WATERLOO, Ont. — The Harper government has created a structural deficit and now needs to outline a clear exit strategy, says former prime minister and deficit-slayer Paul Martin.
Martin, speaking to reporters after a speech to a global economic conference in Waterloo, Ont., on Sunday, said his government left behind a $13 billion surplus and the Conservatives whittled that down to nothing before the recession even hit.
“That surplus was wiped out and more before a penny was spent on stimulus spending,” Martin said.
If the surplus had been left untouched, there would have been enough money in Ottawa’s coffers to cover billions of dollars of stimulus spending without going into deficit, he added.
Finance Minister Jim Flaherty recently updated his estimates for the deficit for this year, raising the number by more than $5 billion, to a projected $55.9 billion from $50.2 billion.
Much of the deficit reflects higher government stimulus spending to fight the recession, lower corporate taxes as company profits fall and billions of dollars spent to bail out General Motors and Chrysler and save them from collapse this spring.
Flaherty has promised to balance the books by the 2015-16 fiscal year by squeezing growth in public spending and relying on higher tax revenues from a growing economy. Flaherty has said he will not increase taxes or cut transfer payments to the provinces.
However, employment insurance premiums are going up and some economists have predicted that taxes, user fees and other revenue generators will likely rise as well over the next several years to help fight the deficit.
But Martin, who balanced the books as finance minister in the Jean Chretien Liberal government from 1993 to 2002, said Canadians deserve a clearer picture of what their government is going to do to eliminate the structural deficit it has created.
“It’s not enough to say we will have a plan,” Martin said. “The government should have a plan now and it should lay it out in front of the Canadian people.”
This doesn’t mean the government needs to start acting to eliminate the deficit immediately, Martin said. He said Canada — and governments around the world — need to wait until the time is right before they start to cut spending, but when that time comes, they should be prepared to react immediately.
Martin is known for successfully eliminating the deficit when he was finance minister — a move that often resulted in unpopular decisions, such as cutting transfer payments to the provinces and reducing funding for universities.
He said he didn’t enjoy doing what he did, but it was necessary at the time, and it will be necessary again.
“The reason I just think it was such a terrible mistake for the government to go to a structural deficit is that you don’t want to do what we did in ’95 every 10 years. You don’t want to impose that on people,” Martin said.
Martin is often criticized for hiding his assests from the taxman in the Carribean.