Paul Martin showed how to tame a deficit

Paul Martin knew a thing or two about retrenching. When he became finance minister in 1993 he faced a much bigger challenge than today’s cost-cutters. Canada’s chronic deficit had hit a record $42 billion. Two international agencies, Standard and Poors and Moody’s, had lowered Canada’s credit rating. The Wall Street Journal branded Canada a “Third World banana republic.” Economists were speculating on when — not whether — Canada would hit the debt wall.

Over his nine-year tenure, he balanced the federal budget and went on to produce five consecutive surpluses. He reduced the size of government without stifling the creativity of the nation. He turned Canada into a globally envied model of fiscal discipline.

Today’s cost-cutters discount Martin’s achievements, pointing out that he raided the employment insurance fund and the government’s pension plan. He off-loaded most painful spending cuts on the provinces and he benefitted from a decline in interest rates and a favourable exchange rate.

All that is true — but the story is bigger than that. He chopped federal spending by $25 billion over three years (a more aggressive goal than Jim Flaherty’s). He downsized some departments by 65 per cent (no one is contemplating cuts of that magnitude today). And he slashed business subsidies by 60 per cent (not even on the Conservative agenda).

Rather than sneering, his successors would be smart to see what they can learn from his approach.

Here is how Martin wiped out a bigger deficit than they face:

 • He was absolutely open about what he was doing. He went on national television repeatedly to explain to Canadians why he was asking them to make sacrifices and why retrenchment was necessary to sustain the programs they valued.

 • He hired the best speech writers, coaches and media advisers available to help him speak in language ordinary Canadians could understand. His 1995 budget speech was a case study in clear, effective communication.

 • He always delivered bad medicine with a spoonful of honey, a reminder there was light at the end of the tunnel, an assurance that Canada was on the path to jobs and growth, a vision of better days ahead.

 • He crossed the country repeatedly, thanking Canadians for their forbearance.

Lest anyone think it was easier then than now, consider the obstacles Martin faced. He was saddled with a Bank of Canada governor he considered obstructive and unlikeable (he defied his advisers and got rid of John Crow). His cabinet colleagues resented him for chopping their budgets. His bureaucrats were uncomfortable with his willingness to take risks. Many Liberals regarded him as a closet conservative.

It is true he siphoned off EI and pension surpluses and reduced provincial transfers by $7 billion, forcing their governments to make deep cuts in health care. Adopting his strategy holus-bolus would be mistake.

But he did get the job done without demoralizing the nation.

Compare that to the current austerity crusade.

Since Prime Minister Stephen Harper set his post-recession course, not a positive word has come out Ottawa. It’s been a steady diet of bleak forecasts, warnings and predictions of years of belt-tightening. Is there no room for ingenuity, new thinking or finding opportunity in hard times?

Secrecy is the order of the day. The public is in the dark about where the axe will fall and how deeply it will cut.

Communication is an afterthought. Since Canadians aren’t part of the process, cabinet ministers see no need to reach out to them.

As budget day approaches, it is hard to find much hope in the land.

Ultimately Flaherty and Treasury Board president Tony Clement are likely to use many of the same strictures as Martin. The difference is they’ll do it with a heavy hand and a grim demeanour.

Original Article
Source: Star