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Thursday, February 17, 2011

Fraser Institute counsels Tories to use Martin’s 1995 budget as a blueprint for 2011

In a Vancouver, B.C. press release, the Fraser Institute, a Canadian think-tank, suggests in a new report[1] that Finance Minister Jim Flaherty use the Chrétien Liberal government’s 1995 budget as a guide for 2011. Sage advice, I would say, though I doubt it would get much support from the current crop of left-leaning Liberals.

Paul Martin
Former prime minister Paul Martin
(CBC 2008)

Say what you will regarding Paul Martin’s ability (or lack thereof) as prime minister, most economists will agree he was one of Canada’s most effective finance ministers in several decades.

“Martin introduced fundamental fiscal reforms in 1995 that led to a decade of prosperity,” according to the report’s authors, and I would add that those fiscal reforms played no small part in helping Canada weather the international financial crisis and resulting world-wide recession from which we are only just recovering.

Promoting its new report—Budget Blueprint: How Lessons from Canada's 1995 Budget Can Be Applied Today— the Fraser Institute reminds us of “the Liberals’ 1995 budget, which reduced program spending from $118.3 billion in 1994/95 to $107.9 billion in 1996/97—a reduction of $10.4 billion or 8.8 per cent over a two-year period.” And “The 1995 budget also announced a reduction of public-sector employment by 45,000 or 14 per cent.”

Wow, think of what this would mean in 2011 terms.

Niels Veldhuis, Fraser Institute vice-president of Canadian policy research and co-author cautions:

“The Conservative government’s current plan calls for slowing the growth in spending for the next five years while hoping strong economic growth brings higher revenues to balance the budget.

“This is precisely what happened from the early 1980s to 1995, as governments tried to constrain the growth in spending while assuming that higher revenues would come. Unfortunately, governments were unable to control spending. And there is nothing in the current government’s track record that suggests it will be able to slow spending growth.”

This is precisely that which I fear will reoccur. During former prime minister Brian Mulroney’s two majorities, spending slowed as a percentage of GDP, but absolute spending remained at untenably high levels, deficits persisted and the national debt ballooned.

There is room to cut federal spending—a lot of room. Coincidentally, Sarah Boesveld points us to a good starting point in today’s National Post where she writes:

“The Frontier Centre for Public Policy, an independent Prairie-based think-tank, analyzed the Statistics Canada reports for all 20 industries the national agency tracks and found that federal public servants’ wages rose by 59%, far outpacing the average worker. Provincial government workers came in at a close second with a 55% rise. Overall, wage growth for federal and public administrators dwarfs the 30% economy-wide weekly-wage growth, and shows the civil servants have seen faster boosts than any other industry.

“Perhaps more striking than the ballooning of federal and provincial salaries are the savings the Frontier Centre estimated taxpayers could have taken advantage of had the growth rate slowed just a bit: $2.6-billion in 2009 alone.”

Government spending in Canada is over the top and out of sight. And we delay bringing it back under control at our fiscal peril and that of generations of taxpayers to come.

And don’t look to the Liberals to bail us out like they did during Paul Martin’s tenure. These are a different breed of Liberals. Paul Martin was a fiscal conservative, this bunch is not. Last February, Michael Ignatieff said that Canada will get a national child-care program under a future Liberal government and that he’d not “allow the deficit discussion to shut down discussion in this country about social justice.”

During Parliament’s break next week, Ignatieff will set off on another of his tours to promise more spending “to hard-pressed families” who he says “are worse off after five years of Stephen Harper.” Speaking to reporters yesterday in Ottawa, Ignatieff said he’ll be highlighting Liberal policies, including pension reform, youth employment initiatives, early learning and child care programs and caregiver support. Hardly what one would expect at a time when we’re running record deficits. This man is no Paul Martin-style fiscal conservative, not are any of the high-profile members of his caucus.

Ignatieff’s are not deficit-cutting words. He and his team like to take credit for the results of the fiscally conservative policies of the Jean Chrétien-Paul Martin era, but they don’t give any indication they’ll re-implement similar policies if they win the next election. Far from it, they are promising to spend billions more on long-term social programs.

A federal budget is expected to be delivered by the end of March. Let’s hope Messrs Flaherty and Harper give us a deficit fighting budget to set this country back on the road to fiscal conservatism and, if necessary, one on which to campaign for a majority government.

[1]Budget Blueprint: How Lessons from Canada’s 1995 Budget Can Be Applied Today
by Niels Veldhuis, Jason Clemens, and Milagros Palacios (The complete report is available
here.)

 

© 2011 Russell G. Campbell
All rights reserved.

3 comments — This is a moderated blog and comments will appear when approved. Please don’t resubmit if your comment doesn’t appear immediately, and please do not post material that is obscene, harassing, defamatory, or otherwise objectionable.

  1. I would like to see an adult conversation regarding the division of powers between the Federal-Provincial governments including the equalization program.

    Unlikely with the current makeup and desire for re-election.

    I believe Canada has the potential to become an Energy Superpower and that will drastically change the amount of revenue available for provinces.

    If we can find alternative markets and lower our reliance on the US trade by boosting exports to Asia/Europe/developing economies our expansion should not be a serious issue.

    We need to push ahead with multiple pipelines and examine is Shale is viable.

    We don't need to divert another $ 200 million for Windmills that don't work in our climate.

    The extent of the cuts made by Martin may have not been necessary if they had expanded free trade.

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  2. yeah i am not happy at all with the current spending. IMO we do need to move on new fighter jets but yes, the govt employees and all the programs which have little to no use other than job creation for public servants must go. we need to cut a bunch of ministries that are as useless as anything.

    brad

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  3. Martin balanced the budget by downloading healthcare and education to the provinces. He accomplished this by reducing transfer payments and literally crippled provinces.
    Another "deft" budget move was to raid the privately funded E.I. of billions of dollars. Effective--yes, moral--no.

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