How it could be

It was long ago, far away. Early 1990. The coffee nook at the back of Room 253D. The government caucus space in the Centre Block with the leather-covered doors so reporters outside in the stone corridor would hear nothing.

Finance Minister Mike Wilson was trying to design the new value-added tax called the GST. Caucus members were suspicious, and worried. With good reason. Almost all of them would be defeated in the coming general election as Canadians handed victory to the next guys who said they would axe the tax.

But they didn’t. They couldn’t. They knew it. This was a deficit-slayer.

So Wilson and I continued to talk about what should be in, and what must be out. Resale houses, he asked? Nope. Realtor commissions? Yes. How about groceries? Nope. One muffin, yeah. Six of them for the family? No. And on it went.

As you may know, the GST replaced a manufacturer’s sales tax and a lot of prices for goods went down. But all services started to cost more. In a few years the GST helped the new prime minister, Jean Chretien, and his finance guy (Paul Martin) stem the tide of government red ink. Wilson went back to Bay Street. I went back to writing books and being a vacuous TV talking head.

It took a few years, but one February afternoon in 1998, Canada got the first balanced budget in three decades. Said the Washington Post that day: “The latest budget caps Canada’s climb from the financial basement of the Group of Seven of the world’s most developed nations to one of its economic leaders.

“Partly through painful spending cuts, partly through tax increases, and partly through the luck of an economic boom that has married growth with low inflation and low interest rates, the country overcame deficits that hovered around $30 billion annually when the current government took office in 1993… They reneged, for example, on campaign promises to eliminate a national sales tax – the government wanted to keep the money for deficit reduction…”

I remind you of this for good reason. Conservatives designed a tax to get Canada back on the right path, implementing it despite certain political suicide. (By the way, I also lost my seat.) And the Liberals understood what the correct course of action was, breaking their key electoral promise for the sake of the country.

Are those days gone?

Source: The Hub

I guess we shall see. Meanwhile, let’s review the extent of the current mess in hopes the next gang start telling us how it might be addressed.

All of the money raised by the GST – $54,000,000,000 (billion) – will soon be consumed by just the interest on the federal debt, now $1.3 trillion. Government has grown dramatically, as has the torrent of money which flowing to families, seniors and provinces – as well as interest charges.

The Trudeau government’s total spending is just a few EVs short of half a trillion annually. Spending in 2024-5 will be a stagging $95 billion more than was foreseen by the Liberals just three years ago. Yes, debt costs exploded along with the Bank of Canada rate. But aging Boomers are also tipping the scale. OAS and GIS will cost the country $80 billion this year, rising to $90 billion by 2026-7. Two years ago – before the Liberals sweetened benefits and more people joined the ranks of the wrinklies – the cost was $69 billion.

Of course, kids pogey – paid tax-free to parents (often used for mortgages) – is a huge expense. So are health transfers to provinces, indigenous payments and funding the military (among a host of other things). This year the feds will be $40 billion short, so that deficit is then added to the debt. At this point our debt-to-GDP ratio (how much we owe compared to the entire economy) is just over 42%. If that doesn’t sound good, it’s because it ain’t. The work Mulroney/Cretien did to get us into the black has been squandered as current politicians cave to insatiable demands from voters for more govy benefits. (Now the kiddos expect Ottawa to build them houses.)

All these programs are costly to run, as well as fund.

As the sharp guys at Wowa point out the ranks of government workers are swelling. The public sector has been adding almost 41,000 workers per month, or 204,600 for the year. The private sector, in comparison, has added 86,000 employees in 12 months while 55,000 more people became self-employed. In total, 59% of all jobs created in a year were in the public sector, In total 22% of all jobs in the country are directly government-linked. That’s the most in 30 years. Yes, since the Chretien/Martin days.

An Angus Reid poll recently found two-thirds of people worry about the deficit and want spending cuts (but not on them). Health care spending should increase, 67% say. Half of us want more spending on defence. (By the way only 52% of Canadian Forces equipment is now operational, for lack of funds.)

The conclusion should be obvious. This is not a sustainable path. People don’t get it. Taxes will have to increase or everyone must take less.

What’ll it be?

About the picture: “Here is a picture of Dexter in response to your urgent request for dog pictures,” writes Julia. “We often take care of Dexter as we currently do not have any dogs. I’m hoping to rectify this situation after a little overdue traveling. Thank you for all that you do. My husband says he has stopped reading but then surprisingly brings up your daily post. Hanging in as best we can in Calgary.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.