RM Issue #030629
Friday, June 27, 2003
With SARS, mad cow disease, the struggling U.S. economy and the Liberals' loose control of the purse strings, the federal government is heading into a fiscal swamp. The conventional (i.e. Liberal) wisdom on this looming problem is that Canada's next prime minister will be constrained by an economic downturn that will preclude new spending initiatives or new tax cuts. But that overlooks a better, (i.e. unLiberal) option: Cut spending!
John Manley, forced to revise his earlier 3.2% economic growth forecast down to 2.2%, is now looking at a shrinking "surplus" to the point where Ottawa has little spending room beyond its annual $3-billion contingency fund. In theory, this could affect the Finance Minister directly, since he is currently running for the Liberal leadership. In practice, it is Paul Martin, the leadership shoo-in, who will be forced to be frugal.
Pushing Mr. Martin into a fiscal box is not entirely a bad thing, if economic constraints prevent him from buying votes with a pre-election spending spree. The real story here, though, is not that the economy has soured slightly, which could have been predicted, but that the government has built up such a colossal head of spending steam. Under current plans, by 2005 spending will have jumped 50% since the Chrétien-Martin-Manley team found the fiscal religion of balanced budgets in 1997.
In February, recall, Mr. Manley not only delivered the biggest spending budget in two decades, he also committed the government to an unusual abundance of long-term initiatives to help Mr. Chrétien cement his legacy. Take, for instance, $935-million for child care over five years; $650-million over two years to "fight homelessness" and build housing; $1-billion in environmental spending above the $2-billion promised to help implement the Kyoto Protocol over the next five years; $2-billion toward "innovation" including a $105-million scholarship program for graduate students; and $3-billion over the next decade for municipal spending. Not one of these is so desperately needed that it should be carved in stone.
If Mr. Manley won't cut spending, the focus will shift to Mr. Martin. It will be difficult for him to renege on any of these commitments without upsetting certain segments of the population, or at least certain interest groups and spendthrift wings of the Liberal party. But aside from key spending on health, defence and a few other priorities, there is plenty of fat for Mr. Martin to trim if he hopes to free up cash for his own policies or, better still, tax cuts, as recommended yesterday by Jack Mintz of the C.D. Howe Institute.
Spending initiatives that are ripe for pruning -- in addition to those mentioned above -- include $114.5 million for an official languages "action plan" and $150-million to assist production of Canadian television programming, both over the next two years, and $100-million start-up for a Canadian Learning Institute to "help Canadians make better decisions about the education of our children." Under current economic circumstances, indeed under any economic circumstances, it is all but impossible to make a rational case for the continuation of these initiatives.
Contrary to what Messrs. Chrétien and Manley would have us believe, there is an alternative to the grandiose spending announced in February. Unless, of course, Paul Martin plans to move into the Prime Minister's office whistling the same old Liberal tune.
© Copyright 2003 National Post