Hailed as the saviour of the Canadian economy, Canadian Prime Minister-in-waiting Paul Martin, in fact, presided over an era of economic erosion. But he’s been good to Bay Street.
If we go by recent polls, Paul Martin already has primeminister-in-waiting status. With 63 per cent of respondents saying hewould make a “good” prime minister, Mr. Martin is clearly drawingsupport from the ranks of all parties. You have to hand it to him: Hemanages to create a personal image of a compassionate politician.
This is no mean feat for someone who has done more than any other politician to erode this country’s social programs and the living standards of most Canadians.
Only collective amnesia could account for Mr. Martin’s popularity. Thelist of issues on which his finance ministry policies offendedCanadians’ values includes virtually everything we care about: medicare, a strong public education system, child poverty, high unemployment, a fair employment insurance program, protection for the environment, fair taxes.
In all of these public policy areas, Mr. Martin was the architect whodesigned Ottawa’s savage cuts, or he was the Doctor No who nixed any newprograms such as national childcare, home care or a prescription drugplan.
He recently made public limited details of his campaign’s financialbackers, but said nothing about the four-year-old, blind trust campaign war chest, thought to be more than $1-million-dollars. Paul Martin, folks, is assubservient a Bay Street boy as ever walked the halls of Parliament.
He did the bidding of Canada’s CEOs, and the cash they have contributed to his campaign will show just how appreciative they are — assuming we receive the whole story of his campaign funding and not the just the crumbs he tossed us in the last couple of weeks.
Even former Reform Party leader Preston Manning congratulated Mr. Martin for slashing $22-billion-dollars from health, education and social assistance in 1994-1995. The rabidlyfree-market The Fraser Institute presented him with the $20,000 Economy in Government prize in 1994. The admiration was mutual: The Liberal party hadbarely taken office in 1993 when Mr. Martin invited the Fraser’s MichaelWalker to an all-day meeting to help set government policy.
Mr. Martin’s policies went far beyond getting control of the deficit.His objective was to permanently reduce Canada’s overall socialspending.
In a speech to American business in Jackson Hole, Wyoming, in1995, Mr. Martin boasted: “Looking to 1996-97, the U.S. budget forecastsa [spending] reduction to 16.3-per cent of the gross domestic product (GDP), while Canada’s ratiowill have fallen to just over 13 per cent, the lowest level since the1950s.”
At what cost? A study by CIBC Wood Gundy concluded that the cuts reduced economic growth in Canada by 3.5 growth percentage points through1994-1996. The spending cuts were part of a one-two punch — the other being the Martin-approved high interest rate policy of the Bank of Canada — that put us in a permanent, low-grade recession during much of the 1990s.
Pierre Fortin, former president of the Canadian Economics Association,put the cost of the cumulative unemployment between 1990-96 (caused bythe cuts and high interest rate policy) at “about $400-billion inforegone national income.” That’s the equivalent of 30 per cent of thelosses of the Great Depression.
Yet the myth persists that Mr. Martin presided over a period ofprosperity, while growth performance in Canada in the 1990s was worsethan in any other decade of the last century except the 1930s.
Average per-capita income fell steadily in the first seven years of thedecade and only regained 1989 levels by 1999. Per capita income in the United States grew 14 per cent during this period. Canadian familieshave less money than they did when the Liberals came to power, the gapbetween the rich and poor has increased, and more people arefalling into unsustainable debt.
Mr. Martin’s real legacy is the savaging of the domestic economy and the deliberate creation of high unemployment. And it was all unnecessary.
Ina 1995 analysis, the Dominion Bond Rating Agency, echoing Statistics Canada andother studies, revealed that all of Canada’s accumulated program deficitwas created between 1975 and 1986. There was a program surplus between1986 and 1994 (and it grew substantially after Mr. Martin’s cuts). Therest of the debt was interest charges — exacerbated by the samehigh-interest policy of the Bank of Canada that killed growth in thefirst place.
If these studies don’t convince you that the cuts were unnecessary, thehuge surpluses the government started racking up in the past few yearsshould. Mr. Martin repeatedly told Canadians in the mid-1990s that oncethe deficit dragon was slain, we could restore our social programs. Butno sooner did the surpluses needed for that restoration begin to appear,than he cut taxes by $100-billion over five years (77 per cent of thepersonal benefits going to those earning more than $65,000, who are just8 per cent of the population). That still didn’t do it, so he appliedmore than 90 per cent of the surplus to debt reduction, breaking hispromise to spend 50 per cent.
Federal government surpluses are expected to rise steadily over the nexttwenty years. If Mr. Martin ever becomes prime minister he will doeverything he can to make sure those surpluses aren’t spent on socialprograms. Paul Martin may look like Main Street, but his heart belongsto Bay Street.