Mr. Speaker, I rise in the House tonight to add my congratulations to the Minister of Finance on the balanced budget. Not only did he balance the budget but he brought in a budget with balance.
Governing is more than merely making the books balance. If you are not fiscally responsible you will soon not have a nation to govern.
I am one of those who thought that debt reduction should be the first priority. After 30 years of running deficits it seemed to me that getting our fiscal house in order was the highest priority. I heard that at the door. I heard it at three town hall forums. I heard it by way of correspondence and I heard it in my office. The people of Scarborough East repeatedly said to me that debt reduction was the highest priority.
I communicated those views to the minister and to the Prime Minister, privately and in caucus. I was therefore pleased to see the commitment of the minister to debt reduction. It is something to be celebrated.
The budget documents that the debt for fiscal year 1997-98 will be $583 billion. That is a serious amount of money by anyone's standards.
The debt is divided into two components: market debt and non-market debt. Approximately $477 billion or 80% of the debt is in fact market debt. Because the total is so high our percentage of GDP is approximately 73.1%, which has since been revised down to about 71%. Some market analysts actually put our GDP to debt ratio at about 68%, primarily due to the growth in the economy.
We will recall recently that when the Prime Minister was in New York he chastized money market traders who buy and sell the Canadian dollar. He called them the men in red suspenders. He was upset because Canada's fiscal house was in order, the fundamentals were the best of all the G-7 nations, and yet the dollar continued to be discounted.
Unfortunately our debt is high relative to our G-7 partners and the traders have noticed. We have no choice but to commit ourselves to a steady reduction in the absolute amount of the debt.
Some economists feel that the economy will grow us out of our debt difficulties. However, if one is to commit oneself to the virtuous circle, one needs to make an absolute commitment to debt reduction.
With the greatest respect, I do not believe that merely letting the economy grow us out of our difficulties is an answer. There are at least two significant reasons beyond interest rate fluctuations for that view. The first is the diminished size and role of government in the lives of Canadians. The second is the wild card effect of a rogue provincial government.
When the people in red suspenders look at Canada they are not only looking at federal government debt. They are looking at national debt. The provinces contribute to the national debt. In fact, if we add the provincial debt to the federal debt, it virtually adds up to 100% of the gross domestic product. If every man, woman and child worked in this country for an entire year they might pay off the debt.
Canadians have been saying in a variety of ways that there is too much government and too much overlap. In some measure the government has listened and has devolved or even abandoned areas of jurisdiction to other levels of government. The House has vociferously debated those things, but even after the cacophony has died down this is a reduced federal government, a reduced entity.
The net effect of the role of government, therefore, in terms of GDP is a reduced role. The government plays a significantly reduced role in the gross domestic product and the red suspenders crowd has noticed.
Another reality is the role of provincial government national debt. New Brunswick, Saskatchewan and Alberta have all balanced their budgets and are not contributing to the debt. However I cannot say that for Ontario.
Ontario will over the course of the mandate of the current government add $30 billion to the national debt. It is a charter member of the flat earth society. It expects that the provincial economy will grow its way out of its difficulties. This is a terrible waste of a time of prosperity. It is as if we have learned nothing. We have learned nothing from the Mulroney years where there were periods of prosperity which were squandered.
The men in red suspenders have taken note and Canada does not get enough respect, a la Rodney Dangerfield, because Canada is far from out of the woods when it comes to the management of the national debt.
The federal government, to its credit, paid down $13 billion of market debt last year. In addition, it did not go to the market for any new debt. It reduced the ratio of foreign debt as a per capita and a per cent of the overall federal debt. It is on the way to becoming a master of its own house.
However, certain provinces have not seen the light, in particular the province of Ontario. The good efforts of the federal government may well be offset by those provinces. The men in red suspenders, I anticipate, will have a few more profitable years.
The federal government wants the ratio down from 73% over the course of the mandate to a low 60% or 50%. A number of private forecasters have in fact said that will happen. For instance, CIBC-Wood Gundy predicts that even if the contingency reserve is not used there will be an absolute reduction in the net debt by about $20 billion over the next two budget years.
Instead of a debt to GDP ratio of something in the order of 70%, it will be down around 59.7% according to that private forecaster. It is good news indeed and something that the red suspenders crowd should notice. However, it will not have any impact on the dollar unless provinces make similar commitments. Spending one's way to prosperity does not work. Tax cutting one's way is equally foolish.
Books that balance is a laudable achievement but a balanced approach to debt reduction makes the budget even better. Building into the budget a contingency is prudent. Committing to debt reduction on a straight line basis is even more prudent. Diminishing the per cent of debt to GDP is more prudent again. However, balancing to other compelling priorities is the most prudent thing a government can do, and to heck with the red suspenders crowd.