Cover

THE ACTIVIST

Martin has done a lot more than vanquish the deficit

JOHN GEDDES August 18 2003
Cover

THE ACTIVIST

Martin has done a lot more than vanquish the deficit

JOHN GEDDES August 18 2003

THE ACTIVIST

Cover

Martin has done a lot more than vanquish the deficit

JOHN GEDDES

THERE’S A PARADOX about the way Paul Martin appears at this triumphal moment in his political career. He has laboured tirelessly to position himself as a future prime minister, at least since he jumped into politics in 1988, and perhaps going back to his childhood as the son of a leading Liberal of

the forties, fifties and sixties. Yet for all that past effort, it still looks too easy today. Martin faces no real obstacle—Sheila Copps is barely a distraction—on the final leg of his march to the Liberal leadership convention scheduled for Nov. 12-15 at Toronto’s Air Canada Centre. In the election that will fol-

low, perhaps next spring, a majority for the Liberals looks all but in the bag, thanks to Martin’s stature—and continued vote-splitting among Canada’s Italianate array of opposition parties.

The democratic instinct revolts at the prospect of a prime minister coming into

office against such weak resistance. Yet Martin can hardly be faulted for doggedly working his way into top-dog position within his own party. As for the fracturing of the traditional Tory electoral alternative, that happened more than a decade ago, and wasn’t any of his doing. So if Martin’s current unassailability is a reminder of how uncomfortable it can be to live in a de facto one-party democracy—what one book title called Canada’s Friendly Dictatorship, and another labelled GritLock—that shouldn’t be held against him. What he should be held to is a stringent standard when explaining how he will govern— especially given the unusual concentration of clout in his hands.

But trying to glean what he might do as prime minister by watching the suspenseless Liberal leadership race can be a frustrating exercise. In speeches, debates and scattered remarks on the hustings, Martin has held forth on everything from municipal taxes to marijuana, paying down national debt to empowering backbench MPs. It’s hard to separate when he’s expressing deep convictions from when he’s merely engaging in karaoke politics—singing a policy jingle whenever it’s his turn with the live microphone.

Luckily, we’ve got more solid stuff to go on. After his long tenure as Jean Chretien’s finance minister, Martin has a substantial track record. Oddly enough, the one accomplishment most Canadians identify with him—eliminating the federal deficit—might be the least telling item. A closer look at other key files suggests that Canada is about to get a far more activist prime minister than Martin’s reputation for budget-balancing prudence might indicate. He has thrown his energy into making the economy more innovative, helping low-income working families, and engaging in worthy projects on the international stage that few Canadians have heard of— and many might find arcane if they did. And while his success fighting the deficit earned him a reputation for risk-averse, target-hitting reliability, Martin has also stumbled in a few largely overlooked cases.

A good starting point is to get past the

usual one-line summary of Martin’s political biography: he was the guy who got rid of the deficit, right? Well, yeah, but... Admittedly, looking beyond the deficit battle is not easy to do. After all, anxiety over the annual flood of red ink dominated the federal agenda back when Chrétien made Martin his finance minister after the 1993 election. By the time the books were balanced in 1997-98, the quest to put Ottawa back in the black had taken on a mythic quality. Martin had become the dragon slayer. What was seen at the outset as a thankless task

turned out to be the making of his national reputation—notably in the West, where other Liberals had often been dismissed as weak-willed spendthrifts.

But for all the attention devoted to it, the deficit war has never been well understood. For one thing, the numbers show that Martin may not have been so rock-ribbed in waging the battle as legend has it. When he announced his famous “program review” restraint plan in his 1995 budget, he vowed to cut spending by federal departments—not including transfer payments to provinces and individuals—by about 20 per cent over

just three years. That truly would have been revolutionary, and federal bureaucrats briefly lived in terror. But they needn’t have worried so much. Instead of being whacked by a fifth, direct spending by their departments merely dipped to $51.7 billion in 1997-98, the year the deficit was eliminated, from $52.1 billion in 1994-95.

