Credit Check - Who Really Saved Canada's Finances?

[Keepitsimple]

Most politicos would have the view that Trudeau put Canada on the verge of bankruptcy and it was Chretien and Martin who "Slew the Deficit"......but what of the man in between? Here's an article from Licia Corbella that sheds some light. Since the article quotes Mulroney himself, it could be construed as self-serving....but I choose to believe that facts are facts and the general thrust of the article appears to be indisputable.....thus the sub-title - Three Sides to Every Story.

Link: http://calsun.canoe.ca/News/Columnists/Cor...pf-4532679.html

Yesterday's news that Canada's federal government just posted a $14.2 billion surplus was met with some grumbling by those who argue -- and rightly so -- that Canadians are overtaxed.

But, if you stop to think about it, huge surpluses are a nice problem to have. After all, they sure beat large deficits, which was the standard practice in Canada under mostly Liberal governments that brought our country to the very brink of bankruptcy.

So, who should get the acclaim for Canada's rather enviable financial situation today?

In his speech delivered before a crowd of 400 people in Calgary on Wednesday, former prime minister Brian Mulroney made it clear with hard facts that the Liberals deserve little, if any, of the praise, though they often get most of it.

[old_bold&cold]

As much as I hate Mulruney with a passion, I do have to say that the GST and freetrade were what really did start us on the road to recovery with our dollar. The people ousted the PC's because of Muruney and rightfully so, but the Liberal were then bless with the mechanisms that were be the engine for the recovery. I will credit the liberals for at least using some of this to get us where we are, but they were also raiding this same engine to pay for many things under the table etc., so I am not going to give them much credit. Harper once in power even in a minority has had an easy time for many things and his cuts and economic views were what cause the world to look more strongly for the CDN and economy. So I will have to say that credit for this was mostly CPC and PC say 60% and 40% Liberal. That to me is a fair division of what I see happened.

[August1991]

Who saved Canada's finances? Well, first of all, Canada's finances are more extensive than the federal government.

IMV, the person who should take credit most of all is an American - Paul Volcker - whom Jimmy Carter named as Chairman of the US Fed in 1979.

Volcker took the 1970s neo-classical revolution in macroeconomic theory seriously and applied a monetary policy designed to control inflation. In the process, the US Fed became independent of the US Congress and the White House.

It took most of the 1980s and part of the 1990s to wring inflation (and inflationary expectations) out of the system but now we all enjoy sensible real interest rates, close to long term trends. That was not the case prior to Volcker's arrival at the Fed.

----

While I think that we now have a resonably good control over monetary policy, we still have not learned how to control politicians' inclination to say yes, rather than no. IOW, government spending has tended to rise (as a portion of all economic activity) over the last 100 years or so. Mulroney, Chretien and Martin all claim to have reduced spending but at most they kept it at the same portion - and even then.

Edited September 29, 2007 by August1991

[jdobbin]

Most politicos would have the view that Trudeau put Canada on the verge of bankruptcy and it was Chretien and Martin who "Slew the Deficit"......but what of the man in between? Here's an article from Licia Corbella that sheds some light. Since the article quotes Mulroney himself, it could be construed as self-serving....

Mulroney certainly is on the promotions tour.

The GST change certainly was a moneymaker but it ignores the massive cutbacks in spending done under the Liberals.

There seems to be a massive effort to rehabilitate Mulroney. Unfortunately for him most people know him for the huckster he is. Certainly he didn't fool Harper who left the party rather than support the man.

[jdobbin]

Who saved Canada's finances? Well, first of all, Canada's finances are more extensive than the federal government.

IMV, the person who should take credit most of all is an American - Paul Volcker - whom Jimmy Carter named as Chairman of the US Fed in 1979.

Volcker took the 1970s neo-classical revolution in macroeconomic theory seriously and applied a monetary policy designed to control inflation. In the process, the US Fed became independent of the US Congress and the White House.

It took most of the 1980s and part of the 1990s to wring inflation (and inflationary expectations) out of the system but now we all enjoy sensible real interest rates, close to long term trends. That was not the case prior to Volcker's arrival at the Fed.

----

While I think that we now have a resonably good control over monetary policy, we still have not learned how to control politicians' inclination to say yes, rather than no. IOW, government spending has tended to rise (as a portion of all economic activity) over the last 100 years or so. Mulroney, Chretien and Martin all claim to have reduced spending but at most they kept it at the same portion - and even then.

