Greg Weston: Harper's challenge in the year ahead

While 2012 mercifully ended without the U.S. economy falling off a fiscal cliff or the world ending altogether, Canadians might nonetheless be excused for approaching the year ahead with one hand on their wallets and the other clutching a lucky charm.

Pollster Nik Nanos of the public opinion firm Nanos Researchdescribes the overall mood in Canada as "tentative"while Canadians remain hopeful of better days to come, they also perceive a steady erosion of their personal financial wellbeing.

Nanos says we are also becoming spooked by repeated warnings from the prime minister and others that record levels of personal debt will crush many families if interest rates rise, as they inevitably will.

At the same time, if consumers do stop spending, the entire economy could quickly go from bright to tight, if not into the tank.

Throw in the almost constant threat of recession from the seemingly serial financial crises in Europe and the U.S., and the one certain thing about the Canadian economy in 2013 is a lot of uncertainty.

For the Harper government, so much economic fog means that even its best-laid plans for 2013 have to be seen as tentative as well.

As one federal cabinet minister put it: "I think you'll find that in most departments, there's a whole lot of pencilling going on."

Eraser-man

The sharpest pencil in the capital has to belong to Finance Minister Jim Flaherty, and some Canadians are already feeling it.

An estimated 700,000 of Canada's poorest seniors live entirely on Old Age Security and federal supplements tied to the quarterly cost-of-living index. On Jan. 1, their total financial support was increasedwait for it by $2.57 a month.

At the same time, Canadian workers are about to discover that the Harper government, which promised no new tax increases, has just boosted employment insurance premiums by 6.2 per cent.

That's another $52 a year disappearing from the average worker's paycheque.

Even as Flaherty and the Prime Minister's Office are writing the next budget, government insiders are warning Canadians not to expect much.

Oneof thempredicts the upcoming budget is going to be "pretty much steady-as-she-goes."

That means the government will remain focused on the economy, and a myriad of trade deals being negotiated in Europe and Asia, which, even if they were concluded in 2013, likely wouldn't affect most Canadians for a long time to come.

Political reset

More immediately, the Conservatives will continue to refashion Canada's immigration system into a workforce recruitment program, and perhaps change the nature of foreign aid.

It's also a safe bet they will make even more headlines for hitting the "reset button" on virtually every big military procurement on the books: fighter jets, shipbuilding, drones, search-and-rescue aircraft, helicopters.

Stephen Harper is also likely to hit reset on his own team.

A relatively major cabinet shuffle is expected shortly after the Commons recesses for the summer as the prime minister tries to give his government a fresh look for the second half of its four-year mandate.

Harper has indicated he has no plans to prorogue parliament this year, but that too could change as the fall rolls around.

Nine months from now, the Conservatives may well need a new agenda, if only to cope with all the expected changes to the country's political dynamic.

First, the Liberals choose a new leader in mid-April, an event that could mark the start of a Grit comeback or the beginning of three strikes and out for the country's once dominant governing party.

(If the winner is the current odds-on favourite, Justin Trudeau, expect a barrage of Conservative attack ads that could set a new standard in political mudslinging.)

The prime minister and his strategists will also have to contend with possibly three new provincial governments in B.C. and maybe Quebec and Ontario with a good chance none will be a natural ally.

Meanwhile, the growing grassroots protest by young aboriginals, Idle No More, has the potential to create no end of grief for the Conservative government, as even the country's most influential native chiefs admit they have no control over where this movement goes next.

Muscle flexing

Idle No More aside, 2013 is certain to be a year of aboriginal muscle flexing over Enbridge's proposed Northern Gateway pipeline from the Alberta oil sands to the B.C. coast.

The board's public hearings are about to move from rural B.C. into metropolitan Vancouver and Victoria, all but guaranteeing greater media coverage of a parade of environmentalists and native groups slagging the project and the Harper government's handling of it.

The prime minister may yet gain some cheer from the expectation that the Obama administration will do a 180 and approve construction of the Keystone XL pipeline from Alberta to refineries in Texas.

But China will continue to cast a long shadow across the Canadian resource landscape, with all the attendant political problems that go with it.

The government's decision in early December to allow China's state-owned CNOOC to take over Calgary-based Nexen, this country's sixth-largest energy company, was accompanied by a stern warning that while Canada is open for business, it's not for sale, especially to other governments.

Still, even as the ink was drying on the supposedly tough new foreign takeover rules, PetroChina was going around them, announcing it was buying 49.9 per cent of a huge Alberta energy project from Encana, Canada's largest gas producer.

Then the government rang in the New Year with another made-in-China migraine, this one a proposal by a subsidiary of state-owned Minmetals to mine a huge swath of the Canadian North, massive projects that would include draining entire lakes and building highways through the heart of eco-sensitive caribou country.

Creating a more business-like relationship with China, while important, would still pale in significance if Canada were to be drawn into a new military role in the Middle East, whether involving Syria or Iran, especially if Israel's safety were on the line and decisions had to be made regarding Europe and NATO involvement.

The prime minister has said the hardest part of governing is dealing with the unexpected.

With 2013 looming as a year of certain uncertainty, it could well be the government's toughest yet.