The Truth About Canada (37 page)

Stephen Harper promised unequivocally to build three armed icebreakers and an underwater sensor system in the Arctic. As for Canadian presence in the Arctic, Harper said, “Either we use it or we lose it.”

Yet, at this writing, Byers points out,

Harper’s indecisiveness is all the more unfortunate because U.S. interests have changed. During the Cold War, the U.S. was focused on maintaining open access for its navy, and especially its submarines. Today, Washington is more concerned about terrorists sneaking into North America, or rogue states using the oceans to transport WMD.

It cannot benefit the U.S. to have foreign vessels shielded from reasonable regulations and scrutiny by maintaining that the Northwest Passage is an international strait.
²⁴

Even the often objectionable and arrogant former U.S. ambassador Paul Cellucci agrees, telling an October 2006 foreign affairs conference in Ottawa that it would be preferable for the United States if Washington allowed Canadian control of the passage, instead of demanding that it be
considered an international waterway open to shipping from all countries.

Unfortunately, yet once again, after years of both Liberal
²⁵
and Conservative promises about Arctic sovereignty, only relatively small steps have been taken. You may remember that in 1986, when the U.S. icebreaker
Polar Sea
sailed through the Northwest Passage without seeking permission from Canada, I “bombed” the huge ship from the air with Canadian flags and “Turn Around and Go Home” notices, much to the embarrassment of Brian Mulroney and External Affairs Minister Joe Clark. This was a year after Clark, in the House of Commons, said, “The Arctic is not only a part of Canada, it is part of Canadian greatness. The policy of the Canadian government is to preserve the Canadian greatness undiminished. Canada’s sovereignty in the Arctic is indivisible. It embraces land, sea and ice.”
²⁶

It appears that Stephen Harper may continue to disappoint us in the same way his predecessors did.

An important point that has been largely missing in discussions in Canada about Arctic sovereignty was identified in a
New York Times
editorial:

The United States does not find itself in a strong position. Misplaced fear among right-wing senators about losing “sovereignty” has kept the Senate from ratifying the Law of the Sea even though the United Nations approved it 25 years ago. This, in turn, means that the United States, with 1,000 miles of coastline in the Arctic has no seat at the negotiating table.
²⁷

By November 2007, because of the potential opening of the Northwest Passage, there was pressure mounting in the U.S. Senate for the country to change its stance and finally join the Law of the Sea.

Two last points for this chapter. In an excellent column in the
Globe and Mail
, Lawrence Martin criticized Stéphane Dion and the Liberal Party for being “strangely mute on the subject of Iraq and squandering a major political advantage where the Liberals have their [Conservative] opponent at their mercy.” What, Martin wondered, was holding Dion back?

How can he stay silent? He should be siding with the war’s more vocal Democratic naysayers in the U.S., and with the American people themselves.

The biggest, most politically damaging link between Canadian and American leaders is the Iraq bloodbath. The Liberals have Mr. Harper cornered and won’t take advantage.
²⁸

Had it been up to Stephen Harper, Canadian coffins would have been returning from Iraq for years now, and for who knows how long into the future. For months, he argued vehemently in the House of Commons that Canada had a duty to stand with the United States in its war against Iraq.

Dion’s reluctance to criticize forcefully George W. Bush and the people around him on the Iraq fiasco is very difficult to understand. It is indeed a squandered opportunity, both politically and a chance to do the popular right thing and show leadership in a sad and tragic vacuum.

I can’t leave this chapter without strongly suggesting that you look at the Middle Powers Initiative website (
www.middlepowers.org
) for the important work of Canada’s former Ambassador for Disarmament Douglas Roche. In particular, see his excellent May 31, 2007, testimony to the House of Commons Standing Committee on Foreign Affairs and International Development regarding de-alerting nuclear weapons, a Fissile Materials Cut-off Treaty, an effective Comprehensive Nuclear Test Ban Treaty, and other matters relating to the terrible dangers of nuclear proliferation. Roche notes that of 31 votable UN nuclear disarmament resolutions in 2006, the United States cast the sole No vote 12 times.

