Debt and taxes can be pared.
by Don Cayo


One group of voices clamours for tax cuts. Another decries what’s happening to health and education and social services, and demands improvement. A third, smaller and more muted, nags about how we Canadians are hamstringing future generations with our unpaid bills, and how common sense demands that we get serious about paying down our huge federal and provincial debts.

Let me add my voice: Me too. I want tax cuts. I want important services maintained at – or brought back up to – a decent level. I want mountainous debts reduced so many more tax dollars can start funding services and stop paying interest.

And I want it all now.

I admit I’m dreaming – at least the part about wanting it all now.

But the part about wanting lower taxes, better key services and lower debt? That’s merely unlikely, not impossible. It boils down to political will.

If you look back 15 or 20 years – indeed, to any era when Canadians thought life was good – taxpayers gave their governments less, not more, than now. Factor in inflation and the numbers are less dramatic, but the trend remains. Yet services, though never perfect, were pretty good.

One explanation is the amount of money – nearly a third of all revenue in the case of Ottawa and getting uncomfortably close to 20 cents on the dollar for most provinces – that goes to interest.

One theory is that a tax cut would help pay our debt. It would spur growth and, since growth generates more tax revenue, tax-cutting governments actually come out ahead. And the unpaid debt would shrink as a percentage of government revenue. The theory is true – but dangerously easy to misapply. So we see things like Ontario Premier Mike Harris running a deficit to pay for an election-year tax cut, or New Brunswick Finance Minister Edmond Blanchard using a federal fund that was intended to be spent over a period of years to balance his election-year books.

The art of more responsible tax-cutting, which federal Finance Minister Paul Martin preaches better than he practices, is complicated by debt. Each few million that is paid off reduces future years’ interest by a few tens of thousands of dollars. But costs money to make the payments.

Like a consumer wrestling with a maxed-out credit card, governments can find the money to make payments in only two ways – earning more or spending less.

Our governments have tried both. Taxes have been going way up – often in sneaky ways – federally and provincially for years, as well as in all of the many municipalities where tax rates and/or property values have increased. And virtually every government tells its voters it has cut spending to the bone – claims tacitly supported by the deterioration of hospitals, road maintenance and much more.

This leaves a perplexing question. If our governments are spending more and doing less, where does the money go?

The fact is that a lot of it is still frittered away. Too many governments try to cut costs by eroding everything, rather than focusing on doing some things well others not at all. They won’t give up the frills – the pork-barrel appointments, the showy but futile attempts to buy new jobs, the junkets, the glitzy PR, the pandering to special interests – in order to properly support schools or health care or roads or other basic needs.

And too many trim and pare, but never fix, the fundamental inefficiencies that got us into this mess. Government bureaucracies run as a monopolies, and monopolies, public or private, all look much the same. They may mean well, but they tolerate – or don’t recognize – practices that could never fly in a competitive environment.

A New Brunswick cabinet minister told me a few weeks ago about a new health clinic opened recently in suburban Fredericton in attempt to provide better service and ease pressure on the city’s main health care facilities. But what’s happening, he said, is that people go first to the clinic, then to the doctor’s office or hospital where they’ve always gone. Since Medicare now has to pay twice, costs are way up.

Any business that goofed like this would cut its losses and close the too-costly branch plant. But government is not a business, and someone’s bound to squawk about “cutbacks” if the new clinic closes. So it remains – open and redundant .

Such inefficiencies are multiplied countless times across the region. Staying with the health care example, even in the face of common sense and credible data, governments cave to doctors’ arguments about allowing low-cost nurse-practitioners to do more, or nurses’ arguments against letting aides take on a broader work load. And thus more and more people work harder and harder to do what may well be the wrong things.

If we fix these kinds of things, not only in health but dozens of other departments, we can eat our cake and still have it. We can chip away at taxes and debt, while at the same time maintaining or restoring the services that most of us agree we want and need.