Ouch. It hurts. Uncle. The audience is listening. Canada, indeed, has to do something about its debt.
Among the industrialized nations, only Italy has a worse record. Together, Ottawa and the provinces owe $700 billion— and rising—and foreigners have lent about 40 per cent of the funds to cover it off. And about one-third of all federal revenues goes to paying off the annual interest on the borrowing.
In an editorial last week, headlined “Bankrupt Canada?” The Wall Street Journal concluded that Canada is “flirting with the financial abyss” and has become “an honorary member of the Third World in the unmanageability of its debt problem.” In contrast, the Journal lavished praise on Premier Ralph Klein’s Alberta, where, after a 20-per-cent slash in government spending, the economy grew last year by four per cent and unemployment has dipped to 7.4 per cent from nine per cent. The message from the megaphone of American capitalism was serious and needs to be heeded.
At the same time, there also is a need for more perspective than was conveyed by the Journal's overblown prose. Writer John Fund, interviewed later by CBC’s Newsworld, himself conceded that “Canada is not on the verge of bankruptcy. Canada is in perilous times. Canada has to get its budget in order.” Is it a basket case? “I wouldn’t go that far,” Fund responded.
The writer’s calmer tone was more appropriate than the heated words on paper. True, the potential for a full-blown crisis is here. But whether it actually happens is still within Ottawa’s control. The outcome will be determined primarily by the response to Finance Minister Paul Martin’s budget next month. It is assumed that he is planning stem measures, and the events of last week on the foreign exchange front certainly strengthen his hand in cabinet. But Canadians should make no mistake: when the money managers warn us to tighten our belt, what they are not saying is that the result will be painful I cuts in education, health care 1 and pensions. That’s where the 5 real spending is.
Facing that prospect, Canadi§ ans can only hope that all of the 2 analysts and experts who have preached doom and gloom for so long about Canada’s prospects are right about their solutions. Those are the folks, after all, whose theories were applied rigorously for years throughout the Western democracies—back before the recession, when Ronald Reagan and Margaret Thatcher and Brian Mulroney helped to run the world, ringing up huge deficits and presiding over the redistribution of wealth up the feeding chain; back when the Mexicans were told that NAFTA was their salvation; back when Canadians were lured into free trade by the vision of a “New Economy.” It is no surprise that there are legions of skeptics: the 26,000 people who lined up last week, Depression-style, at the mere whisper of meaningful work at General Motors; the populace at large, bruised and battered in an economy that was supposed to get better, years ago. Canadians are in a mood for reform of the economy. They can only hope that the proponents of strong medicine are right and that the patient does not expire in the operating room.
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