tax cut

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Wednesday January 17, 1999

Mr. Martin plays it safe

Paul Martin’s second straight balanced budget won’t thrill anyone, and that’s probably a good thing.

Once again, the finance minister and Liberal-leader-in-waiting has proven himsel f the consummate juggler by doing something for nearly everyone and not taking any risks. He and his government will be roundly criticized in days to come, but that’s to be expected. Let’s face it, government budgets are as much about spin and strategy as they are about substance. There is so much flexibility and interpretation in revenue and spending figures, the auditor general won’t even sign off on the budget. Federal finance ministers and their provincial counterparts routinely under- and
over-estimate to suit their political purposes, and Martin is no exception.

None of this is to suggest the budget isn’t important — it is. It speaks volumes about the Liberal strategy for governing. Based on what we saw from Martin yesterday, the Liberals are opting for the strategic status quo: Ultra-cautious management and very specifically-targeted new program spending.

Martin recognizes the need for tax cuts, health care reinvestment, research funding and support for the cash-strapped military, but he also recognizes that the single biggest threat to stability and prosperity is the national debt. When Martin took over as finance minister, 36 cents of every tax dollar went to pay interest on the public debt. Today, that figure has dropped to 27 cents. That’s significant progress, attributable to government spending restraint, a vibrant economy and low interest rates. However, we’re still spending more than a quarter of all public revenue to service debt. That’s about $41 billion per year, more than the feds spend on old age pensions, health care and unemployment benefits combined. This massive load will only get heavier with the passage of time, our aging population and increased demand on social services. So Martin is quite right to resist calls for drastic, across the board tax cuts and opt instead to maintain debt reduction as a priority.

He’s also right to recognize the increasing national anxiety about deteriorating health care. But here, Martin is less forthright with Canadians. Yes, the budget amounts to a considerable transfer payment increase that will go toward bolstering health care, provided provincial premiers keep their commitment made during social union negotiations. But as Martin admitted, this investment only restores health care funding to mid-’90s levels. It will relieve some pressure, but is nowhere near enough to completely restore levels of care. More importantly, this budget does nothing to accommodate the future. In the next decade, our rapidly aging population will place increasing demands on health care, and in the absence of less expensive, more effective forms of community-based care, this problem will not go away.

Martin’s critics will rail over the modest tax cuts in this budget. Their arguments have some merit. We are among the most taxed people in the developed world, a sad fact which makes our economy less competitive and Canadian families less prosperous. Could Martin have done more? Yes. Should he have done more, given other priorities like health care, debt reduction and global economic uncertainty caused by Asian and South American flu? No. There is modest tax relief in this budget, and there will be considerably more in next year’s. That’s an acceptable compromise.

We give mixed reviews to other initiatives unveiled in the budget. We welcome renewed investment in our military, but note the amount allocated is far less than what is needed to give our soldiers a decent living wage. Similarly, increases in research spending are welcome, but still leave Canadian researchers far behind their counterparts elsewhere. We wish Martin had announced spending cuts in some areas, like regional development, the Canada Mortgage and Housing Corporation and business subsidies. These are all areas better dealt with by the private sector, leaving Ottawa to direct the money saved to other more essential areas.

In the days to come, we’ll look in more detail at some of the programs announced in the budget. For now, we’ll retire to study Martin’s latest opus, and fervently hope that next time Canadians are subjected to a budget speech, it’s half the length of this one. (Hamilton Spectator Editorial, A10, 2/17/1999)