The Bill Clinton of Canada, only Much Better

Townhall.com ^ | June 14, 2014 | Daniel J. Mitchell

[Kaslin]

Imagine how weird it would be if the Cato Institute and Americans for Tax Reform praised Barack Obama for fiscal responsibility.

And think how inconceivable it would be for the Heritage Foundation and the National Taxpayers Union to applaud Tim “Turbotax” Geithner for economic stewardship.

But the Canadian version of that happened while I was at the conference of the World Taxpayers Association in Vancouver two weeks ago.

The event was organized by the Canadian Taxpayers Federation and the main speaker was Paul Martin of the Liberal Party, who served as Finance Minister from 1993-2002 and Prime Minister from 2003-2006.

And I should add, for context, that the Liberal Party in Canada is not a classical liberal party with a track record of free markets and small government.

But Paul Martin was honored because he was responsible, while Finance Minister, for one of the best records of fiscal restraint of any policy maker in recent history (click here for international comparisons).

I’ve pointed out that the burden of spending fell under Bill Clinton, and I’ve even acknowledged that the federal budget hasn’t grown much under Obama, at least once you get past his first couple of years.

But Paul Martin was far more frugal. And since Canada has a parliamentary system, there’s no ambiguity about who deserves credit. He restrained spending when his party had control.

What happened to generate the good results? For all intents and purposes, he imposed a spending freeze. And I’m talking a nominal spending freeze, not the kind of fake fiscal discipline you get when politicians make “cuts” off an inflated baseline.

And because the budget was successfully restrained, that addressed both the problem of too much spending and the symptom of red ink.

In his speech, Martin won me over when he bragged that the burden of government spending fell to its lowest point in 50 years.

And my man crush became even more pronounced when he said they allowed agencies to ask for more funds, but only if they identified offsetting cuts elsewhere.

What a novel concept! A government that actually looked at tradeoffs and prioritized outlays. Sort of like a household or business.

I asked the former Prime Minister a couple of questions.

I was specifically interested in why the Liberal Party didn’t behave like other left-wing parties and raise taxes to enable bigger government.

Martin said there were some in his party who wanted that approach, but that there were two reasons for good policy.

First, enough people understood that Canada has a spending problem rather than a debt problem. And second, there was concern that financial markets would react poorly if policy makers simply pushed for higher taxes and ignored the size of government.

Wow, I wish the average Republican had the same sophisticated understanding of fiscal policy.

No wonder Canada got such good results. They imposed austerity on the public sector, rather than trying to squeeze the private sector (a distinction that seems to escape Paul Krugman).

To give you an idea of what Paul Martin accomplished, here’s a video prepared by the Canadian Taxpayers Federation, which features laudatory comments by representatives of major market-oriented think tanks.

At the risk of stating the obvious, I don’t think there will ever be a video like this about Obama.

Very well done, even though I think it focused too much on red ink and not enough on the real accomplishment of spending restraint.

My Cato colleague, Chris Edwards, has produced some very good data on what’s happened to the burden of government spending is his home country.

For further information on that topic, here’s my video on international examples of spending restraint. Canada, you’ll notice, is one of the prominent case studies.

P.S. If you know any Keynesians, you can have some fun by asking them why Canada’s economy grew when the burden of government spending was reduced.

P.P.S. It’s also very impressive that Canada has one of the lowest levels of welfare spending of any developed nation.

P.P.P.S. No wonder Canada now ranks above the United States for economic freedom and the freest jurisdiction in North America is actually a Canadian province.

P.P.P.P.S. To end on a humorous note, Canada should fortify their border to avoid an influx of American leftists.

[Veggie Todd]

I thought this was going to be about the Toronto mayor.

[Jonty30]

Thanks to fiscal restraint, the size of Canada’s relative to the economy is about the same before Mulroney took the reigns of Prime Minister.

I keep hoping Harper will try to pay down the debt rather than hold onto it.

[hosepipe]

Canadians have always had big givernment, only want big givernment, will have nothing less than than big givernment..

actually know of and respect nothing else but big givernment..
Canadians are brain washed socialists.. politically diseased..

True some want smaller BIG givernment and some want bigger BIG givernment..
but with them BIG GIVERMENT is all there is..

Looks like America is becoming CAnada.. PITY!..

[Vigilanteman]

For the record, Canada made their right turn (2006) the same year America made their sharp left turn.

Martin only lasted as PM for three years and, yes, for the Liberal Party, he was actually pretty good on fiscal issues.

Two things contributed to his defeat: the sponsorship scandal which exposed too much crony capitalism in the government and fiscal restraint which cut back on the amount of free stuff given to favored constituencies.

Canada has a far more homogeneous population than we do and far fewer constituencies which expect free stuff. They also have immigration policies which put their own citizens first.

[Former Proud Canadian]

Re post 4: huh? Did you read the article? Do you have any idea how much further down the socialist road the USA is? You might have been right 20 years ago, not now.

[albertabound]

you are talking through your hat...harper has fostered an economy that is making terrific strides

[hosepipe]

Canadia, URP, US.. same thing..

Centralized gvernment is THE problem not the answer..
All Canadians, All URPeans, and 70% of the US.. does not know that..

A version of “Logans Run” is bound to happen..
Really ALREADY IS..

[FreedomNotSafety]

I applaud Canada, specifically Alberta, but especially Harper and those who voted for him. There are a few here on this forum who will not accept that they no longer live in the land of the free and the brave.

[Praxeologue]

Paul Martin is no fiscal hero.

In the mid-1990s, Paul Martin, illegally withdrew thirty billion dollars from eighteen federal pension funds,incorrectly calling them 'surplus contributions', before which his federal government took a contribution holiday. The surplus of pension funds, due to his Finance Department's politically-motivated miscalculations, increased the charge to employees' contributions, arbitrarily, and froze public service pay raises going back to Trudeau. Paul Martin slew the deficit on the backs of public servants. Canada's chief actuary at the time, Bernard Dussault had his integrity slandered by Martin and the Liberals for speaking the truth and opposing the plan. Then Martin increased Canada Pension Plan premiums with no change to benefits.

Martin is widely, and incorrectly, viewed as having saved the CPP in the mid-1990s. The real story of how he balanced the budget, on the backs of the middle class has not been properly told and conveyed to the public. Pension fund actuarial calculations, while valid, are not understood by the public. As such, the Left from union leaders to Liberal leaders use the topic as an opportunity to deceive the masses. The prime example is the way benefits were paid far beyond what they actuarially should have been based on contributions in the Trudeau years, creating unfunded liabilities. This had mass appeal and bought votes. The Liberals, including Martin, knew what they were doing. It was only when the international capital markets increased Canada's borrowing costs to unsustainable levels that Martin was forced to find some sacrificial lambs to balance the federal budget.