Worried about the deficit?

For decades, Canadians have been hearing that government spending and the deficit must be reigned in. A recent study produced by "allltogethernow", a campaign run by the National Union of Provincial Government Employees, invites Canadians to look at the facts.

 

Total government spending in Canada has dropped dramatically in the last 16 years. In 2002, total government spending in Canada as a percentage of Gross Domestic Product (GDP) was 53 per cent. In 2008 it was 39 per cent — the third lowest of the G7 countries, and the 11th lowest of the 30-member Organzation for Economic Cooperation and Development (OECD).

 

The deficit? Canada is in the best fiscal position of the richest countries in the world. In the G7, Canada has the lowest government debt. According to the Internation Monetary Fund, our deficit is 32 per cent, compared to 142 per cent for Japan, 91 per cent for the United Kingdon and 83 per cent for the United States.

 

Our total debt is less than half (32 per cent of GDP) of what it was under Prime Minister Brian Mulroney (70 per cent).

 

The real problem, according to NUPGE, is a revenue problem — a drop of three per cent in government spending, from 36 per cent in 1995 to 33 per cent in 2008. That translates to a loss of about $50 billion in revenue that could have been spent on public services.

 

The drop in revenue can be traced to policies that upped the tax rate for lower income Canadians and dropped it for the wealthiest. The richest one per cent now have a lower total tax rate than that of the poorest 10 per cent.

 

The article refers to corporate tax rates as a "race to the bottom." Canada has the lowest corporate tax rates in the G7 — lower than those of the US by about 15 per cent.