Flaherty, Minister of Finance:
Well the world economy has slowed significantly, as you know. This year, our economy has slowed to an extent as a result about .7 of one percent, but that’s significant when economic growth is anticipated to be 2 or 2.1 percent of real GDP. We’re a lot better off than the European countries and I think Canadians recognize that, but we have a challenge of some reduced growth. You know, I’m not going to have my head in the sand; I’m not going to bring forward numbers that are not realistic. We bring forward realistic numbers. They show us now that we can aim at 2014/15. Right now it looks like we would have a small deficit that year and that we can balance in the following year, 2015/16. That’s what the numbers show. I want to be realistic, straightforward with Canadians. They know where we are.
Tom Clark:
That’s in your next mandate though, if you get one.
Jim Flaherty, Minister of Finance:
Well, the election, I think the election would be in 2015, so it would be within that fiscal year.
Tom Clark:
Okay, Jim Flaherty, Minister of Finance joining us from Honolulu. Thanks very much. Good to have you on the show sir.
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Jim Flaherty, Minister of Finance:
Thanks Tom.
Tom Clark:
Well the other big economic story this week is the future or perhaps the lack of it for the Keystone Pipeline. It was designed to bring oil from the Alberta Oil Sands to refineries in Texas. Now the project has been studied for more than three years, but under intense political pressure, Washington has announced a further delay of at least 18 months.
The 7 billion dollar pipeline would have taken the most direct route to refineries down south, but because of environmental concerns, TransCanada may have to agree to an expensive detour, if it wants the project to survive.
Canada’s oil producers are worried because they are just years away from running out of room on existing pipelines to move their black gold. Without additional transport options, the oil sands will grow much more slowly, which will be a huge economic hit to Alberta and to the entire country.
Well joining me now from Toronto for his very first interview since returning from his trip to Asia, the Minister of Natural Resources, Joe Oliver. And Mr. Oliver thanks very much for joining us this morning. Good to have you on The West Block.
Joe Oliver, Minister of Natural Resources:
You are most welcome.
Tom Clark:
Your colleague, Jim Flaherty says that the delay, the delay for the Keystone could mean the end of the pipeline project, do you agree with that assessment?
Joe Oliver, Minister of Natural Resources:
Well, we’re hopeful that the delay won’t actually kill the project, but obviously we’re disappointed about the delay. There’s been an extensive environment review. It was positive and basically we think this project is good for both our countries. It will add tens of thousands of jobs in the United States, hundreds of thousands of jobs in Canada, generate billions of dollars in economic growth and secure the energy future for both our countries.
Tom Clark:
Yeah, I’m sure you’re aware that when this announcement was made by the State Department in Washington that there was a lot of anger in this country as a result of that, and you know, many people saying, alright well listen, if the US doesn’t want our oil, we’ll just sell it to China. Well you’ve just been to China, are the Chinese pushing for this?
Joe Oliver, Minister of Natural Resources:
Well, yes they are, and I was also in Japan. There is a real hunger for Canadian resources and Canada is held very highly by the Chinese and by the Japanese, so there’s an immense opportunity for our export markets with China. We want to build on very solid relationships. China has emerged as the largest consumer of energy in the world and they have a very keen interest in our oil. So, you know, we have excess oil. We are determined to diversify our client base, our customer base and the Chinese want to diversify their sources of supply, so there’s a tremendous “complimentarity”.
Tom Clark:
I guess the really big question on this though, is how do you move the oil because I know we’ve got a proposal for a northern gateway pipeline going through British Columbia, but there’s a few obstacles in the way like the Rocky Mountains and at least 23 First Nations reserves. Is it possible at the end that America may be our only option for this oil, just because of the problem of moving it out of Alberta?
Joe Oliver, Minister of Natural Resources:
No I don’t believe so. Look, I think it’s a basic strategic objective of our country to diversify our customer base, and of course, as you point out, infrastructure is a critical precondition. So we have a number of applications projects that would move the oil and our gas from where it is in Northern Alberta to Kitimat in British Columbia, or other places along the coast and there by tanker to Asia. We respect the regulatory process but it’s very important that we get on with this.
Tom Clark:
Can you move that process along because I’m guessing, that if the United States is going to wait at least 18 months for an approval of a rerouted Keystone Pipeline, the hearings for the Northern Gateway Pipeline, the one that would go to the coast of British Columbia could be a three year process as well. Is there any way you can shorten that down?
Joe Oliver, Minister of Natural Resources:
Well, we’re hoping it won’t be three years. We’re expecting to get an answer in respect to the Northern Gateway in about a year and a half. Now look, you should understand that the two projects are not mutually exclusive. We have the oil to justify both those projects and others as well. The United States is essentially taking all our energy exports for the moment and it’s been our objective for a while to diversify, and that was one of the reasons that I went to China and Japan. And I should tell you, as I’ve said before, there is a great interest in our oil, in our gas, and there’s also a real interest in investing in projects in Canada, which would help finance the infrastructure that we need to help create those export markets.
