The Martin team does not see the pandemic as a financial crisis
The team that put the country’s finances back on track in the 1990s says that while the pandemic has hurt the economy, the economic crisis that Canada has faced for more than 25 years There are was much worse.
In 1993, then Prime Minister Jean Chrétien tasked his new finance minister, Paul Martin, to put the country’s books in order after years of deficit. At the time, Canada was in the red for almost $ 42 billion, with a federal debt-to-gross domestic product (GDP) ratio of 67%.
Martin had only a few months to prepare the 1994 budget, which laid the foundation for the game-changing budget the following year. Him and his team – which included former Deputy Finance Minister Scott Clark and Martin’s chief of staff Terrie O’Leary – brought Canada back to a surplus four years later by spending less, cutting social programs, ending inefficient corporate subsidies, creating a contingency fund and selling CN Rail, among other measures.
Canada is once again suffering financially, this time because the pandemic disrupted supply chains, threatened businesses and cost many Canadians their jobs.
But comparing this economic downturn to the deficit crisis of 1995 is like comparing apples to oranges, Clark told iPolitics earlier this month.
Clark, Martin and O’Leary spoke to iPolitics before the government released its fall economic update on December 14.
“The government today is not facing a financial crisis; it’s facing a pandemic crisis, ”said Clark. “If you look at Canada relative to all the other advanced economies, but just pick the G7, their debt ratios are on an exponential path above 100%. “
Canada’s debt-to-GDP ratio, which compares a country’s total debt to its economic productivity, is expected to peak at 48% in 2021-22 before falling over the next two years, according to the economic update from autumn.
Canada’s debt is expected to rise to $ 144.5 billion in 2021-22, in part thanks to the government spending billions on benefits and subsidies necessitated by COVID, as well as new universal child care programs .
Martin said he had “great faith” in Finance Minister Chrystia Freeland, and believes the government has made the right choice in focusing on alleviating the pandemic.
“We have a… global health crisis, (and) the response to (it) is crucial,” he said. “A condition (of) a strong economy is a healthy economy. This is what the government is working on.
Indeed, the government managed to provide $ 7.4 billion in targeted COVID relief before the House parted ways for the December 16 recess, including the new tourism and hospitality stimulus package, which subsidizes up to 75% of a company’s wages and rent.
O’Leary said the government needs to prioritize its spending, whether it is meeting labor force needs, expanding broadband internet access, providing child care services. universal or to create affordable housing.
“Partnership and ties with provinces and municipalities have never been more important,” she added.
“It drives me crazy when I read (about) people trying to compare (between now and 1995) because they’re completely different situations,” O’Leary said.