CANADA

NO QUICK FIXES

DESPITE DIRE ECONOMIC TIMES, CANADA’S LEADERS AGREED ONLY TO STUDY PROPOSALS AND TALK AGAIN

BRIAN BERGMAN December 30 1991
CANADA

NO QUICK FIXES

DESPITE DIRE ECONOMIC TIMES, CANADA’S LEADERS AGREED ONLY TO STUDY PROPOSALS AND TALK AGAIN

BRIAN BERGMAN December 30 1991

NO QUICK FIXES

CANADA

DESPITE DIRE ECONOMIC TIMES, CANADA’S LEADERS AGREED ONLY TO STUDY PROPOSALS AND TALK AGAIN

They gathered in Ottawa just six days before Christmas—but the mood was anything but festive. For five hours last week, Prime Minister Brian Mulroney met with the nine premiers from anglophone Canada, the two territorial leaders and Quebec Finance Minister Gérard Lévesque—standing in for Premier Robert Bourassa, who continued his 18-month boycott of all first ministers’ meetings. They grappled in private with the issue that preoccupies more Canadians than any other: the battered economy. Their deliberations began at the Pearson Building on Sussex Drive, near the Prime Minister’s official residence, over a modest lunch of soup and sandwiches, and produced comparatively little of the provincial “bitching” that Mulroney had warned in advance he would not tolerate. But it also did not provide much fresh impetus for an economy that was further battered last week by grim reports.

In fact, the first ministers emerged from their discussions having agreed only to study several proposals and to meet again. Mulroney, describing the meeting as “a good discussion on a broad range of issues,” announced that the federal and provincial finance ministers will meet in Quebec City on Jan. 30, followed by a first ministers’ meeting some time in February. In the meantime, he added, federal officials will examine proposals put forward by the premiers for jump-starting the economy—including across-the-board tax cuts, an acceleration of planned government spending on public works and a suggestion to allow prospective home buyers to use tax-sheltered retirement savings for their down payments. Both Mulroney and the premiers stressed that the talks had been cordial, and that in Bourassa’s absence, they had left all discussion of the Constitution to another day. But with 1.4 million Canadians already out of work, some premiers

expressed dismay that no firm action would be taken until February at the earliest. Said Saskatchewan Premier Roy Romanow: “The good news is that we met, we talked and the Prime Minister said that he’d consider the ideas. The bad news is that it’s not fast enough.”

In part, that mixed assessment reflected the complexity of the problems that confront the Canadian economy. Although most economists insist that the country is emerging from recession, the recovery is proving both glacially slow and painfully uneven. The signs of that were abundant last week. In Ottawa, the Conference Board of Canada predicted that corporate profits, which fell sharply during the recession, will not recover until after 1993, and that “business conditions are expected to remain grim” through next year. In Detroit, General Motors announced plans to cut 79,500 jobs, including

several thousand in Canada (page 16). And hopes that a quick U.S. recovery might help revive Canada’s fortunes were doused when a spokesman for President George Bush’s administration finally used the unpalatable “R-word” and acknowledged that the country is “mired down in a recession-like economy.” Still, Mulroney and the premiers entered their meeting with directly conflicting objectives that left little room for agreement. The provincial leaders were united in seeking lower interest and dollar-exchange rates. Most were also critical of Ottawa for cutting federal support for social services at a time of recession. Mulroney had complaints of his own—notably that Canada’s economic woes are in large part the result of provincial overspending. The accumulated provincial debt now stands at $120 billion, compared with $400 billion owed by

Ottawa. And Mulroney made it clear that the central pillars of Ottawa’s strategy—aimed at reducing the federal deficit and fighting inflation—were not open to discussion.

With the potential for deadlock clear even before the meeting began, some critics accused the Prime Minister of inflexibility. Noting that Mulroney had ruled out requests from both business and labor leaders for action to lower interest and exchange rates, Douglas Peters, chief economist for the Toronto-Dominion Bank, observed: “Until he recognizes

that there is a problem and what that problem is, there’s not much that can be done on a cooperative basis.”

Other analysts, however, echoed the Prime Minister’s complaint that the provinces have failed to confront their own role in prolonging the economic malaise. Thomas Courchene, director of the school of policy studies at Queen’s University, pointed to the failure of successive Conservative and Liberal governments in Ontario to rein in their spending between 1983 and 1989, when the province enjoyed a boom. Observed Courchene: “Ontario fed its own inflationary cycle and the Bank of Canada had to raise its interest rates higher, which hurt people across the country.”

But like many other experts, Courchene blames the process as well as the players for the persistent failure of first ministers’ meetings on the economy to produce more than vague statements of optimistic intent. The

gatherings were first promoted by Lester Pearson in the 1960s to foster co-operation between Ottawa and the provinces. But in practice, they have often served more as a platform for each side to attack the other. The tone of the meetings has ranged from frankly hostile under Pearson’s successor, Pierre Trudeau, to the remarkable warmth of a gathering of Mulroney and the premiers on St. Valentine’s Day, 1985, five months after the federal Conservatives came to power on a pledge of national reconciliation. But last week’s gathering was typical in its lack of clear progress. Observed Ontario Premier Bob Rae: “I’d have preferred if we had reached some specific decisions today.”

If that record of futility is to change, many experts say, the federal and provincial governments may need to establish a more formal basis for their joint management of the economy. Courchene, for one, advocates “some kind of permanent federal-provincial secretariat on the economy” that would monitor the spending and tax practices of both levels of government, forecast their impact on the national economy and produce policy recommendations. University of Calgary economist Robert Mansell, a specialist in federal-provincial relations, argues similarly for the creation of a new agency that might range from “a body of moral suasion,” with purely advisory powers, to a full-fledged coordinating council that could bind both Ottawa and the provinces to specific policies.

There were signs last week that at least some premiers are ready to consider such measures. New Brunswick Premier Frank McKen| na advocated, among other things, uniform legislation that would require all provinces to balance their operating budgets over the traditional four-year election cycle. Similarly, Alberta Premier Donald Getty urged both levels of government to provide a jolt to the economy by cutting their respective income tax rates by one per cent next year.

The presence of Lévesque in the chair reserved for Quebec, however, reinforced the political forces ranged against a national economic recovery program. As Calgary’s Mansell noted, whatever taste English-Canadian premiers may have for joint action, it is certain to face stiff resistance from the one premier who stayed away last week. Said Mansell: “In Quebec, they want more control over the economy, not less.” That assessment offered Canadians little reason to hope that their leaders would agree any time soon on a prescription for the economic ills that have taken much of the cheer out of a grim holiday season.

BRIAN BERGMAN with correspondents’ reports