Tom Clark:
Joe Oliver, Minister of Natural Resources, I just want to point out to the audience, you literally just got off of a plane from your Asian trip, I really appreciate you getting up at this hour to join us. Thanks very much for being here today.
Joe Oliver, Minister of Natural Resources:
You’re most welcome Tom. Happy to be here.
Tom Clark:
Well, coming up on The West Block, we’re heading into the briefing room and we’re putting these issues to our panel, right after the break. Stay with us, The West Block returns.
Commercial Break
Tom Clark:
Well welcome back to The West Block, I’m Tom Clark. We go now to what we call the briefing room on The West Block and joining me today, is the former national director of Liberal Party of Canada and a former Liberal candidate, and now with the PR firm of Hill and Knowlton, Steve MacKinnon. Steve MacKinnon, good to have you here.
And Gerry Caplan, a long time NDP organizer and advisor and academic as well; good to have both of you here.
I want to start off where we…and there’s a whole lot of big issues on the table right now. One of the things, let’s start with Jim Flaherty, we were talking about this question, it may seem a little arcane but it’s the question of under spending. There are 12 billion dollars that have been promised for certain projects that haven’t gone out the door and some of that money is being pulled back and being used to pay down the deficit. Is this a big deal Steve or what?
Well, two big things this week of course. We’ve put back the date, which we can expect the budget to be balanced by this Conservative government and they’re not spending tens of millions [billions] billions rather sorry, in infrastructure, I’m sure General Natynczyk would have loved to have that money for the troops, community projects. You know, our leader, Mr. Rae out there talking about putting Canadians to work, that’s money that could have put Canadians to work but the irony of course Tom is, with all of these needs, defence, communities, jobs, this Conservative government still can’t manage to scrape up enough funds to balance the budget on time.
Tom Clark:
Let me just before go to you Gerry, let me just read something that retired Lieutenant General Andy Leslie said when he was asked about or he found the same problem, is under spending in National Defence. He said this, he said, “A certain degree of administrative incoherence and increasingly cumbersome and even confusing degree of interdepartmental process go a long way in explaining a disturbing and increasing trend as to why many hundreds of millions of dollars have remained unspent.” That was General Andrew Leslie when he was looking at the books of National Defence.
Should we be making a big deal of this Gerry or is there some comfort in knowing that some of this money is going to pay down the deficit?
Gerry Caplan:
No. No comfort whatsoever and that the debt will be paid down in time a few dollars in relatively speaking here and there doesn’t make a difference. Since 911, the budget of the Department of Defence has doubled, a few dollars in your time before well Chretien and Martin were in, but dramatically since 2006, when the Prime Minister…and it does appear that far too much money was shovelled in far too fast. And what General Leslie talks about is bureaucracy, simple incompetence and cumbersomeness, is that any kind of comfort to anyone? I guess I doubt it when our guys were out fighting what I consider a pretty futile war and when the Department of Veteran’s Affairs is being cut a quarter of a billion dollars, they could have used that money too because our vets have been treated shamefully. But on the other hand, you can be more suspicious of the money lost to infrastructure. Because they were all in green projects or overwhelming green projects; energy conservation projects and everyone knows, this government has no sympathy whatsoever for environmental things. They barely believe in global warming so it’s possibly suspicious that they were just as happy to have this money disappear for a while.
Tom Clark:
I want to move on to what is going to be a huge topic for this coming week anyway, and that is a relationship with the United States, after the Keystone decision, the Obama administration basically kicking it down until after the next presidential election. So let’s look at this through a political prism right now. The decision that Obama made was a political decision so how do we respond in an political way to our relationship with the United States?
Steve MacKinnon:
Well look, this government went all in Tom. It’s gone all in on Keystone, its gone all in on border security and this perimeter security initiative that we keep hearing is going to be launched or signed very shortly. You know, the foreign policy successes, particularly as they pertain to the US, have gone lacking under this government and I think Canadians have every right to ask themselves, you know, is this a government that can shoot straight with respect to its relationships in the United States.
Tom Clark:
But what do we do though because we have to come up with a response to this, I mean do we just get mad at the United States and go off and dance with China?
Gerry Caplan:
We huff and puff and blow the house down but it won’t fall. You were kind enough to say I sometimes have academic tendencies so let me say that this was a case where both. Mark’s and Adam Smith were proved wrong. Economic man does not drive the world. Politics drives much of the world, especially the world we cared about and this was solely absolutely a political decision by the president who cannot afford to, I was going to use a harsh word, to alienate any further his many disappointed supporters all over the country, many of whom are environmentalists and so he made a decision that was strictly in his self-interest – he ain’t going to change it. That’s why I say you huff and puff, there is nothing this country can do about anything the president wants to do, either because he needs it for his election or because he has governors all across the border who are tough and who make demands on him. That’s the reality.
