On November 4, 1993, I was sworn in as finance minister, along with the rest of Jean Chrétien’s new cabinet, at the Governor General’s residence at Rideau Hall. After the swearing-in, there was a reception for the freshly minted ministers and their families. It was an intoxicating moment, poised as we were between the satisfaction of electoral victory and the responsibilities of governing. Yet, it was there that Jean Pelletier, the prime minister’s chief of staff, took me aside to tell me that my mother had been taken to the hospital. When I spoke with my mother’s physician, he reassured me that her situation had stabilized and that I had time to attend that afternoon’s cabinet meeting and meet briefly with the department the next morning before catching the plane for Windsor.
Right after the swearing-in, I stopped by the apartment building on Bay Street in downtown Ottawa where I was staying. David Dodge, who would be my deputy and was coming to meet me, stepped out of his own car at the same moment as I stepped out of mine. “Good morning, minister,” he said in his inimitable nails-on-chalkboard voice. “Welcome aboard.” I suspect I must have looked around to see who he was talking to, because it was the first time anyone had called me minister. After a brief meeting with David, I made my first visit to the departmental offices on O’Connor Street. Terrie O’Leary and I had a quick tour of the ministerial suite, and she immediately declared that the washroom in the corridor separating our offices would be a joint one. In fact, since my staff ended up being predominantly female, and the room filled up with hairspray and hand lotion, I don’t think it would be true to say that it ever was a joint space at all.
The department had given me a huge stack of briefing books. One of the first things that caught my eye was David Dodge’s biography, in which I discovered he had been responsible for managing the GST file — the target of many a Liberal attack when we had been in Opposition. When I went out to share this with Terrie, she was coming the other way, having just stumbled across the same information.
The next day, there was the planned briefing with David and the assistant deputy ministers, and I was off to the airport with a stack of briefing books in tow. By the time Sheila and I arrived in Windsor on the evening of November 5, it was well after dark, and I was un certain whether we should go to the hospital so late. Sheila insisted, and I am glad that she did, because my mother’s condition had worsened. Indeed, it was one of the last times that we were able to talk to her as she slipped in and out of consciousness. Throughout her life, my mother had always suffered from frailer health than my father. In the latter years, hers was a slower, steadier decline than my dad’s. I am certain she knew he would have found it impossible to get through a day without her, and so she clung to life by sheer force of will. After he passed away, it was clear she felt she was now free to go, and it was just a matter of time. Increasingly, she suffered the symptoms of angina, including shortness of breath. She had been very ill before the campaign began, then rallied, then slumped again just before voting day. I had made a number of quick trips to Windsor during the election campaign and during the transition before we took office.
My sister lives in St. Paul, Minnesota, where her husband, Michael, was head of the English Department at St. Thomas University. They have two daughters, Katie and Julie.
Shortly after I had arrived at my mother’s bedside on that eventful first day in government, she looked up and saw Sheila and our boys and Mary Anne and her family all gathered around her. She said only one word: “Why?” Thinking she was wondering why we were all at her bedside, Mary Anne told her that we had come because she was ill, and then she slipped back to sleep. A few minutes later she, she woke up and asked again, “Why?”
I told her, “Mother, we’ve explained to you. You’ve been sick and we’re all here to make sure you get better.” And then she said, “No, no. I don’t mean that. I mean, why Finance? Why would you want to be minister of finance?”
My mother had a very deep faith, and was at peace with the idea of her own passing. When she got very ill, the medical staff put breathing tubes down her throat. On one occasion when they did this, Mom told Mary Anne and me that she didn’t want to go through that again, and said that when it was her time to go, she wanted to be left to it. At the very end, I had a hard time accepting that wish; I would have done anything to keep her with us a little longer. My sister was more compassionate and willing to see the physicians step back and let nature run its course. Mary Anne was a great rock at a time when I found it hard to deal with my grief.
