This interview with Brian Lee Crowley, President of the Atlantic Institute for Market Studies and Bruce Campbell, the Executive Director of the Canadian Centre for Policy Alternatives was heard on the CBC Radio One program “The Current” on February 19, 2003. “The Current” is hosted by journalist Anna Maria Tremonti and is broadcast weekday mornings.

INTRODUCTION
It’s Wednesday, February 19th. The second longest laundry list this country has seen in 40 years is being put through the ringer. For the cost of $16- billion, John Manley’s first budget has bought him few friends. The military is unhappy, the cities are upset, and Bay Street was hoping for a bigger break. Currently, critics are calling Manley’s performance “vintage Trudeau.” Not only did he wear a rose in his lapel, but he also flipped them the bird. This is “The Current.”

MS. TREMONTI
Good morning and welcome to “The Current.” I’m Anna-Maria Tremonti. After years of going lean, years of no fat, low-fat budgets, the Chretien Liberals have chosen to butter us up with a budget that slathers on the money for a whole list of government departments and social programs. Some are gobbling it up, others worry we’ll have to sweat it off later. We’ll talk about John Manley’s budget this morning.

And he’s an Air Canada ticket agent by day but some nights and most weekends he becomes Col. Gillespie. We’ll talk to the first reserve soldier to command Canadian troops in Bosnia. And we talk to someone else who, in these still tight times for the military, has reservations about the reserves.

And a week ago, Canada was the underdog. This morning, Canada became the dead dog in international cricket. But the fact that a group of amateurs from this country, the land of hockey, even got to the Cricket World Cup says a lot about the evolution of sports and sports fans. We have got to ask. But, first, big spenders!

Pierre Elliot Trudeau called it the “just society.” As he saw it, the project for Canada was to create, in his words, “the most humane and compassionate society possible.”

MR.. TRUDEAU
Canada must be one, Canada must be progressive and Canada must be a just society.

MS. TREMONTI
Well, that was 1968 and this is 2003. And for nearly a decade the project of Paul Martin was to kill the deficit for good. That meant a whole lot of belt tightening. Yesterday, John Manley took over and did a complete about-face.

After a decade of slashing away at the country’s social safety net, the Liberals now appear ready to spend money to rebuild social programs. Is Canada returning to Trudeau’s vision of a “just society”?

Bruce Campbell is the Executive Director of the Canadian Centre for Policy Alternatives.

He is in our Ottawa studio. And Brian Crowley is the Director of the Atlantic Institute for Market Studies. He’s in Halifax. Good morning to both of you.

MR. CROWLEY
Good morning.

MR. CAMPBELL
Good morning.

MS. TREMONTI
Well, let’s start with Brian in Halifax. How big of a departure is this budget from those budgets of Paul Martin in the past?

MR. CROWLEY
Well, I think there’s a very big departure. I think that, you know, program spending has been very significantly increased, breaking the Liberals’ own promise of just two years ago that program spending would only increase with economic growth and population growth.

And I think what we’ve done is we’ve taken a time when the economy is looking good, tax revenues are up, budget is balanced, and we’ve made huge spending commitments, which we’re going to have to honour even when times get tough. And this is exactly the kind of behaviour that’s got us in trouble in the past.

You know, the whole point of being able to deficit finance during bad times is that you pay back the money during good times. You don’t make even further commitments that we’re not going to be in a position to honour later on.

And the political price you pay for trying to fix too big spending commitments is exactly what we went through in the ’90s. You often have to fix it when economic times are bad. And that’s absolutely the worst kind of public policy.

MS. TREMONTI
Bruce Campbell, how big a departure do you see this?

MR. CAMPBELL
Well, I hate to be out of sync with the majority — the large majority of commentators on the budget. I think it’s — I don’t think it’s the big spending budget that it’s being portrayed as. I think you have to look at it in context. A lot of the commitments — you know, there’s been an attempt to really kind of puff up the commitments. Many of them have been projected over as much as 10 or 11 years. So I think when you really get down to the nitty-gritty of the numbers, it really isn’t the big spending budget that it’s being portrayed.

I think the real Chretien legacy is the huge social debt that his own government created by the massive program cuts in the mid to late ’90s. And I think even being charitable, this budget, you know, while it is significant in relation to past budgets and it sprinkles a lot of money around sort of superficially in a lot of areas, I think we’re talking about, in the best case scenario, baby steps.

I think if you look at — look at the new program commitments over three years, the amount just over $15- billion. But there’s also, you know, that commitment to debt repayment and that’s still there. And that’s going to be an equal or greater amount. And let’s not forget the massive tax cuts that are in place and reduce the fiscal capacity of government year after year.