In the Chretien years, the cutbacks were not at the same portion as you say. Martin increased spending in his short time in office. It was a mixed performance considering what he did as Finance minister. The one good thing he did was the tax cut. I wish we would see more in income tax cuts given the surplus.

I have no problem crediting Volcker with a change in monetary policy. However, I don't think anyone credited Carter with the explosive growth the U.S. experienced or the eventual defeat of the deficit under Clinton.

Canada has made its own economic policy which is different from the U.S. and the rest of the world. We take some cues from other countries like with the GST, combating inflation and reducing spending but we adapt them to our own economic model. It is probably why Canada has had a leading economy in several categories. We still have a few more categories to go to do even better.

Everyone knows the GST under Mulroney brings in the bucks. It is interesting to note that it was supposed to be a replacement for the Manufacturers Sales Tax and was sold as revenue neutral. I never believed that and the evidence is that it has been a huge revenue generator for the government. However, it is not the only reason the deficit was defeated.

[Visionseeker]

Most politicos would have the view that Trudeau put Canada on the verge of bankruptcy and it was Chretien and Martin who "Slew the Deficit"......but what of the man in between? Here's an article from Licia Corbella that sheds some light. Since the article quotes Mulroney himself, it could be construed as self-serving....but I choose to believe that facts are facts and the general thrust of the article appears to be indisputable.....thus the sub-title - Three Sides to Every Story.

Link: http://calsun.canoe.ca/News/Columnists/Cor...pf-4532679.html

Mulroney has very little claim to turning the page on debt. Yes his government took some measures to tackle the beast, but the real work was done under Chrétien (not that he deserves credit either IMO).

Our debt was born from the provinces taking full advantage of the 50/50 social program spending formula initiated under Pearson. Armed with this dollar for dollar subsidy, each province began to spend outrageous amounts on social files. Provincial debts spiraled and the federal treasury was dragged-down with it. This 50/50 formula essentially left Ottawa with little budgetary control as the outlays on provincial social spending were entirely out of their control.

Marc Lalonde (a Trudeau era finance minister) made some tentative efforts to reign in the beast, but the government rightly feared the political repercussions of facing a ten front fiscal war with the provinces. Once Mulroney came in, the problem was becoming ever more dire.

Mulroney made cuts in areas of explicitly federal spending, but largely avoided the social file because of the same fear. His own ill-advised constitutional gambit meant that he could do very little to stoke provincial fiscal ire. All he managed was to choke areas of federal responsibility and promote asymmetry within the federation. The real cancer was left to Chrétien to excise.

As for Chrétien, the issue of mounting public debt had reached such proportions that it became politically tenable to deal with the gorilla in the room. This made it politically feasible to cut federal contributions to health, education and welfare to 16, rather than 50% of matching funds. This reduction in contributions eventually forced all provinces to deploy more sustainable spending behaviours on social programs, which further reduced the amount of federal outlays.

I’m sick and tired of arguments regarding who caused and who slew the debt. For it was greedy electorates and then fearful ones created the setting for both outcomes.

[August1991]

In the Chretien years, the cutbacks were not at the same portion as you say. Martin increased spending in his short time in office. It was a mixed performance considering what he did as Finance minister. The one good thing he did was the tax cut. I wish we would see more in income tax cuts given the surplus.

I have no problem crediting Volcker with a change in monetary policy. However, I don't think anyone credited Carter with the explosive growth the U.S. experienced or the eventual defeat of the deficit under Clinton.

I have always been suspicious of the supposed Chretien/Martin budget cuts of the mid 1990s. I was working in the federal government bureaucracy at the time and despite the howls, underneath, it was business as usual. Bureaucrats are remarkably inventive in finding ways to get and spend money.

For example, Finance Minister Martin tried to reduce the size of the civil service by offering cash-outs. Other than costing 'off-budget' money, it also meant often losing the wrong people. (BTW, I neither sought nor received any severance package when I left.) Officially, the civil servant numbers decreased in the mid-1990s but those numbers were cooked. The politicians (and ministerial staff) have a good handle on most media-sensitive statistics now.

Nevertheless, all things considered, I will say that Mulroney made an effort to cut federal government transfers and Chretien/Martin made an effort to reduce programme-spending and provincial transfers. And nevertheless too, the trend is still up. Governments in Canada take a larger share of GDP now than they did in 1980.

