Dr. Depression’s Bitter Elixir Now Available in Ontario

SOME DAYS AGO I spoke to the former Finance Minister and Prime Minister of Canada, Paul Martin, who in 1995 tabled the federal budget balancing Canada’s books. It’s become an established (and easily falsifiable) political cliché that Liberals tax and spend whilst Conservatives tidy the fiscal house. Speaking to Mr. Martin, I was reminded of the conspiracy theory that Reagan had tripled the US deficit in order to undermine the welfare state. Well, some thought it a conspiracy theory — and then David Stockman, the Office of Management and Budget Director, confirmed the supply side ruse.

This brings us back to 1995 and the Liberal Finance Minister:

When I became Finance Minister it’s no secret that Canada’s balance sheet was in tatters. It was very clear to me that we were going to have to act to clean up the balance sheet. Thirty-six cents of every dollar was being spent on servicing the debt. We could not afford to have that number go up, simply because if we did it would affect our ability to fund our social programs and work our way out of the mess we were in.

I begin with Martin because in many respects the Ontario of 2012 brings to mind the Canada of 1994. Don Drummond, whose commission today released a very discouraging report on Ontario’s finances, was one of Martin’s deputies in 1995 when the federal government undertook its own program of deep spending cuts and fiscal reform. Arguably the most profound of Martin’s reforms, the Canada Health and Social Transfer (or CHST) has had a lasting influence on the fiscal character of the country. Within a few years of 1995, the books were balanced and Martin was on his way to the Liberal leadership and the Kelowna Accord. I was surprised when he told me that “the concept of Kelowna was one of the things that brought me into public life.” But I’ve always thought that the case for fiscal responsibility rested as much on liberal and even socialist principles as it did on conservative ones — and the same is true for lower taxes and many other matters over which the right has now claimed an exclusive possession.

It’s fine and good to speak of fiscal prudence, but the medicine prescribed by Mr. Drummond — I’ll call it Dr. Depression’s Bitter Elixir — is frightening stuff. It concerns — as it must — broad spending cuts, wage freezes, and reforms of a nature “pretty much unprecedented in Canadian post-war history.” If the government refuses to act as directed, then the economic equivalent of the apocalypse will occur and Ontario will face the four fiscal horsemen. It’s a doomsday scenario, and doubtless you’ve already had a faceful of it in the current news cycle. Less known however, and less reported, are Drummond’s harsh (one might even say scandalous) views of governments and media. Allow me to explain.

On October 12, 2011, Drummond delivered a lecture at Queen’s University called  “Public Policy Analysis in Canada,” the main thesis of which appears to me that governments don’t do the analysis and media don’t hold them accountable for not doing it. Reflecting on the last Ontario election, he asserted that all three political parties lied about fiscal conditions and that journalists mostly let them get away with it. Other interesting points are as follows: people have absolutely no idea what’s going on and couldn’t even say what the current debt amount of Canada is, we need smarter citizens and better journalists, ideological think tanks are doing a poor job of producing balanced policy analysis, governments no longer care about research, editorial boards don’t provide enough policy information and analysis, the Harper government isn’t interested in what the bureaucrats think and meets with them only 1/4 as much as politicians did a decade ago, and the culture of policy analysis no longer exists within Ontario’s public service either.

Some of these points seem to me weak, and in this connection it’s worth noticing that of the 362 recommendations it was only one — Drummond’s call for an axing of the full-day kindergarten program — which the province unequivocally rejected. Few things have been studied more than early childhood education. But other assertions, that ideology today plays a larger role in governance and that talented policy analysts and researchers are seeking more welcoming pastures outside the public service — and good riddance to them — strike me as spot-on. This ought to be the source of the real gloom. In a matter of a few years, budgets may be balanced. This will do nothing however to address the deficits of an uninformed public and political class so much in evidence.

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