From the equality of rights springs identity of our highest interests; you cannot subvert your neighbor's rights without striking a dangerous blow at your own. Carl Schurz

Monday, October 8, 2012

Paul Martin's Austerity Budgets

I often get my back up when I hear and read progressives praising Paul Martin's balanced budgets, using them as cudgels with which to beat the Harper government over the head. While true that Martin balanced the budget it is important to look at how he did so.

In the mid 90's Canada just having come out of a deep recession was said to have hit the "Debt Wall", this despite the fact that our debt to GDP ratio was better or no worse than other industrialised nations and much like today primarily the result of the recession. This debt wall meme was repeated ad nauseum by the business community, the media and of course the government. It was during this period in fact when deficits first came to be seen as the great evil they're considered to be today.

 A key feature of Canada's deficit wars was the deliberate cultivation of fear. As documented by Canadian journalist Linda McQuaig in her book Shooting the Hippo, the media and officials fanned totally groundless fears of a debt default, and even resorted to talking down Canada's debt standing in influential international circles such as the Wall Street Journal editorial board to create a sense of crisis.

Having convinced Canadians of this debt wall and the dire need to address it lest we go bankrupt it was time to strike. Between 1996 and 2000 Martin slashed social transfers by $7.6 billion or 40% During this time he also raided the UI and CPP surpluses, unilaterally ended the formula where Ottawa covered 50% of welfare costs, made it harder to qualify for UI and slashed UI rates from 66.66% to 60% of gross income.

While other nations used a mixture of spending cuts and tax increases to achieve deficit reduction Martin relied almost solely on spending cuts to achieve his goal, reducing overall spending compared to GDP by 7 percentage points.

Between 1993 and 2001, the after-tax and transfer income share of the bottom 80% of families fell as the share of the top 20% rose from 36.9% to 39.2%.

As you can see cheering Martin's balanced budgets and exhorting the Harperites to be more like him is in fact calling for more austerity and inequality , what kind of progressive would be in favour of that.

1 comment:

  1. Exactly! We shouldn't make a fetish of balanced budgets and we shouldn't praise Martin for gutting the welfare state while delivering his stupid tax-cuts "come hell or high water."

    Let's also not forget his imperialism in Haiti.