MS. TREMONTI
Well, let me ask you this, Bruce Campbell. If we look back to where we were before this budget and we look at Trudeau’s vision of a just society that was one of humanity and compassion linked into government spending, are we a just society in your mind?

MR. CAMPBELL
Well, the just society really precedes, predates Trudeau, really goes back to King and through St. Laurent and really reached its apex, I would say, in the ’60s with the Pearson government. Trudeau came in at the end of that period and made a few improvements. In some areas there was backsliding.

MS. TREMONTI
So are we a just society, under those principles?

MR. CAMPBELL
So I think we’re — I think we’ve — I think after Mulroney came to power, we started to backslide. I think the Chretien government that came into power in ’93 had no intention of returning to that path — that Liberal path of moving towards, and I think it moved massively back away from the vision of the just society with its overriding preoccupation with debt.

And I think what happened in the wake of that very quickly — I mean one of the hallmarks of a just society is reduced inequality, reduced poverty, you know, a strong infrastructure of universal social programs. And on all of those indicators, we’ve seen backsliding and relatively dramatically both wealth inequality, income inequality and so forth.

MS. TREMONTI
I know, Brian Crowley, you want to get in on this.

MR. CROWLEY
Well, look, there’s so many things that we need to talk about. Let me just touch on a few. First of all, the just society, one of the things that we simply have to talk about is Mr. Trudeau tried to bring in the just society on the national credit card. And everybody loved it because they were getting a dollar’s worth of services and only paying 85 cents worth of taxes.

It sounded like a heck of a good deal except that what was happening is we were — you know, every one of those 15 cents that we weren’t raising in taxation went into an account somewhere and then the bill came due. And the bill came due when we were spending $40-billion a year just to pay the interest on money we’d already borrowed and it was unsustainable.

And what we’ve done over the last ten years, contrary to what a lot of people think, there have not been huge cuts to services. In fact, you know, if you look at total government spending today, it is at its historic high in Canada. So is taxation. It’s not as if we’ve suddenly reduced vastly the burden of government on Canadians and we’re just trying to catch up some lost ground. That’s nonsense.

What’s happened is that we raised taxes very significantly for Canadians on the promise that we would defeat the deficit. Having defeated the deficit, brought things into balance, paying our own way, the government suddenly says, Hey, we’ve got a bunch of extra money and now they want to spend it on new programs.

But it seems to me that they made a promise to Canadians that they were taking that money for something very specific, which was to defeat the deficit. They have done so and it is not money that is now available for them to spend as they wish. It’s money that belongs to Canadians and they should return it to them. And the taxation burden that Canadians are bearing is still higher today than it was when the Liberals came to office in 1993.

MS. TREMONTI
Well, I want to pick up on the deficit issue. Now Paul Martin, long ago, sold the idea of spending 50 percent on social programs and 50 percent on tax cuts and debt reduction. Bruce Campbell, you have long argued that the government hasn’t come close to that balance. Where are they now after this budget?

MR. CAMPBELL

Yeah. First of all, I just want to say I don’t think Brian and I would agree on the causes of the debt and deficit. I would see it more as a revenue and an interest problem than spending beyond our means.

And, also, it — I think it’s a bit misleading to talk about spending being at historic highs. I think in — I think the most honest way to look at spending is in relation to GDP in relation to the economy. And in the — and with the Martin cuts, we saw spending fall to levels not seen since the early post-war era; massive, massive program cuts. And in the wake of that, we had an election.

And one of the core promises of that election renewed in 2000 was that the fiscal dividend that was coming available with the program cuts would be allocated 50 percent to program spending, social reinvestment, and the other 50 percent to a combination of debt repayment and tax cuts. And we’ve done an evaluation of that commitment and we — you know, this was the Liberals’ so-called balanced approach. And —

MS. TREMONTI And what does your evaluation show?

MR. CAMPBELL Our analysis shows that up until this current year only about ten percent of the fiscal dividend went into new spending and 90 percent between tax cuts and debt repayment.

Now you can push that up a bit if you see, for example, the child tax benefit as a program that’s delivered through the tax system and you can move that up to 14 or 15 percent. But I think the point is that they have been far from that commitment and this budget doesn’t really alter it a whole lot. It improves it somewhat but it’s still very far from the 50/50 commitment, you know, if you look at the starting point of 1997/98.

