David R. Henderson  

David Gratzer's Misleading Article on Canada's Election

The Alternate Universe Problem... Debating Monetarism...

Gratzer leaves out the tremendous accomplishments of the Liberal Party between 1995 and 2006.

Since the early 1960s, when the Liberals won the first of 10 victories in 13 elections, Canadian governance largely focused on welfare statism. Between 1963 and 1993, government spending soared to over 50% of GDP from 29%. In contrast, American government spending in the same years grew only about 6%, to 34%.
The Liberals championed public pensions and free health care, favored tariffs, and implemented massive wealth transfers to poorer regions. The party cobbled together a coalition of students and professors, big business and big labor, old money and new immigrants--a coalition held together by subsidies, grants and government programs, with high taxes and large deficits to fund it all.
The Liberals still won back-to-back-to-back majorities (1993, 1997 and 2000), but the coalition began to fall apart.

The highlighted quote above is from David Gratzer, "Canada Makes a Right Turn," in today's Wall Street Journal. Everything in the above quote is true. It's also highly misleading. Why? Because it leaves out the tremendous accomplishment of Liberal Prime Minister Jean Chretien and his Minister of Finance Paul Martin in cutting spending, turning deficits into surpluses, and cutting the ratio of debt to GDP by over half. I documented all of this in my Mercatus study, "Canada's Budget Triumph."

David makes it sound as if the Liberal Party continued with its Trudeau-initiated big government schemes, but the Liberal Party, beginning in 1995, changed its ways dramatically. Here's what I wrote in summarizing the effects of their budget cuts:

The result of years of cuts in government spending was that, as a percent of GDP, federal spending on programs fell from a high of 17.5 percent in 1992-93 to 11.3 percent in 2000-01.

Note that program spending does not include interest on the debt, which fell also. Check my study for more details.

It's true that the coalition broke down, but that has more to do with the Sponsorship scandal than anything else.

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CATEGORIES: Fiscal Policy

COMMENTS (5 to date)
Shangwen writes:

Thanks David. What planet is Gratzer on? He appears to be more interested in partisanship than history. You are right about Chretien and Martin. As Macchiavellian as they were, they did a great job on reversing the welfare state and reigning in spending. The few 70s-style initiatives they enacted were financially trivial symbolic gestures to the left to make the party look less economically conservative. The Chretien era, pre-scandal, is one of the great stories of political branding.

John Thacker writes:

I think that the coalition also broke down because the Liberals' tendency of "campaigning left, but governing right" was inherently unstable.

CBBB writes:

There really aren't any major differences between the Conservative Party and the Liberal Party, except the modern Conservative party tends to be very socially conservative. On both economic and foreign policy both parties are similar.
This is the reason for the decline of the Liberal party, they're caught in the middle between two parties that offer more meaningful choices then the old Liberal-Conservative duopoly offered.

blink writes:

"...turning surpluses into deficits.." sounds bad! Surely you mean "turning deficits into surpluses."

David R. Henderson writes:

Correction made. Thanks.

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