Federal Liberals break their 50:50 budget-sharing promise

CCPA analysis
February 12, 2003

OTTAWA--Prime Minister Jean Chretien, during both the 1997 and 2000 federal election campaigns, promised that future "fiscal dividends" (the underlying budget surpluses resulting from economic growth and a shrinking debt burden) would be spent in a balanced "50:50" manner. Half would be re-invested in social priorities such as more funding for health care, education, and poverty reduction, and the other half would go jointly to tax cuts and debt reduction. Since then, he and both his successive Finance Ministers, Paul Martin and John Manley, have continued to claim that this "balanced approach" has guided the government in its budget decisions.

The reality, based on hard data on actual budget performance since 1997, is that the Chretien government's allocation of its fiscal surpluses has been anything but balanced. In fact, during the five fiscal years since the federal deficit was eliminated, fully 90% of newly-available resources has been dedicated to tax cuts and debt repayment, and barely 10% to new spending initiatives. That's the finding of the Canadian Centre for Policy Alternatives, in a technical paper released today as part of the CCPA's annual Alternative Federal Budget project.

Titled "A Funny Way of Sharing," the paper was prepared by economist Jim Stanford, who chairs the CCPA's Alternative Federal Budget macroeconomic committee. He concludes that the government's tax cuts alone now are consuming over 60% of the surpluses, with the benefits going mainly to Canada's wealthiest citizens.

"Even the recent federal-provincial deal on Medicare funding will not do much to alter this lopsided division of the federal government's surpluses," says Stanford. "So much has been committed to tax cuts that it will be impossible for the government to reach its avowed 50:50 target without reversing some of those tax cuts, or, even less likely, going into deficit again."

He said the Liberals have broken their 50:50 promise by "a huge and ongoing margin.

"Their pattern of underinvestment in public programs and services is so consistent that it can only reflect their true priorities. While they continue to talk about a fair and balanced budget approach, their actions indicate clearly that the 50:50 promise will remain just that--a promise that is politically convenient but, given their real priorities, fiscally unattainable."