The 60-Day Blues

Liberal Leader Lester Pearson, who promised spectacular accomplishments during his first 60 days in office, has since regretted his electioneering enthusiasm. As the 60th day rolled around, the only tangible legislative accomplishment he could point to was his first budget. And that last week proved so ill-considered that it trapped Pearson and his longtime friend and economic adviser, Finance Minister Walter Gordon, 57, in a violent and humiliating political uproar.

The Liberals had spread the impression that they would be less nationalistic than the Tories. Yet Gordon's budget called for a special 30% "takeover" tax designed to discourage U.S. investors from extending their control over Canadian business. Among those most alarmed was Eric Kierans, 49, the bluntly outspoken president of the Montreal and Canadian stock exchanges, who thought the exchanges would be jeopardized. He got busy, worked up a scorching five-page letter to Gordon, and then set off to Ottawa to protest in person, with five of the exchanges' governors in tow.

Gordon greeted him, and the cameras, with a smile. But the smile faded quickly as Kierans presented his letter, which began, "The financial capitals of the world have just about had enough from Canada." In effect, the letter called the tax discriminatory, prohibitive and unworkable--"complete and utter nonsense." It was, he continued, "an axe to murder the record of trust and confidence that has grown up over the years." As Kierans talked to Gordon, his Montreal office distributed 1,200 copies of the letter in English, and another 600 in French, to every company president with shares listed on the exchanges and to every Cabinet minister.

Certain Difficulties. The effect on Canada's stock markets next day was shattering. As prices plummeted, Gordon held a hasty series of conferences, then beat a full retreat. At 2:35 p.m., 55 minutes before the Montreal and Toronto stock exchanges closed, Gordon appeared in the Commons, announced that because of "certain administrative difficulties" he was withdrawing the 30% takeover tax from the budget. In the final moments after his announcement, the stock markets staged a spectacular rally. Trans-Canada Pipe Lines Ltd., which had dropped from 30 to 26 3/4 by 2:30 p.m., soared to 29 1/2 by closing time at 3:30.

Poor Gordon. He was already under sharp fire in the Commons for the way he had called in outside help to prepare his budget. Despite the usual strict rules on budget secrecy, he had help from three private businessmen--Martin O'Connell, a specialist in municipal finance, Geoffry R. Conway, a tax accountant, and David Stanley, an investment analyst. Opposition sharpshooters pounced on this indiscretion.

Guilt by Innuendo. Conservative Leader John Diefenbaker put the question: "Did the Minister advise Mr. Kierans last night that the 30% tax was going to be withdrawn, and did he advise anyone today, before he made the announcement in the House? I ask these questions because of the fact that the stock market reacted so quickly this afternoon." Diefenbaker's ex-Finance Minister George Nowlan snapped: "I assume that fortunes have been made on this rise this afternoon." Gordon said he had told only Pearson and certain other fellow Cabinet members. Angrily, Mike Pearson rose to his friend's defense and said cuttingly to Diefenbaker: "I do not believe in guilt by innuendo or insinuation."

As the opposition continued its attack, Gordon once again had to backtrack. Had Gordon made known his "intention" to withdraw the 30% tax to anyone outside the Cabinet? "Yes," said Gordon, amid gasps of amazement. "To whom?" persisted his questioner. "To the deputy minister and senior assistant deputy minister of the department, and Mr. Stanley, Mr. O'Connell and Mr. Conway."

The sag on the Liberal benches was almost visible. Lamely, Gordon tried to explain that the three outside advisers had the technical status of senior advisers to his department. Nothing could have been more humiliating to the new Finance Minister than the behavior of the stock market when rumors swept the exchanges that Gordon was about to resign. Prices stiffened--only to tumble back when Pearson said it wasn't true.

Having been through two elections in ten months, few Canadians are anxious for another one soon. Yet after last week's bungling performances, Mike Pearson's hopeful new government has a long, hard grind ahead to restore its lost stature. As Douglas Hall, president of Toronto's General Accident Insurance Co., said: "Now either this tax was wrong in the first place--which is hardly comforting--or it was right and he should have stuck by it. It makes you uneasy to see this kind of weakness."

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