How, then, did Martin vanquish the deficit? Tough, though temporary, cuts in transfer payments to the provinces for health and education were part of the answer. But the big item was a rapidly swelling tax haul. Federal revenue climbed to about $150 billion in the year the deficit disappeared, from $116 billion when Martin took over at finance, a far greater increase than had been projected. That doesn’t mean Martin just sat back counting the cash as it rolled in. He did impose restraint, especially in areas such as defence. But at a time when most Canadians might reasonably have assumed Martin was focused like a laser on curbing spending, he was really able to pursue a far more activist agenda than is generally acknowledged. And these underdiscussed initiatives, which he chose, may tell far more about his policy proclivities than the deficit crusade that was thrust upon him.

One of the most far-reaching was the creation of the National Child Benefit. Introduced in 1998, the benefit works through the tax system to encourage lowincome parents to get off welfare and into the workforce. The perennial problem was that poor parents, quite reasonably, declined to take jobs that didn’t pay enough to make up for losing various social-assistance benefits. To eliminate that disincentive to work, Ottawa agreed to increase tax credits to low-income working parents. That got families off welfare, saving the provinces money in social assistance payments. The provinces, in turn, agreed to reinvest those savings in expanded benefits and services aimed at the poor. Two years after the benefit was introduced, it was credited with lifting 22,900 families above Statistics Canada’s low-income cut-off, usually called the poverty line.

Martin was the pivotal figure in the creation

of the benefit. Ken Battle, president of the Caledon Institute of Social Policy, advised the government when the strategy was being hatched, and he remembers being surprised by the finance minister’s intense interest. “I talked a lot to Martin about it,” Battle says. “He’s a tough guy. We debated it. But he was supportive of the basic idea, and without him there would be no National Child Benefit.” As a key advocate of the reforms, Battle admits he is biased, but he casts the accomplishment in historic terms: “It’s the most important social policy change in a generation.”

That’s a remarkable claim for a policy that emerged in a period when retrenchment, not expansion, was supposed to be the reality for Canadian social programs. But Battle cites data to back it up: $2.5 billion in benefits paid between July 2001 and June 2002, the latest figures available, to 1.5 million families with 2.7 million children. That’s about 40 per cent of Canadian families with kids. Although the deal to create the child benefit was formally hammered out among provincial and federal social services ministers, Battle unequivocally credits Martin. “In terms of political and policy work, this was Martin’s initiative.”

The notion of Martin hashing out details of a landmark new social policy with leftish policy wonks doesn’t mesh neatly with the popular understanding of what he was up to during those crucial deficit-cutting years. It does dovetail, however, with another theme in his capsule biography—the influence of his late father. As an influential Liberal cabinet minister in the Louis St. Laurent and Lester Pearson governments, Paul Martin Sr. was a force in the creation of universal health and social programs. Martin worshipped him. Many pondered how he might try to build on that progressive legacy after putting the deficit behind him. If Battle is right, he didn’t bother waiting.

If his father’s influence shows in Martin’s instincts on social issues, on economic matters his own business background is key. Martin got his private-sector apprenticeship working for Paul Desmarais at Power Corp. He struck out on his own when he decided to buy Canada Steamship Lines in 1981, and prides himself on having made CSL a more innovative, internationally competitive company. As finance minister, he tried to use the tools available to the federal government to prime the whole

Canadian economy’s capacity for innovation and competitiveness. Even before the books were balanced, Martin’s 1997 budget created the Canadian Foundation for Innovation, a major new source of funding for research facilities at universities, colleges and hospitals. In the 1998 budget, he unveiled a package grandly called the Canadian Opportunities Strategy—devised with considerable input from Eddie Goldenberg, then Chretien’s senior policy adviser. That opened the tap for a gush of billions

that continues today in new funding for university-based research, scholarships and grants to parents who save to send their children to college or university in registered education savings plans.

