Flaherty intends to copy the Liberals

Julian Wolfe
June 6th, 2011

Flaherty looked to Liberals for lessons on spending cuts

The Conservatives promised that they would get us out of deficit by 2014. However, such a promise won’t be visible in the upcoming budget. The Conservatives are well aware of the Liberal Party’s prudent economic abilities and plan to copy it. Jim Flaherty, Canada’s Finance Minister has declared that he doesn’t how to fix the economy, but knows that if he can figure out how the Liberals fixed the previous Tory mess, he can clean up his own.

Flaherty has asked for a review of the former Liberal government’s spending cuts in the 1990s a year before the Conservatives hinted similar actions. A briefing note to Flaherty, obtained through the Access to Information Act examines program review (found below), the way the Liberals cut $13.3 billion in expenses in 1994. When the cuts were finished, the government eliminated 55,000 positions from the public sector and raised revenue by introducing user fees.

The Conservatives have tried to keep their images clean by saying that the types of cuts won’t be the same. During the election, Flaherty said he would avoid the “slash-and-burn” tactic that the Liberals used in program review when he announced that he would get the surplus a year sooner.

Critics, however, say that the current government has a large task ahead of them.

“For all we know, [Flaherty] made those statements after he looked at these [program review] documents and said, ‘no, I can’t deal with this,’ Gene Swimmer, a professor emeritus at Carleton University, who studied the mid-1990s cuts told CBC.

“He certainly couldn’t deal with it in a minority government. Maybe now they can. From a policy perspective, it makes sense to know what happened in the past and to keep your options open.”

Tony Clement said that the Conservatives won’t cut funding for healthcare and transfer payments to the provinces like the Liberals did.

“We made that clear. The budget will make that clear as well. So it’s an entirely different circumstance than that,” Clement said.

Clement said that he would trim $11 billion by not replacing retiring bureaucrats and scraping programs that have effectively died.

During the 1993 election, Jean Chretien’s Liberals promised to cut government spending by 3% of the country’s GDP (Gross Domestic Product), a goal that he wasn’t able to complete when he was finance minister. When the Liberals came to power, they were criticized for not cutting enough in their first budget. Chretien responded with the “Program Review” initiative.

Every expense except for Aboriginal peoples and children, including transfer payments for provinces, healthcare and social programs was on the table. Instead of cutting across the board, Chretien’s Liberals focused their primary cuts on transportation, privatized airports, and ended business subsidies.

One section in the 2010 background on program review focuses on the mistakes that the Liberals made by cutting too much in certain places.

“In retrospect, some departments cut too deeply, and reinvestments and course corrections became necessary in subsequent years. It became rapidly clear in the Department of National Defense, for instance, that the rent expected as a result of the end of the Cold War would not materialize. Missions became more numerous, more complex and more costly.”

It is expected that the Conservatives will exempt sectors while making the cuts. The Liberals exempted Aboriginal people and children and the Department of Indian Affairs and Northern Development at the time received a 12% increase in funding between 1994-95 and 1997-98 fiscal years.

The Conservatives indicated that they would leave transfer payments for healthcare alone and follow suit with the Liberal and NDP promises to increase funding by 6% annually. They also wouldn’t touch their tough on crime initiatives where the Conservatives have increased funding by 32.5% since 2006.

Critics point to National Defense as the way to save money. With Canada’s reduced commitment in Afghanistan, money can be saved. However, the Conservatives have locked in a fighter jet deal that will pose as large expenditures.

Clement said that once the 2011 budget will be passed, which will signal that spending cuts is the direction, “We’re going through a process over the next year, and then those decisions will be found in the 2012 budget.”

Unlike the Liberals who had to slay a $37 billion deficit in 1995, the Conservatives, will have to slay a $34.4 billion deficit, lower than the $40.5 billion that was expected.

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