Time for Trudeau to emulate Chrétien and slay the deficit

OTTAWA—There was quite a party a couple weeks ago in Ottawa: longtime Liberals celebrated the 25th anniversary of the election of Jean Chrétien’s government, and the launch of the former prime minister’s book, My Stories, My Times. Although I couldn’t make it, I know many ministers and MPs were there, along with Prime Minister Justin Trudeau. The celebration coincided with some interesting news: a revelation the cabinet spent a $20-billion tax windfall, instead of paying down debt; Nanos poll results showing Canadians believe the next budget should be balanced; a rise in interest rates by the Bank of Canada; and an announcement the fall federal budget update will be presented on Nov. 21. Each news item provided a study in contrasts between the current Trudeau government and that of Chrétien. The current government has willingly created deficits, while the Chrétien government’s most laudable accomplishment (along with the Clarity Act) was the reduction of accumulated government debt. At the time of finance minister Paul Martin’s 1995 “Program Review” budget, I was toiling for a minister from Atlantic Canada. When the news hit that expenditures would be cut by about a third, and 45,000 jobs would be eliminated from the federal public service, there was a shockwave across government and in the region. Sure enough, there had been warning signs: with a debt close to 70 per cent of GDP, the fear was the International Monetary Fund might step in to put Canada’s finances aright. For more than a year, Martin had embarked on an information campaign, warning Canadians about the debt. According to one analyst, he raised the issue from “21st on a list of 20” to top spot. As a result, the subsequent years were times of sacrifice and careful spending, and the Liberals became known as deficit slayers. The move was long overdue: every public servant has their own little horror story of a too-casual approach to budgeting. When I first arrived in Ottawa as a ministerial aide in the 1980s, I met with a senior member of the department who offered to organize a meeting with my public-servant equivalents from across the country. A dozen officials would be flown in, and a hotel ballroom rented for a two-day meeting. The cost: $10,000. I said “thanks, but no thanks” and proceeded to meet with the officials when I was in their region with my minister. While I was abroad as a diplomatic spouse in the late 1990s, a million dollars was squandered on housing not required by the Foreign Ministry at our post. And when I was working on a special project in the early 2000s, I discovered we could save $150,000 from the budget. When I mentioned this to the person in charge, I was asked “Why do you care?” I replied I thought we should be careful stewards of taxpayers’ dollars. The reaction: “Oh, give me a break!” It’s why I think (as the Nanos poll shows) many Canadians are leery of the current government’s attitudes toward deficit spending. They recall with fondness Chrétien’s tough budgets, and the benefits that accrued to their mortgages and the Canadian economy as a whole. They compare that to the Liberal promise of the 2015 campaign to not exceed $10-billion deficits, which quickly went out the window, along with the promise to get back to balanced budgets by 2019. Instead, another $19-billion deficit is foreseen. Not only do those actions send a message that careful hewing to the budget line is not necessary, they virtually give licence to ministers and public servants to be profligate. When I was in university, I studied the theories of economist John Maynard Keynes, which promoted saving when times are good and spending when the economy is weak. Unless the theory has been updated, I think the principles remain the same. Last I looked, the economy was strong. The financial update Nov. 21 and the ensuing spring budget will be real tests for the Trudeau government, and may prove to be its Achilles heel in the run-up to the next election. If there are more tax windfalls in the pipeline, it would behoove Finance Minister Bill Morneau to learn from Chrétien’s example and slay the deficit dragon while he can. Andrew Caddell retired last year from Global Affairs Canada, where he was a senior policy adviser. He previously worked as an adviser to Liberal governments. He is a fellow with the Canadian Global Affairs Institute and a principal of QIT Canada. He can be reached at pipson52@hotmail.com. The Hill Times