Nobel laureate Jody Williams visited Canada in late November 2007 to celebrate the 10th anniversary of the treaty to ban land mines, the treaty that Canada was so instrumental in promoting. But this time, she asked “Where’s Canada’s leadership in global issues right now? … You are really taking a back seat and it’s really hard to understand.”

PART EIGHT

33

GOVERNMENT IN CANADA

“Canada is the highest spending country in the world.”

—
STEPHEN HARPER, ANNOUNCING HIS INTENTION TO SEEK THE LEADERSHIP OF THE CONSERVATIVE PARTY, JANUARY
12, 2004

T
he best thing you can say about this statement is that it was nonsense then and it is nonsense now. Either Harper simply didn’t know what he was talking about, or he was intentionally misleading Canadians. But Harper is not alone. If we believe the steady stream of propaganda coming from our far-right-wing Canadian plutocracy, most of our so-called “think tanks,” some of our business press, and all of our ultra-conservative politicians, government spending in Canada has been out of control and is far greater than in most other countries.

Nonsense and more nonsense.

If we look at all government spending, central, provincial, and local, and include all social security expenditures, of the 30 OECD countries 17 spent more as a percent of GDP than Canada in 2006. At 39.5 percent in 2005, government spending in Canada was far below the Euro area average of 47.1 percent, and below the OECD average of 40.4 percent.
¹
In 2007, total government spending in Canada was expected to fall to 38.1 percent of GDP.

And, of course, some of the countries that spend less than Canada have poor to appallingly bad social programs, countries such as Korea and the United States, for example.

It’s interesting to note that, contrary to conventional wisdom, U.S. government spending, at 36.6 percent of GDP in 2005, isn’t much less
than our government spending in Canada. But government spending in the United States that year included over $500-billion for military and defence expenditures, plus some $220-billion to service the enormous U.S. federal debt.

So, quite contrary to what Stephen Harper told us, Canada — down in 20th and 18th place in 2005 and 2006 when total government spending is measured as a percentage of GDP — is among the lowest government spenders in the OECD.

In 2004, when Harper made his misleading claim, Canada’s total government spending amounted to 39.4 percent of GDP, below the 40.4 percent G7 average, and well below the spending of France (54.4 percent), Italy (48.6 percent), Germany (47.7 percent), and the United Kingdom (44.1 percent). While the United States (36 percent) and Japan (37.3 percent) were below Canada’s spending, most Canadians would be very unhappy with the poor government social programs in these two countries.

Moreover, Canada’s string of 11 consecutive years of overall government surpluses (from 1997 to 2007) compares most favourably with the 12 consecutive years (from 1993 to 2004) of deficits in Japan, and the American post-Clinton string of massive, record-breaking deficits and enormous accumulated debt. In contrast, all Canadian governments, municipal, provincial, and federal, had total combined net financial liabilities of only 26.6 percent of GDP in 2006, compared to the G7 average of 50.0 percent, and liabilities in Italy of 94.6 percent, in Japan 85.4 percent, Germany 51.9 percent, France 42.5 percent, the United Kingdom 39.7 percent, and the United States 36 percent.
²
In 2005, percapita government total debt in Canada came to $28,390. In the United States it was $48,700 (Canadian).
³

In 2006/2007, the consolidated surplus for all Canadian governments and the Canada and Quebec Pension Plans was the highest on record, some $47.7-billion. There hasn’t been a combined government deficit in Canada since 1998/1999. In 2006, by contrast, Washington recorded a deficit of an enormous $811-billion.

Two thousand and six was the fourth consecutive year in which Canada was the only G7 country to record a surplus, and this was also expected to be true for 2007 as well.

In 2005/2006, the largest surplus in Canada, some $13.2-billion, belonged to the federal government. This was Ottawa’s ninth consecutive surplus. Next was Alberta’s $7.3-billion surplus, followed by the Canada Pension Plan surplus of $7-billion. In 2006/2007, Ottawa’s surplus grew to $13.8-billion.

Six provincial and territorial governments had deficits, and local governments had combined deficits of $2.9-billion.