It was a tough week in which to have to plunge into the new job I had just taken on. The Hôtel-Dieu Hospital was the place I had been born, where my father had died, and where my mother would spend her last days. Now it was also the scene of my initiation into my responsibilities as minister of finance. With my mother slipping in and out of a coma and the family gathered around her bed, I suppose I resented the time I needed to spend learning my new job. But I had just three and a half months to prepare a budget, the first Liberal budget in a decade. As my mother’s question implied, Finance was never the portfolio I had sought, so it was not as if I had the framework of a budget already sketched in my mind. My first preference was to be minister of industry. It took the energetic intervention of people such as Ed Lumley, the late Arthur Kroeger, and others, including Terrie O’Leary and David Herle, to persuade me to go for Finance. “If you want to be the modern C.D. Howe, you have got to be minister of finance,” they told me. “The minister of finance is the most powerful minister in the government. In any other job, you’ll have to depend on the finance minister to support whatever you want to get done.” They were right, of course, which I soon saw. When I went to Jean Chrétien and told him that I would like Finance, he graciously consented, although my change of heart undoubtedly complicated his cabinet planning.
In that difficult week, David Dodge made a generous gesture by decamping to Windsor with some of the department’s most senior officials. That way I could be briefed while still being able to keep vigil at my mother’s bedside. For the most part, we met in the chaplain’s room at the hospital, which effectively became my ministerial office. Subsequently I remember joking to a friend of mine who was a priest that I could feel the church’s guidance as I prepared the budget. His reply did not miss a beat: “You can blame the church for a lot of things,” he said, “but I suspect your budget is beyond saving.”
A legend has grown up that at some point I threw all the briefing books into the garbage in disgust. I have no recollection of this, nor do any of the principals who would have been there had it actually happened. Like a lot of legends, though, it conveys a whiff of the truth. The briefing books had clearly been prepared with the idea that the new Liberal government was not going to place a priority on addressing our dire fiscal situation. I made it very clear from the start that I was serious, though I did not yet fully understand what that implied.
David and I also discussed an even more urgent decision I had to make. John Crow’s term as governor of the Bank of Canada was about to expire in January, and the government would have to decide whether to reappoint him. Crow was a controversial figure in Canada, both because of his rigid focus on inflation and because of his testy personality and a take-no-prisoners rhetorical style. At the same time, he was a top-ranked central bank governor and was highly respected by the markets, which would be looking to us to prove our monetary bona fides by keeping him in place. Like any new government, we were treated with caution, if not suspicion, by the financial community. Although I had a business background, the meticulous fiscal reputation of Liberal prime ministers such as Louis St. Laurent had long been displaced, and I knew this was an obstacle I had to overcome. John Crow symbolized monetary probity to the markets, so I wanted him to stay. Jean Chrétien wanted him to stay for the same reason, despite having been very critical of him when we were in Opposition. If we let him go, we thought, it was going to be a major blot on our economic copybook before we even got started.
I very much appreciated that Crow, like Dodge, came down to Windsor and met with me in the chaplain’s office at the Hôtel-Dieu and later over dinner. I told him that I supported his fight against inflation and I understood the need to preserve the independence of the central bank. Under the law in Canada, the government can give directives to the bank, and the governor of the bank can resign if he or she deems them unacceptable. But that would be a calamitous political and economic crisis, similar to the one that rocked the Diefenbaker government in 1961 when it tried to fire the governor, James Coyne, who was pursuing a “tight money” policy. I wanted to make sure that Crow and I could work together. I was worried that raising interest rates at the wrong time could injure the fragile Canadian economy. It was still adjusting to free trade with the United States, and we had not yet felt the upturn that was taking place south of the border. At that initial meeting, we did not discuss precise details, but I was hopeful that Crow would prove to be someone with whom I would be able to work.
As the days passed, with me shuffling back and forth between meetings in the chaplain’s office and my mother’s bedside, her periods of consciousness grew fewer and fewer. More and more of the extended family gathered, bidding her farewell in the hospital room. For her, it was an agonizing week before she finally gave up her last breath. Once again, not much more than a year after my father’s funeral, it fell to me to give the eulogy. Perhaps because my father was a public person and my mother was much more private, I found it a more difficult eulogy to give. Or perhaps it was because, as family tradition would have it, I take after my mother more than I do after my father. But it was not hard that day to fill the church with love and laughter.