MS. TREMONTI
Brian Crowley, let me ask you. When Paul Martin, in his budgets of the past — he created a new vision for the role of government in Canada, a belief in a smaller government. How much of what Paul Martin has done in the past has affected the way we see how spending should be done by our governments now?

MR. CROWLEY
Well, that was certainly the rhetoric of Paul Martin. But, I mean, if I take Bruce’s benchmark, let’s say ’96/’97 when program spending was $102-billion – as of last year it was 138-billion. It’s gone up 36-billion just in that period. It’s projected to go up to 143-billion. You know, program spending is up 40 percent over that period. So I think it’s not right to say that Paul Martin was a small government guy.

Sure, you know, he cut transfers to the provinces. He also increased taxation very significantly on Canadians. We’ve talked about spending cuts. I can tell you that historically we have never spent more money than we are spending today on things like health care. So that I’m just not convinced by this argument that we’ve gone through this huge diet of public spending and that now we’re just trying to catch up on where we were ten years ago. I just don’t think the evidence is there.

MS. TREMONTI
Bruce Campbell?

MR. CAMPBELL Well, there was — just looking at the front page of the Globe and it said, you know, Spending is now at $150-billion. Brian mentioned $140-billion. It was about $120-billion program spending when the Liberals came to power. But that — you know, you have to take into account inflation. You have to take into account population growth. I mean just to stay still — I think the real numbers really have to take into account that fact. And that’s why I think you have to look at it in relation to the size of the economy and in those terms. You see that it has shrunk rather dramatically.

And I just — you know, I just don’t think that this budget really lives up to its billing as a big spending budget. I think it is less than meets the eye. I think this is not — you know, the Chretien legacy is not that he is putting Canada on the path to — back towards a just society, not at all. I think his legacy is –– the social debt.

MS. TREMONTI Well, at the same time — we’re looking at increases in — and a lot of people argue they’re not enough, but — certain child benefits, child —

MR. CAMPBELL
Sure.

MS. TREMONTI —
— disability benefits, homelessness. We are looking at greater reductions for RRSPs.

MR. CAMPBELL
Okay. Let’s —- just stop — just –.

MR. CAMPBELL
That is a social program for the rich. The lifting of the RRSP ceiling or —

the raising of the ceiling, the people that benefit from that particular tax measure are the top five percent or less of income earners. They will benefit big time. Yes, there are some measures – the increase in the child tax benefit, some of the commitments, homelessness and housing. But these are — while steps in the right direction, they’re tiny steps. And, don’t forget, these wounds were self-inflicted. So it’s beginning to undo damage. But I just don’t see the — you know, the big commitment to the challenges at hand.

MS. TREMONTI
Well, let me ask Brian Crowley about commitment. If Paul Martin becomes the prime minister, to what extent are his hands tied by this budget?

MR. CROWLEY
Well, you know, Paul Martin is somebody — you know, you look at Paul Martin’s back. You see the scars of somebody who had to wrestle with existing spending commitment and sort of wrestle them down. Even at a time of economic downturn when, you know, we had this huge deficit every year that had to go to service just on interest payments. So he’s somebody who knows that it can be done but he also knows that there’s a terrible political price to pay for it. And he also knows that it often requires very special political circumstances in order to be able to achieve it.

So I think that he’s going to find that it’s very difficult to manage these spending commitments if he has other priorities. You know, he’s — if he has other priorities, he’s going to have to shift this money into other areas and, of course, these spending commitments quickly become encrusted with special interest, you know, people who benefit from that spending and don’t want to see it shifted to anybody else.

I think there is one other point that it’s very important to make. You know —

MS. TREMONTI
I’ll just have you make —- it briefly

MR. CROWLEY
Yeah.

MS. TREMONTI
— if you could.

MR. CROWLEY
Bruce talked about self-inflicted wounds. I think part of the problem here is that the federal government — the federal government that’s doing all this extra spending is the same federal government that can’t account for all its spending on HRDC, that spent $20-extra-billion after the last federal election on health care and had nothing to show for it, that spent a billion dollars on the gun registry.

And this is the government that’s going to solve child poverty and is going to solve all our health care problems by extra spending? I’d like to see the evidence that they are capable of managing that.

MS. TREMONTI
Well, Bruce — Brian Crowley, you got the last word. Thank you, Gentlemen, both for your perspective.

MR. CAMPBELL
Thank you.

MR. CROWLEY
Thank you.

MS. TREMONTI Bruce Campbell is the Executive Director of the Canadian Centre for Policy Alternatives. He was in Ottawa and Brian Crowley is the Director of the Atlantic Institute for Market Studies. He was in Halifax.