IMV, it is the most serious problem facing the world today. We need government yet government doesn't work. It just consumes more and more. (I really would like to see an intelligent Left defend intelligently government and what it can and should do.)

-----

True, Clinton raised taxes (and Chretien imposed surtaxes). This, plus economic growth and low inflation, made it possible to eliminate government deficits in the 1990s.

I take the radical view (radical among ordinary people but not radical among economists) that government deficits (and government debt) just doesn't matter that much.

IMV, the far more significant change of the last 30 years is the reduction in inflation. Volcker introduced a very tight monetary policy in 1980 (and this was imitated by Gerald Bouey and John Crow in Canada). At first, this lead to extremely high nominal interest rates and a serious recession in the early 1980s - when Trudeau was PM. Once inflation rates fell by around 1984, the high nominal interest rates (and high real interest rates) were required to ensure the Fed's credibility. Through the later 1980s, high nominal interest rates (and low inflation) meant an awful situation for any debtor - including the Mulroney government.

It took a sustained, tight monetary policy through the 1980s before long term, nominal interest rates (and real interest rates) fell to reasonable levels. By 1993 or so, we had nominal rates around 5% and real rates around 3%. Finally, we were back to the 1950s. Ordinary people could borrow for a mortgage with some certainty.

Inflation is pernicious. It makes a mess of interest rates and it makes relative price changes thoroughly confusing. Robert Lucas won a Nobel Prize by showing that high inflation leads to high unemployment because of the confusion inflation introduces into ordinary decisions.

Since the early 1990s, inflation has been low and people believe it to be low. All governments in place since the early 1990s have benefitted from this price stability.

This price stability came about because Paul Volcker (and then Alan Greenspan) created an independent central bank in the US. By rights, this independence should be formalized in the US Constitution and the US Fed should have a position equal to the original triumvirate of the Congress, Supreme Court and Executive. The US federal government should - like a compass - have four corners.

-----

Other than this major change in how monetary policy is determined, two other major events occurred under Trudeau, Mulroney and Chretien/Martin. Women and baby-boomers entered the labour force (making unemployment a constant problem from 1970 to 1990) and also computers became a modern day industrial revolution.

We are still feeling the productivity shift caused by computers and unemployment simply won't be an issue in the next few decades. Once again, governments since the early 1990s have benefitted from these changes.

Lastly, Mulroney. He did two things that in their own small way made the boat called Canada float better on this ocean of world events. First, Mulroney got rid of the MST and replaced it with the less wasteful GST. (As originally planned, the GST would have been better - covering food purchases too - but Mulroney compromised.) Second, Mulroney got rid of arbitrary barriers of trade with the US and made a good attempt to stop future barriers. As a third point maybe, Mulroney/Wilson also simplified our income tax structure and cut the high marginal rates.

Unfortunately, Mulroney failed on UIC reform and more dramatically, he failed with Meech Lake. Quebec's status within Canada has been a source of uncertainty since the mid-1960s and only now are we beginning to see maybe the end of the tunnel.

Edited September 30, 2007 by August1991

[Visionseeker]

I have always been suspicious of the supposed Chretien/Martin budget cuts of the mid 1990s. I was working in the federal government bureaucracy at the time and despite the howls, underneath, it was business as usual. Bureaucrats are remarkably inventive in finding ways to get and spend money.

For example, Finance Minister Martin tried to reduce the size of the civil service by offering cash-outs. Other than costing 'off-budget' money, it also meant often losing the wrong people. (BTW, I neither sought nor received any severance package when I left.) Officially, the civil servant numbers decreased in the mid-1990s but those numbers were cooked. The politicians (and ministerial staff) have a good handle on most media-sensitive statistics now.

Nevertheless, all things considered, I will say that Mulroney made an effort to cut federal government transfers and Chretien/Martin made an effort to reduce programme-spending and provincial transfers. And nevertheless too, the trend is still up. Governments in Canada take a larger share of GDP now than they did in 1980.

IMV, it is the most serious problem facing the world today. We need government yet government doesn't work. It just consumes more and more. (I really would like to see an intelligent Left defend intelligently government and what it can and should do.)

-----

True, Clinton raised taxes (and Chretien imposed surtaxes). This, plus economic growth and low inflation, made it possible to eliminate government deficits in the 1990s. I take the radical view (radical among ordinary people but not radical among economists) that government deficits just don't matter that much.

