Editorial The courage to cut debt

But this certainly isn’t the direction we are now heading. For, awash in debt and with our federal politicians still spending over $30 billion more than they collect year after year, this annual deficit build-up will soon exceed $400 billion — a truly dangerous level with a crippling interest charge.

Warnings from industry leaders across the land get louder, yet apparently go unheeded. Even the International Monetary Fund, watchdog of the Third World economies, has seen fit to warn our Ottawa mandarins to trim this fiscal year’s deficit by a whopping $9 billion. If we don’t act soon in this direction, we could be joining ranks with the likes of Brazil, Venezuela and Mexico.

Certainly we don’t envy Finance Minister Michael Wilson’s job in formulating his soon-to-be-presented new budget, a budget Canadians in every walk in life will be watching closer than any other before. There is great political risk in just about any move he can take — damned if he does and damned if he doesn’t.

This political dilemma confronting the federal government’s problem of debt and deficit reduction is indeed horrendous. Already one of the heaviest taxed people in all the world, further boosts in this direction could adversely impact on our economy. On the other hand to withdraw the government largess to which we have become so accustomed would raise cries of anguish, even political suicide. So where to cut?

As Canadians, we should realize there is a limit to what governments can do for us, and what we should legitimately demand of government. With a strong new mandate, Prime Minister Mulroney has created a powerful new Expenditure Review Committee of Cabinet which one hopes will lead to a higher level of deficit and debt reduction than we have seen heretofore.

We feel rather strongly that there is just too much government in this country and that 40 federal cabinet ministers is on the heavy side. But the real culprit contributing to these huge deficits is to be found in the cost of the multiplicity of government programs rather than the civil servant salary cost.

For starters, do we really need or can we afford that new Space Agency to be set up in Montreal? And what about Sports Canada? Must government be in the sports business at all? Or would it be better left to private enterprise to sponsor? And then there is the CBC which is certainly costing the federal government a pretty penny while private networks prosper. And Via Rail, whose year-after-year subsidy works out to over $90 per passenger. And what about that plan to purchase a fleet of 12 nuclear powered submarines, the real cost of which could easily run to $15 billion or more?

The key to lasting debt reduction, says one of ScotiaMcLeod’s investment letters, would be to trim government spending and then reduce taxes by about half of the spending cuts. This seems sensible, realistic and quite attainable. While any kind of cutback is bound to create some pain, the inescapable hurt of piling debt on debt will be much worse.

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