“My mother just simply had a tremendous effect on anybody,” I told the congregation. “Those of you who have been in our house and have seen the pictures know that many of them show my father with the great people of the world; and they’re engaged in sober conversation, barely smiling. And then you see other pictures of the same great people, and they’re smiling. Inevitably it’s because my mother is in that picture.”
I finished the eulogy with the story of a dream that my mother had recounted to Mary Anne and me just a few weeks before her death. In the dream, my dad was calling to her and saying, “Nell, come.” Naturally we had lumps in our throats as she told us this, and we asked her what she had replied in the dream. She told us she answered, “Paul, I’m not coming. I’m not ready yet. Somebody else can get your coffee.” The story created a great wave of laughter through the church. And then I told them what I truly believed, which was that she had been ready, and her time had truly come.
Hundreds of people came to my parents’ home for a reception that turned out to be a great celebration of her life. Soon after, Dwight Duncan, then on the city council and later a provincial cabinet minister, proposed that a new variety of rose that had been developed in Windsor be named the “Nell Rose.” What a touching tribute that was!
Soon after, I returned to Ottawa. I was beginning to wrap my head around some of the crucial issues I faced, the most urgent of which was whether to reappoint John Crow. Under Michael Wilson, one of my Conservative predecessors, the government had agreed with the Bank of Canada on a five-year plan to reduce inflation. There was one year left on the agreement, which at that point called for an inflation target of 1 to 3 per cent. I talked with David Dodge and said that we needed to establish an understanding with Crow on what the future target would be before reappointing him.
In my view, we were only going to dig ourselves out of our economic difficulties if the fiscal policies we adopted worked hand in hand with the monetary policies pursued by the bank. I didn’t want to reappoint Crow only to find out later that we could not agree on our inflation target. His definition of price stability was widely interpreted to mean zero inflation. I fundamentally disagreed with that, because only a small slippage would tip us into deflation, which would have huge negative economic implications. My fear was that he might view the next round of target setting as an opportunity to make a major downward move. I believed in setting low inflation targets, but if the bank drove interest rates up too high with the goal of lowering inflation, that could send the economy into a downward spiral at a time when it was already vulnerable by raising to prohibitive levels the costs that businesses pay for borrowing or people pay for mortgages. If that happened, my only resort then would be to dismiss Crow — or live with the consequences.
So my idea was to settle on the targets, then reappoint him. Within the department, we decided that the inflation target should continue to be a range of 1 to 3 per cent, with the midpoint — 2 per cent — being the critical number.
It was clear from very early on that Crow was unwilling to accept the 2 per cent midpoint. His position was that the inflation band should be lowered and reset as 0 to 2 per cent. On the face of it, while the gap was significant, it did not seem insurmountable, and I wanted to find a compromise if we could. Not the least of my worries was that if we did not reach an accord, and I decided not to re appoint Crow, the financial markets would see this as a signal that we were not serious about inflation. Crow’s deputy at the bank, Gordon Thiessen, who was just as adamant in his belief in wrestling inflation to the mat, shared our concerns about the dire consequences of losing Crow. He became a crucial intermediary, along with David Dodge, between Crow and me. One suggestion they discussed was keeping the top of the band at 3 per cent but lowering the bottom to 0.5 per cent. Endless versions of a one-page statement were faxed back and forth between Don Drummond, a key assistant deputy minister, and the bank. The text was pretty much agreed, but there was an unceasing tinkering with the numbers. It soon became an infuriating negotiation because of Crow’s unwillingness to budge even a fraction of a percentage point.