IMV, the far more significant change of the last 30 years is the reduction in inflation. Volcker introduced a very tight monetary policy in 1980 (and this was imitated by Gerald Bouey and John Crow in Canada). At first, this lead to extremely high nominal interest rates and a serious recession in the early 1980s - when Trudeau was PM. Once inflation rates fell by around 1984, the high nominal interest rates (and high real interest rates) were required to ensure the Fed's credibility. Through the later 1980s, high nominal interest rates (and low inflation) meant an awful situation for any debtor - including the Mulroney government.

It took a sustained, tight monetary policy through the 1980s before long term, nominal interest rates (and real interest rates) fell to reasonable levels. By 1993 or so, we had nominal rates around 5% and real rates around 3%. Finally, we were back to the 1950s. Ordinary people could borrow for a mortgage with some certainty.

Inflation is pernicious. It makes a mess of interest rates and it makes relative price changes thoroughly confusing. Robert Lucas won a Nobel Prize by showing that high inflation leads to high unemployment because of the confusion inflation introduces into ordinary decisions.

Since the early 1990s, inflation has been low and people believe it to be low. All governments in place since the early 1990s have benefitted from this price stability.

This price stability came about because Paul Volcker (and then Alan Greenspan) created an independent central bank in the US. By rights, this independence should be formalized in the US Constitution and the US Fed should have a position equal to the original triumvirate of the Congress, Supreme Court and Executive. The US federal government should - like a compass - have four corners.

-----

Other than this major change in how monetary policy is determined, two other major events occurred under Trudeau, Mulroney and Chretien/Martin. Women and baby-boomers entered the labour force (making unemployment a constant problem from 1970 to 1990) and also computers became a modern day industrial revolution.

We are still feeling the productivity shift caused by computers and unemployment simply won't be an issue in the next few decades. Once again, governments since the early 1990s have benefitted from these changes.

Lastly, Mulroney. He did two things that in their own small way made the boat called Canada float better on this ocean of world events. First, Mulroney got rid of the MST and replaced it with the less wasteful GST. (As originally planned, the GST would have been better - covering food purchases too - but Mulroney compromised.) Second, Mulroney got rid of arbitrary barriers of trade with the US and made a good attempt to stop future barriers. As a third point maybe, Mulroney/Wilson also simplified our income tax structure and cut the high marginal rates.

Unfortunately, Mulroney failed on UIC reform and more dramatically, he failed with Meech Lake. Quebec's status within Canada has been a source of uncertainty since the mid-1960s and only now are we beginning to see maybe the end of the tunnel.

Nice post. I agree with most of it accept the last sentence: "Quebec's status within Canada has been a source of uncertainty since the mid-1960s and only now are we beginning to see maybe the end of the tunnel."

We are nowhere near the end of the tunnel and I'm afraid that Harper, in pursuit of his majority, is apt to collapse the tunnel altogether.

[jdobbin]

I have always been suspicious of the supposed Chretien/Martin budget cuts of the mid 1990s. I was working in the federal government bureaucracy at the time and despite the howls, underneath, it was business as usual. Bureaucrats are remarkably inventive in finding ways to get and spend money.

For example, Finance Minister Martin tried to reduce the size of the civil service by offering cash-outs. Other than costing 'off-budget' money, it also meant often losing the wrong people. (BTW, I neither sought nor received any severance package when I left.) Officially, the civil servant numbers decreased in the mid-1990s but those numbers were cooked. The politicians (and ministerial staff) have a good handle on most media-sensitive statistics now.

Lastly, Mulroney. He did two things that in their own small way made the boat called Canada float better on this ocean of world events. First, Mulroney got rid of the MST and replaced it with the less wasteful GST. (As originally planned, the GST would have been better - covering food purchases too - but Mulroney compromised.) Second, Mulroney got rid of arbitrary barriers of trade with the US and made a good attempt to stop future barriers. As a third point maybe, Mulroney/Wilson also simplified our income tax structure and cut the high marginal rates.

Unfortunately, Mulroney failed on UIC reform and more dramatically, he failed with Meech Lake. Quebec's status within Canada has been a source of uncertainty since the mid-1960s and only now are we beginning to see maybe the end of the tunnel.

You can be suspicious of the numbers during Chretien's time but I can't think of an economic report by any organization inside or outside of government that doesn't confirm massive cuts in government spending. Do you have numbers that suggest otherwise because it just sounds anecdotal that you observed that government spending didn't decrease an iota?

