Madam Speaker, I am pleased to participate with colleagues on both sides of the House today in this prelude to the upcoming 1999 federal budget.
As I lead into my remarks, which will be made within the shared time, I cannot help but think back to the way things were just a few years ago when I was first elected to this House in 1988. The backdrop of how we got here from there is still important to Canadians. It is still important to all of us who understand how we got here from there as we try to lay out some kind of framework, some kind of direction on where we will go from here, what kind of leadership we will exhibit and where we will try to lead our Canadian economy within the ability that a federal budget can offer.
One concedes of course that a government budget will not always be able to provide leadership and direction in all elements of the economy. We do not run the entire economy from our desks here in the House of Commons, nor does the ministry of finance run the entire economy from its ministerial offices.
Approximately seven years ago we had the recession of 1992. I remember that it was supposed to be a difficult year. It turned out to be for Canadians a very difficult three years. It was not a one-year cyclical recession.
There were reasons for that. The cyclical recession of 1992 was exacerbated by several other economic circumstances, each of which was chosen by the government of the day as part of a policy option.
I know they were not selected to exacerbate the recession. They were selected because they were seen as necessary. Some of it was necessary medicine. Some of it was just the right time to implement policy. However, it turns out to have been poor timing.
I notice that our colleague from the Progressive Conservative Party made reference to choices made by the Progressive Conservative government in the very early nineties which perhaps in some way laid some of the groundwork for our economy. Some of those decisions that were taken did lay the groundwork. As I say this, one has to remember that the timing was actually atrocious.
In opposition I and my colleagues did not spare the government at all in our criticism, as much because of the timing as for its effect on Canadians.
High interest rate policies were pursued by the Bank of Canada. The timing was awful. High interest rates mean high unemployment. At the time of the recession the bank decided it would squeeze and crush inflation out of the Canadian economy. The timing was all wrong. It succeeded ultimately, but at a very high cost to Canadians.
The government decided to implement a new GST, replacing the earlier MST. However, there are economic costs in implementing a new tax like that.
There were adjustments to the free trade agreement. Those adjustments would have to have been paid in any event, but those adjustments, in terms of employment losses, occurred right at the time of the recession.
Then there was the hopelessly out of control government spending of the day that ran deficits from $25 billion to $42 billion.
All of these factors exacerbated that very difficult recession year.
I remember talking to constituents. Most of us in this House have dealt with constituents who have been in difficult personal situations. Some were unemployed. I remember saying “This is just a cyclical recession. It will be over in a few months or a year. Don't worry, the jobs will come back”. However, that situation persisted for several years at a very high cost to Canadians.
When it all ended, sometime in 1993, 1994 or 1995, as fate would have it Canadians elected Liberals in October 1993. Our first order of business was to deal with the deficit. We adopted a plan, a process which was called a program review.
There were tax adjustments. There were effective tax increases at the time. They were modest, but nonetheless they were increases. The revenues increased, expenditures went down and we ended up balancing our Canadian budget approximately one year ahead of schedule.
We are now entering a second or third year in which we will have a surplus. The result of that backdrop has produced a situation that is described as “good fundamentals”.
Who can take the credit for it? Certainly those who were in government. As a government member I will ask Canadians to give us credit for dealing with the deficit. I think they have given us credit for that, notwithstanding the desire of members opposite to discount that fact.
Other things occurred. Interest rates came down, in part because of government action, but in part as well because of market reaction to other economic factors.
Our interest rates now are the lowest in 25 or 30 years. Our inflation is down to the lowest it has been in 25 or 30 years. That is very positive.
The free trade agreement then became the North American Free Trade Agreement. We have adjusted to that and we are now seeing the benefits of jobs and exports.
Our balance of trade has been in positive territory for a long time. Our current account, which moved into positive territory a couple of years ago, is now slightly under and is heading back toward positive territory. That is all very healthy.
The deficit is gone. We are now faced with the difficult problem of how high taxes should be and what kind of a surplus there should be. Certainly we want balanced books. Maybe there should not be a surplus. Maybe there should just be a balance. Then we would not need to argue about a surplus.
Because of the finance minister's prudent planning we are facing small surpluses this year and next year. That allows all of us to happily debate over what targets the surplus should be directed to.
This government has undertaken to use the surplus in three areas. It will use it to pay down the debt, which was sitting at around $583 billion and has now been paid down in modest amounts to $570-some billion. That may be small progress with a billion here and a billion there but pretty soon it adds up.
Our economy is growing at the same time, which means that our national debt to GDP ratio is dropping. This is the measuring stick most economists use in looking at our ability to sustain and carry a debt. That ratio is now poised to drop below 50%. It was riding up toward 60% at one point. We are now headed below 50%, which is positive territory for us. We have to deal with debt management. Like it or not it is there and we have some bills to pay.
Second, we will have to restore the effectiveness of our social programs. There is more than one way to do that. Spending money properly is one way as well as sustaining them and making sure there is enough money to deliver on our objectives.
Third is tax reduction. In the last budget the government began to deliver tax reductions in modest amounts. These reductions are showing up at the low end of the income scale. This time I as one member of parliament would like to see tax reductions spread right through the economic spectrum. In its report the finance committee mentioned the surtax which is still a part of income taxation at the federal level. My constituents and I would like to see that addressed seriously.