COLUMN

A damning indictment of politicians’ behavior

For Bob Rae to suddenly realize the error of his ways proves his inadequacy to manage 40 per cent of this country’s economy

DIANE FRANCIS May 3 1993
COLUMN

A damning indictment of politicians’ behavior

For Bob Rae to suddenly realize the error of his ways proves his inadequacy to manage 40 per cent of this country’s economy

DIANE FRANCIS May 3 1993

A damning indictment of politicians’ behavior

COLUMN

DIANE FRANCIS

For Bob Rae to suddenly realize the error of his ways proves his inadequacy to manage 40 per cent of this country’s economy

It’s not the economy, it’s government spending, stupid. That’s what I have been saying for years. But, suddenly, politicians, both left and right, are listening to deficit critics. The “D” word is everywhere. Newfoundland Premier Clyde Wells wants a mandate from voters to take on his overpaid public-sector employees. Tory candidates talk tough about deficit-cutting. But, surprisingly, Premier Bob Rae of Ontario has become a born-again deficit-fighter, along with other spendthrift premiers. Long overdue, this newly acquired fiscal responsibility has only happened because, in a series of secret meetings with prominent businessmen, Rae and other premiers were persuaded by representatives of the Business Council on National Issues (BCNI), that their spending threatens to destroy Canada’s economy, reputation and social programs.

The closed-door sessions were held at the request of the Ottawa-based BCNI, whose membership includes chief executives of 150 big businesses. Each of the provincial leaders, at separate meetings, received copies of a confidential report chillingly called “Canada’s Looming Debt Crisis.” The message is not light bedtime reading. “Clearly, Canada’s public finances have been deteriorating for several years and are now in danger of spinning out of control,” the report declares. “We are entering dangerous territory. Canada’s ability to borrow will eventually come into question. When this happens, the economic consequences will be far more painful than anything Canadians have endured so far.”

But consequences will be much more of the same. Already, taxes here are excessive and have resulted in mass unemployment, a lacklustre business environment and diminishing tax revenues. Apart from raising the consciousnesses of politicians, the report is a damning indictment of their behavior. Particularly damning is the fact that nothing in this report is new, and for Bob Rae to suddenly realize the error of his ways as a result of reading it proves his inadequacy to manage 40 per cent of this country’s economy. But he is not the only one without qualifications. He has simply caused the most damage so far with what, at one time, Rae called a potential $17-billion deficit—a figure that the BCNI described as one of the world’s worst government deficits.

Perhaps politicians became convinced because of what this observer found to be the council’s uncharacteristic use of such phrases as “cause for alarm” and “debt crisis.” Perhaps it was because representatives from Bay Street brokerage houses were in attendance and warned premiers in no uncertain terms that the world’s lenders were becoming worried about Canada’s financial stability because, by a BCNI yardstick, our finances and debts are the world’s worst for an industrialized nation.

The council report begins, “As leaders of Canada’s major enterprises, we are alarmed at the state of our country’s public finances and worried about what the future could bring if action is not taken quickly to contain federal and provincial government deficits.” It states, “If growth averages only two per cent and interest rates are two per cent higher than as-

sumed, overall government debt would approach 160 per cent [of gross domestic product] by 1999—a level 25 per cent higher than the highest rate experienced by any advanced industrial country.” If the BCNI’s forecast proves correct, Canada will no longer be an advanced industrial country, but the next Argentina, as a currency and debt crisis will force enterprises and talented people out of the country to the United States. This has already begun to happen.

And in the past three years, debts dramatically outpaced economic growth. The total public-sector debt, states the BCNI, is now a staggering $630 billion, or 90 per cent of the economy. Among developed nations, according to a BCNI chart, only Belgium, Italy and Ireland have higher per capita gross public debts. At the same time, Canadian governments and private businesses combined run a deficit in transactions with other countries. Says the council report: “This is because as our governments have gone deeper into debt, they have been borrowing heavily from foreigners.” The provinces are mostly to blame.

This year’s combined federal-provincial deficits will total $60 billion, predicts the BCNI, or eight per cent of the economy. And it continues: “Canada is threatened by the possibility of a serious loss of confidence in domestic and international financial markets. Already there are worrisome signs.” Credit rating agencies have downgraded several governments and lower ratings are threatened, says the BCNI. The lower the rating, the higher the interest rates governments must pay to borrow because they have become riskier prospects. Worst of all, Canada already relies more on foreigners to live beyond its means than do any of the world’s 24 industrialized countries, the BCNI report says, stating that $300 billion out of $630 billion in debt was borrowed abroad.

The report rightly argues that spending cuts, not taxes, are needed. As a proportion of the gross domestic product, Canadians pay 10 per cent more taxes than Americans pay. Even if the United States increased taxes to extend a fully funded health care system, like Canada’s, to all its citizens, Americans would still pay five to six per cent less in taxes than Canadians, the BCNI calculates. That in itself is fascinating, considering that the U.S. government not only provides all the other social programs Canada does but also supports the biggest armed forces on earth. Canadian governments deliver less for much more money than our efficient cousins to the south.

Premier Rae recently remarked to a businessman that he didn’t realize the seriousness of the situation. Such an admission illustrates what has been wrong with the leadership in this country. Rae has spent his career criticizing and formulating policies without even the most elementary understanding of fundamentals. Politicians should have to pass exams before being allowed to run for office. At the very least, the Business Council on National Issues report should be required reading for every elected official in this country.