Many people forget that Mulroney raised taxes 17 times during his tenure as well. It wasn't just about the GST being raised that got people miffed in terms of finances.

Edited September 30, 2007 by jdobbin

[August1991]

Nice post. I agree with most of it accept the last sentence: "Quebec's status within Canada has been a source of uncertainty since the mid-1960s and only now are we beginning to see maybe the end of the tunnel."

We are nowhere near the end of the tunnel and I'm afraid that Harper, in pursuit of his majority, is apt to collapse the tunnel altogether.

Canada, according to the mayor of Quebec City, has existed for some 400 years. End of the tunnel? Maybe I should have stated - end of a tunnel.

I happen to think that a WASP federal PM is a good thing in Canada now. We haven't had a Protestant PM since Pearson and we've never had a Protestant PM who could speak comprehensible French. Harper's a first. So, for the uncertainty of Canadian unity, let's see where this goes.

----

More broadly, what should a politician do to get a future "credit check"?

First, I think Harper should pursue freer trade within Canada, between provinces and with the US. Let's eliminate the chance of future countervailing duties. (Let's open up agricultural trade!)

Second, I think Harper should also ensure that we don't borrow from future generations. The present cannot borrow from the future using government debt - the present can only borrow from the future by leaving a polluted planet. As an economist, Harper surely knows about the Coase Theorem. IOW, Harper should be a good steward of the environment.

Third, Harper as a WASP who speaks French can make Canada work. It takes compromise and Harper seems, like many protestant English-Canadians, to be reasonable. It's all about fair play. Northern North America is a distinct place - let's make it work, as civilized people.

Edited September 30, 2007 by August1991

[geoffrey]

We are nowhere near the end of the tunnel and I'm afraid that Harper, in pursuit of his majority, is apt to collapse the tunnel altogether.

Federalist polling numbers in Quebec disagree with you. The ADQ and CPC are the only way Canada will ever work, decentralised Federalism. If anyone in Canada actually thinks the wet dream of Liberals, the big Federal Ottawa run complex, they must be living in Ontario.

--

I strongly agree with August's thoughts on the Federal Reserve's impact on Canada. Volcker and Greenspan are largely responsible for our current financial position.

[Leafless]

Third, Harper as a WASP who speaks French can make Canada work.

Ha-ha-ha, Harper a WASP.

Can't wait for my next post to refer to the French as FROGS.

[geoffrey]

Ha-ha-ha, Harper a WASP.

Is Harper not white, anglosaxon or protestant?

[Leafless]

Is Harper not white, anglosaxon or protestant?

Totally unnecessary to describe Harper this way and you know it.

August is using it in a condencending manner to emphasize two separate cultures politically different, as if Quebec can only be ruled by a Francophone PM.

Imagine that, an influential WASP taking in the English-speaking world's language, culture, technology, wealth, influence, markets and economy ruling over poor little French Quebec.

For over a hundred years, the French have used "Anglo-Saxon" to refer to the Anglophone societies of Britain and the United States, and sometimes (rarely) including Canada, Australia, New Zealand, and South Africa. It is a wide-ranging term, taking in the English-speaking world's language, culture, technology, wealth, influence, markets and economy.

http://en.wikipedia.org/wiki/Anglo-Saxons

[geoffrey]

Totally unnecessary to describe Harper this way and you know it.

August is using it in a condencending manner to emphasize two separate cultures politically different, as if Quebec can only be ruled by a Francophone PM.

Actually, I think he's making a statement to the contrary. Harper is the only WASP to really enjoy such support in Quebec.

[Michael Bluth]

Actually, I think he's making a statement to the contrary. Harper is the only WASP to really enjoy such support in Quebec.

Geoff, regardless of the rationale for using a term like WASP it is inappropriate.

It's just as inappropriate as referring to any of a number of racial epithets. If it doesn't offend you that's fine, but there are also French-Canadians who don't object to frog, Chinese-Canadians who don't object to...

What's good for the goose is good for the gander.

I read Leafless' post as pointing out the hypocricy of the left in taking offence to possibly derogatory terms only for some racial/ethnic groups but not for all.

[jbg]

I have always been suspicious of the supposed Chretien/Martin budget cuts of the mid 1990s. I was working in the federal government bureaucracy at the time and despite the howls, underneath, it was business as usual. Bureaucrats are remarkably inventive in finding ways to get and spend money.