Steve MacKinnon:
But Mr. Harper’s miscalculation seems to have been underestimating that complexity. You know, this is a fellow who went down to the US or said in a preachy way, this is a no brainer in the US. Well guess what, there was some complexity there. The irony is it’s a republican governor of all places, Nebraska; that seems to be the biggest single political roadblock, other than the president and the state department in the US. I think Mr. Harper and his government have vastly underestimated the interests at play here and notwithstanding that put a lot of Canada’s credibility and diplomacy in Foreign Service on the line in trying to secure approval.
Tom Clark:
Well then I guess right now, I mean the reality is there is no other way we can ship our oil to any other port. We don’t have any pipelines to do that and won’t for at least a year and a half.
I don’t want to run out of time before we get to this thing. Both your parties, or the parties that you used to be connected with, are going through leadership changes right now and Steve, the Liberal Party has decided, speaking of America, to do an American style Primary for the campaign. I’ve got less than a minute and I want to get Gerry in here as well. Good idea, bad idea, Primaries in Canada>
Steve MacKinnon:
I think it’s worth having the discussion. I think it’s worth the huge questions with you know, the Liberal Party did pass a one member one vote system at its last convention. We haven’t even used yet. I think there is some margin maybe in going back and looking at the system that’s already in place to see…
Tom Clark:
I’m hearing a no here…I’m hearing Steve saying this is really a dumb idea.
Steve MacKinnon:
I think it’s very difficult where you are in a world where you are spending constrained to have an American system where they spend hundreds of millions of dollars having candidates get better known.
Tom Clark:
Gerry, your system any better?
Gerry Caplan:
Um, I don’t know what my system is and it’s not mine because I don’t represent the NDP. I’m very excited about what the Liberals are doing in this. Renewal is, I think, a thrilling development. They have now come out for democracy, for majority rule, for jobs; this is an entirely radical new…
Steve MacKinnon:
…cynic here…
Gerry Caplan:
No, no, it’s a radical new approach that the country has needed and I think they’ll be back maybe within 30 or 40 generations.
Steve MacKinnon:
I think before that….
Tom Clark:
I hate to bring this to an end but we’re going to talk to you again. Gerry Caplan, Steve MacKinnon, great having you here. I appreciate your time on The West Block.
When we come back, what’s in a name? Why did we choose the name The West Block for this show? We’ll show you right after this. Stay tuned
Commercial Break
Tom Clark:
Well welcome back. Since the show debuted last week, many of you were asking why have we called this, The West Block. Well for the answer we take you behind the scenes of a massive makeover taking place on Parliament Hill.
It’s a construction zone right now, but behind the tarps and the scaffolding lies the building where the work of creating a young nation was born.
It was really the heart of the government – was located in the West Block.
Construction on what was to be the West Departmental building began in 1859; one of a trio of buildings, making up the legislature for the province of Canada. These three buildings alone housed all the offices of government. In the East Building, the Prime Minister’s office, the Governor General and Privy Council, but the West Building housed departments that more closely affected the day-to-day lives of the people.
Post master general, the public works…that type of… agriculture obviously to begin with…
Once the Dominion of Canada was born it grew fairly quickly, so did the need for space on Parliament Hill. The West Block expanded twice.
What’s really fascinating about that is the fact that those additions in some ways reflect the growth of the country.
It happened in the 1870’s as Prince Edward Island, Manitoba, British Columbia and the North West Territories joined the country, and again, in 1906, with the addition of Alberta and Saskatchewan. In the 1960’s, there was talk of demolishing the West Block for more modern office space.
There was a huge outcry, both from the architectural…you know historical segments of society as well as the general public.
And the West Block is about to be transformed one more time. In six years, renovation work begins in the Centre Block and so the House of Commons will be moved to the West Block and for a few years, the West Block will once gain be the heart of government and the home of people’s business.
Well, to use a hockey analogy, especially popular with the Maple Leafs, we’re going to where the pucks going to be not where it is.
This week, the MP’s are back on the Hill debating among other things, Senate Reform and changes to the Human Rights law, specially the often criticized Hate Speech provision, specifically the often criticized.
Well remember you can find us on line at the westblock.ca. We’re also on Twitter, we’re on Facebook; join us there for a continuing conversation as the week goes on. . Transcripts and web exclusives you’ll find it all there.
Well thanks for joining us for our first show from our brand new studio. We’ll see you back here next Sunday morning.
Until then, I’m Tom Clark. Have a great week.
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