Trudeau bidding Morneau farewell?

It all points to Morneau getting goodbye handshake

Conventional wisdom has it that a leader can’t oust his finance minister in times of economic instability because such a move would compound the instability.

Traditionally, firing a finance minister signals to the world that something is dreadfully wrong, either with a countryís economic policy or with the governance of the countryís money.

That’s not the case in Canada right now.

The federal Liberals are sinking in the polls and scrambling to put out the fires popping up all over the place as the public learns more about the connections WE Charity has with Finance Minister Bill Morneau and Prime Minister Justin Trudeau.

There may come a point at which Trudeau needs to pay a price.

Trudeau did not come to his minister’s defence during his unprecedented testimony to the House of Commons finance committee on Thursday, instead telling its members he hadn’t known the extent of the Morneau family’s dealings with WE Charity.

And both Trudeau and his chief of staff, Katie Telford, were careful to distinguish the prime minister’s “perceived” issues with WE Charity from Morneau’s far more troublesome connections.

With Trudeau having drawn that line, Morneau is clearly in play, numerous sources suggest. He can no longer count on his job being protected by the maxims of the past or the tacit support of the prime minister — and not just because the pandemic changes everything.

Morneau has never been so central to fiscal policy decisions in Canada as to be indispensable.

While his title suggests that he is the face of fiscal policy in Canada, he is not the personification of it.

Trudeau, by force of personality in public and in private, has kept that role for himself throughout his time in office — and reinforced it during the pandemic.

When it was time to roll out billions of dollars in emergency income supports, Trudeau was the one to announce, promote and defend that course of action.

When the government decided to subsidize payrolls -— first through a small wage subsidy and then through an enormous one — Trudeau and the Prime Minister’s Office were front and centre.

They were often ahead of the work being done at the finance department on how to design the package, which took Morneau’s officials by surprise.

When Morneau became finance minister in 2015, he was a rookie politician with a solid reputation in the pension industry and some credibility and connections in the business community.

He renegotiated the Canada Pension Plan with the provinces, using a mix of policy proposals and brass-knuckle politics to get them all to sign on to a more generous system. He took a similar approach to revamping health transfers, although the outcomes were not nearly as generous as the provinces and health-care advocates had hoped, and there is grumbling to this day.

But his profile has suffered since then, beset by questions about his ethics and political judgment, a low profile, and very few allies in a cabinet that would rather spend than fight the deficit.

In short, he is no Paul Martin.

Martin was Jean Chretien’s finance minister from 1993 until 2002, when his political rivalry with Chretien reached a boiling point.

Chretien’s abrupt replacement of Martin with John Manley had economists and market analysts ready for turmoil; Martin had a lot of heft, markets moved when he spoke and the federal cabinet was swayed by his point of view.

When he was ousted, traders and Bay Street analysts braced for market carnage but it was just a ripple and investors didn’t leave Canada in droves.

Much of that smooth transition had to do with his replacement; Manley had a lower profile than Martin, but he was a known quantity to both Bay Street and Main Street, and he was able to gain public confidence quickly.

More recently, the federal government successfully switched central bankers at the height of the pandemic. Stephen Poloz’s term came to an end and the federal

Liberals opted not to extend it. Instead, they brought in Tiff Macklem, a former senior official at the Bank of Canada and the Department of Finance.

The bank was in the midst of using hundreds of billions of dollars to keep financial markets functioning, yet the transition went off without a hitch — mainly because Macklem was a known, experienced and trusted player.

A smooth transition will be essential if Trudeau is thinking of replacing his finance minister, given the momentous decisions in fiscal policy now at hand. At stake is the future of hundreds of billions of dollars in support payments — turning the taps off for the Canada Emergency Response Benefit, revamping the Employment Insurance system and ramping up the wage subsidy, all while keeping an eye on a deficit that is growing exponentially.

The quality of the recovery depends on having a solid, moderated fiscal policy led by a finance minister who has the confidence of the prime minister, his cabinet and, more importantly, the Canadian public and investors.

Whether that’s Deputy Prime Minister Chrystia Freeland, former central banker Mark Carney, Foreign Affairs Minister Francois-Philippe Champagne or Treasury Board President Jean-Yves Duclos is a current subject of speculation around Parliament Hill.

But Morneau no longer seems to fit the bill.