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Governments have vital roles to play in building a stronger Canada, but their capacity to act is limited by what Canadians collectively earn and are willing to pay to support their work. Over time, Canadians may vote to spend more or less of their total paycheques on goods and services through the public sector rather than through private consumption. But as we learned painfully in the 1990s, public services cannot be sustained indefinitely with borrowed money. Ultimately, governments have to live within the means of Canadians. The battle to eliminate repeated and growing deficits and to reduce inflation dominated fiscal policy in the early 1990s. These efforts paid off dramatically in the late 1990s in an environment of rapid North American and global economic growth. The federal government was able to run large budget surpluses, reduce public debt, begin cutting tax rates and yet still boost spending to record levels. Moving forward, a responsible fiscal framework will require governments to become much more conscious of achieving the best results for the money they spend. They will have to rigorously assess the effectiveness of all existing programs on a regular basis in order to free up resources to meet emerging needs. And they will need to rethink the mix as well as levels of taxation in order to raise the revenue they need today while encouraging the economic growth they will require to fund the priorities of tomorrow. The 2008 global financial crisis and economic downturn created an urgent need for fiscal stimulus. Like their counterparts across the industrialized world, Canada's federal and most provincial governments have descended once again into deficit. The challenge now is to manage stimulus spending and pursue creative tax reform to ensure that Canada does not return to the destructive cycle of structural deficits nad emerges from recession well positioned to enjoy strong and sustainable growth in the years ahead. |
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