COVER

NO QUICK FIXES

February 17 1997
COVER

NO QUICK FIXES

February 17 1997

NO QUICK FIXES

COVER

Finance Minister Paul Martin spoke in his Ottawa office recently with Maclean’s Contributing Editor Mary Janigan and Assistant Managing Editor Ross Laver. Excerpts:

Maclean’s: Are Canadians better off now than when your party took office in 1993?

Martin: Absolutely. First of all, if you were the average taxpayer then, you had just come off virtually a decade-long string of tax rate increases.

What you have seen in the last three years is no tax rate increases. Second, you had just come off a period in which your disposable income declined. Over the past three years, your disposable income has stabilized. What taxpayers are asking is: is there more money in my jeans today? Very clearly, the reduction in interest rates has meant an enormous amount Whether you are buying a new car or a refrigerator, you have more in your jeans today than a year ago. If you’re rolling over your mortgage, you are in a much better situation.

Maclean’s: What about the 1.5 million Canadians who don’t have jobs?

Martin: The fact is that the unemployment rate has come down—not nearly as much as one would have wanted, but it has come down. Virtually every economist in the country will tell you that we are going to have very strong job creation in the year ahead, so you have a far greater expectation of getting a job. Obviously, that is going to give a great deal of hope. But there is no doubt that the single most important problem of our society—Western society, not just Canadian—is the failure of governments over the past 20 years to develop decent [employment] adjustment policies. That has meant that we have a very stubborn unemployment rate.

Maclean’s: Many economists believe that unemployment will remain high for several more years. Does that worry you?

Martin: I’m worried about it. Everybody is worried about it. But I have not had a lot of pressure for quick fixes from caucus. People understand that we are going through a period of transition. If you go back to 1972 or 1973, what you see after every recession is a steadily ratcheting level of unemployment. What I believe now is that we have embarked upon a new period that is much closer to the one from 1948 to 1970. Instead of steadily ratcheting increases in unemployment, we are going to see ratcheting decreases in unemployment. But it is going to be a very different kind of employment. It is going to involve much more self-employment. It is going to require

‘Very slowly,

I think, there’s a growing confidence’

specialization within the world market as opposed to generalization in a domestic market By definition, that carries a great deal of insecurity with it. It takes people time to adjust to that, and the role of government has got to be heavily focused towards adjustment policy. Maclean’s: What sort of adjustment policy?

Martin: Governments have got to provide the means for saving for education. They have got to provide the means for lifelong training. Our tax systems have got to facilitate change as opposed to inhibit change. And for those who find it difficult to survive change, there have to be income supports. Maclean’s: If you are describing the future job market correctly, won’t those insecurities remain with us?

Martin: No, I believe the unemployment rate is going to drop. We’ve just come through 20 years of increasing unemployment. I think we’re now looking at 20 years of decreasing unemployment because we are learning how to handle these problems better. The simple fact of seeing decreasing unemployment lev£ els is going to build security. § Also—and this is a Canadian * phenomenon—I think you are s going to see less insecurity in Canada than in any other industrial country outside of the United States, and quite conceivably including the United States. The fact that we are succeeding in the world economy, creating the jobs in the New Economy, is going to breed a great deal of security as to our ability to handle the evolution of the economy. Where you are really going to see insecurity is in Europe. But in Canada, we are measuring up really well. Two years from now, you are going to find a very, very confident nation. Maclean’s: Isn’t there a significant disconnection between those views and the view today on Main Street?

Martin: I think there is less of a disconnection today than a year ago. Look, all it takes is another big headline of another big company letting 2,000 people go. But very slowly, I think, there’s a growing confidence.

Maclean’s: There’s also growing pressure for a tax cut.

Martin: We will be reducing taxes. Let there be no doubt about that. But when you do a tax cut, you want it to be a permanent tax cut, not a temporary cut. We can today hold out the possibility of a permanent tax cut. We can today hold the probability of ongoing low inflation for as far as you can see. We can today hold out the prospect of increasing productivity. The United States and ourselves are the only two countries that are consistently increasing productivity. Every single indicator out there is positive for us. And that is the greatest answer to this insecurity. You’re right—it is taking a while for it to penetrate. But I really do believe that it is happening. □