Still, as the relationship deteriorated behind the scenes, the pressure continued to mount to keep Crow on board. Doug Peters, a highly respected former chief economist with the TD Bank who had just been elected as a Liberal and was secretary of state for financial institutions, fiercely opposed Crow’s policies but nonetheless urged us to keep him on for fear that the dollar would tank if we did not. That rocked us. Meanwhile, most Bay Street analysts were outspoken in public about the need for Crow to stay. On December 2, when I held a tele vised meeting with a group of economists at the Conference Centre in Ottawa as part of my budget consultations, someone did an informal poll and announced, live on Newsworld, that the group favoured Crow’s reappointment by a margin of roughly four to one.
I understood the argument for keeping Crow, yet I came to believe if we could find a credible alternative candidate to take the job, and agree on the inflation targets in a public declaration, the warnings of the market analysts might prove to be overdrawn. Even as my budget meeting with the economists took place, Dodge and Drummond were popping out to exchange faxes with the Bank of Canada. Increasingly, though, Dodge was looking at Thiessen’s reaction rather than Crow’s. Eventually, Dodge asked me if he could sound Thiessen out about taking the top job. I said yes. Thiessen, who was very loyal to Crow, indicated that he would consider it if necessary, and he and Dodge were able to agree on an extension of the existing inflation formula.
Finally, a meeting was arranged between me and Crow at my departmental office in Ottawa. I was determined to see, one last time, if I could reach a zone of comfort with him. The meeting went on for hours, with David Dodge waiting in Terrie’s office for word, and then Terrie waiting in David’s office. Crow was absolutely stuck on 2 per cent as the top of the range, with a target lower than that. In truth, I would have been willing to tinker further with the numbers to keep him on board. But in the end it was Crow’s absolute intransigence that disturbed me. My god, I thought, if we can’t agree on something like this in which our objectives are similar and we have no crisis in front of us, what’s going to happen when there is a crisis? As the meeting wore on, I found myself coming to the conclusion that this game was over. I asked him point-blank whether he was saying that he could not live with anything but his precise demands, and he said yes.
“Well,” I replied, “if that’s the case, we’re not going to be able to work together and we might as well deal with that.”
He asked me whether I was saying that I did not intend to re appoint him, and I said yes. He agreed that he would step down without comment from either of us to ensure that there was no unnecessary roiling of the markets. And for several years the agreement held. Privately, he may have vented a bit, but in public he comported himself just as he promised, as I did.
The prime minister had been clear from the start that this was to be my decision, and so I arranged a meeting at his office to inform him of my intention. Like me, he had been critical of Crow’s policies in Opposition and uncomfortable with his prickly personality. Still, my impression was that he shared my initial view that it might be better for the government if Crow were reappointed. Certainly he had every reason to expect that I would come back to him with just such a recommendation. He was surprised and clearly somewhat unnerved by what I had to say. “That’s fine,” he said at the time, but he later told me he had trouble sleeping that night.
The announcement to cabinet elicited a quite different reaction, the result of long-nurtured and deeply felt antagonism to Crow. Despite my confidence that the markets would accept Crow’s replacement so long as it was clear that the institution remained sound and independent, we were all nervous the day of the announcement. In the event, Gordon Thiessen handled himself with the public skill that we all came to admire, and did so, to my relief, both in his native English and in French — which turned out to be much better than we had been told. The dollar actually rose slightly on the news of his appointment.
The choice of Gordon Thiessen turned out to be even more inspired than we understood at the time. His commitment to a sound monetary policy was no less adamant than Crow’s had been. But in the place of Crow’s astringent personality, we had a governor who blunted much of the criticism of the bank simply by his willingness to listen and his readiness to explain. He also proved to be a very effective and highly regarded voice for Canada on the world stage (though I have to say that every year at the World Bank/International Monetary Fund meetings in Washington, he would enthusiastically suggest a stroll back to the hotel, knowing I have no sense of direction, and, claiming to know the way, get us hopelessly lost). Seven years later, when Thiessen attended his last G7 meeting as head of the Bank of Canada in Prague, Alan Greenspan, one of the most respected central bankers of our generation, insisted on giving the farewell speech on behalf of his colleagues.