In 2006/2007, consolidated provincial, territorial, and local governments recorded a surplus of $7.4-billion. Alberta’s surplus increased to $8.5-billion.

Because of Ottawa’s surpluses, federal debt charges fell to 15 cents out of every dollar of government revenue, while provincial/territorial charges were down to nine cents of every revenue dollar. Federal debt as a percentage of GDP peaked at 68.4 percent in 1995/1996, was down to 32.3 percent in 2006/2007, and is expected to be down to 29.7 percent in 2008/2009. By 2006/2007, the debt was down over $95.6-billion from the $562.9-billion peak and is now at its lowest level to GDP since 1981/1982.

These federal government surpluses are in sharp contrast to the federal deficits of over $30-billion which were common from the 1980s until 1995, the highest being just under $38-billion in 1985, the first full year of the Mulroney government.

Despite all of this, conventional right-wing “wisdom” is that government spending in Ottawa has been out of control and has been rising for years. But in fact the federal government’s budgetary revenues have fallen, from 18.2 percent of GDP in 1997/1998 to 16.3 percent in 2006/2007, and are projected to be down to 15.3 percent in 2008/2009. Total federal Canadian government spending, as a percentage of GDP, has declined significantly in recent years. In 1982/1983, it amounted to 25.4 percent of GDP, but it is expected to be as low as 15 percent of GDP in 2008/2009.

Let’s turn now to look at all of Ottawa’s program spending as a percentage of GDP.

From the time the provinces and territories joined medicare in 1972 to 1979, Ottawa’s program spending averaged 17.8 percent of GDP, and during the 1980s it was about the same, at 17.6 percent of GDP. But with the Americanizing impact of both the FTA and NAFTA, program spending in the 1990s fell all the way to 14.5 percent of GDP. By 2005/2006, it was down to only 12.7 percent, and at this writing the Conservative government forecasts it will be 12.9 percent for 2008/2009, well below pre-medicare days. The last numbers are far below the averages of the past few decades, but if you believe the likes of the Fraser Institute, et al., the Conservative government has gone wild and abandoned all the right-wing fiscal principles.

Dr. Janine Brodie of the University of Alberta has calculated that during the past decade Canadian governments have collectively reduced program spending from 41 percent to 31 percent of GDP.
⁴
In 2008/2009, Ottawa’s transfers to persons (see below) will have sunk to 3.8 percent of GDP from a high of 5.9 percent in 1992/1993.

By 2006, a 5 percent drop from the pre-medicare program spending levels represented a drop in federal government spending of a colossal $72-billion.

I’m not suggesting for a moment that we should be spending $72-billion more on various government programs, but as we’ve already seen in the chapter on social spending, the comparatively low levels of program spending are so far below historical averages that they are incomprehensible when current demands regarding health care, post-secondary education, the environment, child poverty, our military, public housing, and so on, need to be addressed.

Some people think our very low level of program spending is great. Suggest to them that they read the chapters on poverty, social spending, welfare, health care, and education in this book.

To make matters worse, the Harper government’s projections of program spending show a further decline to only 12.6 percent of GDP by 2011/2012.

Let’s turn now to Ottawa’s total spending, including transfers to persons and transfers to other levels of government, all program expenses
including defence, and all interest payments on the government’s debt.

Perhaps the most important thing that Ottawa does with your tax dollars is to transfer money to persons (including you) and to other levels of government (mostly to the provinces).

Let’s look at transfers to persons. From 1982/1983 to 1993/1994, for nine of these 12 years, these transfers were about 5 percent of GDP. In four of these fiscal years, the transfers to persons amounted to from 5.7 percent to 5.9 percent of GDP. However, after Paul Martin became Finance minister, they fell like a big rock.

Some people will say, “So what? Martin fixed the long string of Liberal and Conservative deficits.” Others, however, will say that the deficits could have been much more justly addressed with changes to the tax system. You have already read about this in the tax section of this book. While for years transfers to persons were over 5 percent of GDP, in most recent years they’ve been in the 3.8 to 4 percent range.
⁵
The last time they were as low as 3.8 percent was 38 years ago, way back in 1970/1971.