This article was published by the Edmonton Journal on January 30th 2012. To see this article and other related articles on the Edmonton Journal website, please click here.
OTTAWA — On Thursday, Prime Minister Stephen Harper gave a speech to the World Economic Forum in Davos, Switzerland, bragging about our country, lecturing the Europeans and pointing to his agenda for the year ahead.
Harper gets a respectful hearing there because Canada is doing fairly well compared with the rest of the world, which is a key part of his message to voters at home.
Canada has the soundest banks in the world, he said, and the best net debt-to-GDP ratio in the G7.
It sounds good, but he is choosing the numbers he cites carefully.
According to the International Monetary Fund’s Fiscal Monitor, Canada’s gross debt-to-GDP ratio, which includes other levels of debt, is 84 per cent, much better than Japan (220) and Italy (119), a bit better than the United States (91.6) but worse than France (81), Germany (80) and the United Kingdom (77).
The central message of Harper’s government is that Canada is doing better than the rest of the world, thanks to his steady hand on the tiller, and the rest of the world should follow suit.
Harper told his audience that the “No. 1 priority as a government is prosperity, that is, economic growth and job creation,” and then he asked whether other governments can say the same.
He warned that in the developed world there is “too much general willingness to have standards and benefits beyond our ability, or even willingness, to pay for them.”
That’s why, he said, Canada has “already taken steps to limit the growth of our health-care spending,” to help get our public spending under control.
Thankfully, he said, the Canada Pension Plan is adequately self-financing, but “for those elements of the system that are not funded, we will make the changes necessary to ensure sustainability.”
That means he plans to cut Old Age Security, a program that provides $526.85 a month to seniors below an income cutoff.
In a memo to supporters on Friday, the Conservatives said that OAS must be changed because the number of Canadians older than 65 will increase to 9.3 million from 4.7 million over the next 20 years, increasing the burden on taxpayers, which is true.
The memo says current recipients won’t be affected, nor will Canadians close to retirement.
The Conservatives didn’t mention this idea during the recent election campaign, and for good reason, since taking money away from old people isn’t a real vote winner.
The powerful Canadian Association of Retired Persons already has spoken out against the idea, and the opposition parties squealed.
In the memo, the Conservatives called those objections “the same tired (failed) approach to deficits and debt that led to the economic crisis in Europe.”
This is the frame that the Conservatives will impose during this spring sitting of the House of Commons, which begins Monday, and which will culminate with a budget containing deep cuts to federal spending.
We have a choice, the Conservatives will say. We can take the tough measures necessary to keep our economy on track, or we can do what the opposition wants, and end up like Greece.
It’s a powerful frame, and was largely responsible for Harper’s majority election win, but this seems like a good time to recall that we face a challenge with public debt because of somebody I like to call Prime Minister Stephen Harper.
In September 2007, Finance Minister Jim Flaherty announced that Canada had a surplus of $13.8 billion, which was thanks to Paul Martin and Jean Chretien, who had brought the federal debt down to $467 billion.
Harper cut the GST by two points, reduced corporate taxes, bailed out the auto makers, invested billions in the military and infrastructure, taking exquisite care to get credit for every dollar as it went out the door.
As a result, this year, the deficit will be about $30 billion and the debt is up to $570 billion.
And Harper is not responsible for the sound state of Canada’s banks. In 1987, Brian Mulroney’s finance minister, Michael Wilson, established a single powerful regulator, and Martin and Chretien resisted the international trend to deregulation.
In 2006, on the other hand, Flaherty eased mortgage rules, allowing CMHC to back risky, zero-down-payment, 40-year mortgages. When the crunch came, the government helped out lenders by buying $69.35 billion worth of insured mortgages with our tax dollars.
There is a strong argument to be made for belt-tightening in this time of global uncertainty, and it may be necessary to make changes to Old Age Security, but it might be wise instead to top up the fund with our tax dollars, except the Conservatives have put us in the hole.
If we want benefits beyond our ability to pay, as Harper said in Davos, that’s because he has simultaneously cut taxes and increased spending, reducing the government’s capacity to pay for anything.