Wednesday, June 15, 2011

The Paul Martin Guide to Cutting Deficits

The Paul Martin Guide to Cutting Deficits: FCPP - Frontier Centre for Public Policy

Most importantly, the Chrétien-era Liberals were able to balance the
budget, "not with large tax increases, but with substantial cuts in government
spending." Federal spending as a percentage of GDP went from 18% in 1993 to 13%
in 2009. And the Canadian economy prospered because of it.

During this period, the unemployment rate fell from a high of 11.4% in 1993
to 6% in 2007, according to Statistics Canada. Moreover, as the government cut
spending, more resources were freed up for the private sector. As a result,
Canada experienced high growth rates of 4-5% between 1997 and 2000.

Let's give credit where it's due... If it wasn't for Mr. Mulroney's maneuvering to get the GST through the Senate and to get NAFTA done very little of that growth would have happened, regardless of the government's spending levels.

Sure, when a government makes cuts that deeply, it is a strong signal to business that taxes won't go up and that now is a good time to buy that new piece of equipment, however the switch to the GST did more to take a tax burden off business than any amount of government spending cuts will do.

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