Behind the strategy was the theory that the key to a smart economy was creating so-called clusters of economic activity, often built around universities. Martin’s backers say it’s working—to a degree. They point to the concentrations of bio-technology companies in Saskatoon, say, or pharmaceutical firms in Montreal. But they also acknowledge this file is far from closed. The Martin brain trust admits that Canada is not yet getting

sufficiënt economie bang for its research buck. According to one of his top advisers, Martin is planning to deliver a major speech next month on how to make sure more of the basic science done in Canada results in money-making new business. “Canada does OK on developing the start of intellectual property,” said the adviser. “But moving it through the pre-competitive stages to commercialization has been a traditional problem in this country.” It’s one Martin wants to tackle as prime minister.

The child benefit and the opportunities strategy may represent the best of Martin’s output as finance minister. Even his loyalists, though, don’t credit him with much of the original thinking behind these thrusts. “He’s not the creative spark,” said one insider. Martin surrounds himself with a swirl of argument and buries himself in reading on subjects that grab his interest. He clips newspaper articles on the weekend to show his aides, demanding follow-up work. He sometimes tries to make direct contact with big thinkers. Martin once surprised Michael Smith, the late Nobel Prize-winning chemist from Vancouver, by dropping by one Sunday morning to chat over coffee in a hotel lobby when Smith was visiting Montreal. The scientist found Martin’s personal curiosity about genome research unusual for a busy politician. Soon afterward, genome science got $160 million in Martin’s 2000 budget.

Over and over, those who have worked closely with Martin describe a pattern: he latches onto an idea, launches interminable meetings to discuss how it might be shaped into policy, and continuously bounces alternatives off communications and polling experts to see how options might sell. “He wants to make sure he understands why he is going ahead with policies,” says Jack Mintz, now president of the C. D. Howe Institute, who worked with Martin as a visiting economist in the finance department in 1996-97. “But he always keeps the politics in mind.”

The dynamic sounds appealing—a symbiotic blend of brainstorming and spin-

doctoring. But it has proven far from infallible. In his 1996 budget, for instance, Martin unveiled an ambitious reform to replace the familiar Old Age Security and Guaranteed Income Supplements with a new-fangled Seniors Benefit. Never heard of it? That’s because it was quietly abandoned. The scheme would have taxed back much of the benefits paid to many seniors, and prompted a backlash from retired Canadians that should have been easily anticipated—but wasn’t.

This was no minor blunder. On the other

hand, the botched reform bid wasn’t central to Martin’s policy outlook. Neither was his decision three years ago to bow to pressure from a well-organized high-technology lobby group and offer new tax advantages for employee stock options—a voguish policy at the time, now tainted by the dubious part stock options played in the high-tech bubble economy. Or his move in 2000 to pay fuel rebates to low-income earners, widely mocked when prisoners, kids living with their parents and other unintended

recipients ended up getting cheques. What these and other miscues may show is Martin’s capacity for looking less than sure-footed when he ventures beyond the concerns that seem more fundamental to his visionsuch as economic strategy linked to university research, and tax reform rooted in the values of social equity.

In the leadership campaign, though, it has often been hard to find those core convictions anchoring Martin’s public pronouncements. He has tended to sound more surface-skimming than deep-thinking. On Canada’s role in the world, he says we need to shore up our relationship with the United States and engage in more multilateralism. That sounds far vaguer than his past work on, say, creating the G-20, a group that brings together leading industrialized countries and emerging-market economies. On climate change, he supports meeting our Kyoto targets and making sure Alberta’s oil patch and the Atlantic offshore don’t pay the price.

To be fair, Martin is still, after all, a Liberal MP, and is constrained somewhat from fleshing out ideas that would clash with the ongoing policies of the Chrétien government. Be patient, his backers plead, insisting the vision will come into focus. “It’s not fair to ask for detailed, fully costed-out programs months before he’s leader or prime minister, and many months before an election,” says one Martin strategist.

Maybe not, but Martin is no ordinary candidate for high office. As the closest thing to a sure bet Canadian politics has seen for a long, long time, he can afford to risk some political capital on straight talk. Demanding it in this languid summer barbecue season is probably futile. Instead, watch for that planned September speech, on linking science research to the marketplace, as a good place for the more substantial Martin to reappear. Until he does, there’s enough in his record to predict that even if his leadership campaign is proving to be a dull affair, a Paul Martin prime ministership should turn out to be anything but. Iffl