Weren't a lot of of the cuts really downloads to the provinces?

[Keepitsimple]

Weren't a lot of of the cuts really downloads to the provinces?

Absolutely. That's why it was so miraculous that Mike Harris was able to accomplish so much. He inherited an 8 or 9 billion dollar deficit from the NDP and had to bear the brunt of reduced transfersw from the Federal Liberals. Putting the inherited deficit in perspective, at that time total annual revenues were only about 45 billion - yet the NDP were spending 53 or 54 billion - that's almost 20% over budget. In comparison, McGuinty's Liberals inherited a 5 billion dollar deficit but have had about 85 billion in revenues to work with - that's about 7% over budget. At the time that Harris came in, taxes were so high that businesses were fleeing Ontario and revenues were in danger of going down. Ontario was oh so close to bankruptcy and anything less than drastic action would have brought that about. By slashing taxes. he stimulated the economy, revenues rose, he invested in Healthcare and Education - saving both. He was the right man at the right time but clearly ran out of steam. I'm not a personal Mike Harris fan but I have to tip my hat to how he saved the province from absolute ruin.

[jdobbin]

Absolutely. That's why it was so miraculous that Mike Harris was able to accomplish so much. He inherited an 8 or 9 billion dollar deficit from the NDP and had to bear the brunt of reduced transfersw from the Federal Liberals. Putting the inherited deficit in perspective, at that time total annual revenues were only about 45 billion - yet the NDP were spending 53 or 54 billion - that's almost 20% over budget. In comparison, McGuinty's Liberals inherited a 5 billion dollar deficit but have had about 85 billion in revenues to work with - that's about 7% over budget. At the time that Harris came in, taxes were so high that businesses were fleeing Ontario and revenues were in danger of going down. Ontario was oh so close to bankruptcy and anything less than drastic action would have brought that about. By slashing taxes. he stimulated the economy, revenues rose, he invested in Healthcare and Education - saving both. He was the right man at the right time but clearly ran out of steam. I'm not a personal Mike Harris fan but I have to tip my hat to how he saved the province from absolute ruin.

Seems to me that Harris transfered many of his problems to the municipalities just as Chretien transfered many of this to the provinces.

[Michael Bluth]

He was the right man at the right time but clearly ran out of steam. I'm not a personal Mike Harris fan but I have to tip my hat to how he saved the province from absolute ruin.

Absolutely.

He inherited a nightmare from Bob Rae. And the Liberals welcome him with open arms Federally?

[capricorn]

He inherited a nightmare from Bob Rae. And the Liberals welcome him with open arms Federally?

A sure sign that the Liberals are tilting toward the left. Is it any wonder the Liberals have him running in a Toronto riding? In all probability, many Toronto Center constituents were too young to remember Rae as Premier of Ontario or didn't reside there at the time.

[jbg]

I'm not a personal Mike Harris fan but I have to tip my hat to how he saved the province from absolute ruin.

He had a certain amount of common sense which in politics is revolutionary.

[Argus]

Mulroney certainly is on the promotions tour.

The GST change certainly was a moneymaker but it ignores the massive cutbacks in spending done under the Liberals.

The only cutbacks were on the backs of the provinces. The Liberals cut back on transfer payments - for health, education and public welfare, and then let the provinces take the heat for having to close hospitals, fire nurses and cram fifty students together into a class.

Very noble. Very brave.

[jdobbin]

The only cutbacks were on the backs of the provinces. The Liberals cut back on transfer payments - for health, education and public welfare, and then let the provinces take the heat for having to close hospitals, fire nurses and cram fifty students together into a class.

And the provinces took the opportunity to cut taxes.

[Keepitsimple]

And the provinces took the opportunity to cut taxes.

Some did....certainly Ontario did...and revenues started to go way up - from 45 billion to about 70 billion. Some of that was due to the North American economy starting to get traction but it was aided by a favourable business climate in Ontario. As a result, Harris was able to make unprecedented investments in both Healthcare and Education. That's what a lot of people miss - within reason cutting taxes smartly usually increases government revenues. Increasing taxes in a way that penalizes business or reducing personal spending power usually decreases government revenues. There's a balance that has to be struck. Trudeau at the Federal level and Peterson and Bob Rae at the Ontario Provincial level are examples of tax and spend policies that ran amok.