THE NATION’S BUSINESS

Our choice: go broke fast, or slowly

The emphasis in Axworthy’s paper is on the need for individual responsibility— something very close to a user-fee democracy

Peter C. Newman October 17 1994
THE NATION’S BUSINESS

Our choice: go broke fast, or slowly

The emphasis in Axworthy’s paper is on the need for individual responsibility— something very close to a user-fee democracy

Peter C. Newman October 17 1994

Our choice: go broke fast, or slowly

The emphasis in Axworthy’s paper is on the need for individual responsibility— something very close to a user-fee democracy

PETER C. NEWMAN

THE NATION’S BUSINESS

Lloyd Axworthy’s much postponed social policy review, finally published last week, is one of those seminal documents designed to alter the social contract between Canadians and their governments. Those critics who decry the fact that the document’s ultimate purpose is to reduce deficit spending by more than $7 billion should temper their hostility by remembering neither Ottawa nor the provinces can afford to keep the existing social net in place, much less to broaden it.

The options Axworthy is having to defend were not his first choice. He is a Winnipeg politician with deep roots in the left wing of his party, dating all the way back to its social conscience days under Walter Gordon, the nationalist guru who served for a time as Lester Pearson’s finance minister. Axworthy would have much preferred to sponsor a policy based on a full-scale guaranteed annual income or its equivalent. That notion went out the window because its initial cost would have been staggering. Nearly all of the programs a guaranteed annual income would replace would have had to be phased out over lengthy periods in a way that hurt its recipients least; also, any such move would have required federal initiatives to be meshed with provincial jurisdictions. Quite apart from Jacques Parizeau, who declared that he wouldn’t play in Axworthy’s ball park even before the Ottawa recommendations began to leak out, provincial premiers don’t want any part of any arrangement that will reduce their clout.

The $14 billion in transfer payments from Ottawa to the provinces at stake in the Axworthy proposals yet again underline the crazy quilt of duplication that impedes the efficiency of the country’s governance. William Watson, the McGill University economist, has calculated that it costs $9 in public money to move $1 between income classes. He points out that while Canadian governments at all levels spend more than $300 billion, it would require only $13 billion to bring up to the poverty line all those Canadians currently below it.

To sell his program, Axworthy must take the high ground and insist that the social net must be reformed and not just reduced. He must pretend that the current social net is no longer desirable, while knowing that it’s no longer affordable. That’s a tough sell.

There’s something very un-Canadian about having to cut or eliminate government handouts. Those who attack the public sector’s largesse, claiming that the safety net has become a hammock, ignore the fact that government support has become less a privilege than an entitlement. Having accepted responsibility for almost every economic and social trend that shapes Canadian life, governments can now escape responsibility for virtually nothing.

Canada’s first social welfare program was the modest Old Age Pension Act of 1927, but it was the 1940 Unemployment Insurance Act and especially the 1945 White Paper on Employment and Incomes that set the thrust and tone of government support in this country. That radical document was accepted by the Liberal government of the day (headed by Mackenzie King and masterminded by C. D. Howe) as a way of co-opting the then-burgeoning support for the CCF, the socialist movement that predated the NDP. The Liberal prime ministers after King faithfully followed this model, introducing the social welfare measures in subsequent years that made it workable. It was a way of purging capitalism of some of its harshest inequalities without forcing voters to seek their salvation on the political left. Lord Keynes, the Cambridge don whose General Theory on Employment, Interest and Money provided the white paper’s ideological rationale, may have been their high priest, but pragmatism was their religion. Part of the faith that sustained that belief system was that social welfare payments must not discriminate between the rich and the poor. The end of universality began to accelerate during the Mulroney years as social policy payments to high earners were clawed back through the income tax. But now, with publication of the Axworthy paper, universality is officially dead. And buried. (So it should be. I know of one Winnipeg-born millionaire, who married his son’s youthful babysitter and, when they had a child, he boasted that he may be the only guy in Canada collecting both an old age pension and the baby bonus—when he didn’t need either.)

Under Jean Chrétien, the Liberals are still dedicated to seeking the middle of the political road, but with the NDP and the few surviving Red Tories decimated in last year’s election, the main political threat now is from the right and Preston Manning’s Reformers. That’s why the emphasis throughout Axworthy’s paper is on individual responsibility— something very close to a user-fee democracy. (This document, incidentally, is only the first tentative step in the government’s social spending review. The next instalment will deal with such controversial topics as cutting back old age pensions, RRSP allowances and welfare payments to natives.)

The most painful dilemma in designing any national social welfare policy is the inevitable regional disparities. In the Northwest Territories, for example, government payments of all kinds account for 71 per cent of economic activity, percentages that are almost equally high for Prince Edward Island, Newfoundland and Nova Scotia. Any significant cut in federal payments would devastate local economies, which in turn would put many more people on welfare.

The Axworthy paper’s best features have to do with helping eradicate poverty among the young and redesigning the financing of higher education. From now on, getting an education won’t be the most important thing the young can do to survive in tomorrow’s economy. It’s the only thing.

In the weeks ahead, every special-interest group in the country will set out to prove that Axworthy’s paper will harm its members. And they’ll be right. But replacing Axworthy or throwing his carefully crafted document in the garbage won’t help.

About the only alternative Canadians have left is to go broke fast or to go broke slowly. Lloyd Axworthy’s ideas will help stem the slide.