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Debt driven.

"It's because of the cutbacks." This refrain is now heard over and over a again. The library's closed, so you can't research the assignment due on Monday - "It's because of the cutbacks." Uncle George has to wait two years for hip replacement surgery - "It's because of the cutbacks." Spend an hour in the line-up for a driver's license - "It's because of the cutbacks."

And the cutbacks are the result of debt. During the 1960s, '70s, and '80s, governments in Canada ran up huge debts. Whether the debt came from spending too much on social programs is a matter of debate (see sidebar). What is not open to debate is that the debt exists.

In 1995, the debt of all levels of government was about $750 billion - that's $25,850 for every child, woman, and man in the country. Governments pay interest on that debt at an average rate of about 9%. This means that the cost of servicing the debt is around $67.5 billion ($2,327 per person) a year. So, the average Canadian family (3.1 persons) hands over more than $7,200 a year for which it receives nothing. Only after our governments have collected their $7,200 per family can they begin to use tax dollars to pay for services and social programs.

Clearly, our governments have dug themselves into deep holes. And, rule number one when you've dug yourself into a deep hole is STOP DIGGING. To a large extent, rule one has been applied.

Seven of the country's ten provinces have reported balanced budgets or surpluses in their 1995-96 fiscal years. In 1992, total government deficits equalled 7.4% of Canada's Gross Domestic Product (GDP); the figure for 1997 is 1.3% of GDP.

If everything goes according to budget - and it seldom does - in the five years up to 1998, combined spending by provincial and municipal governments will have fallen by about 16%, and that of the federal government by about 19%.

That's a quite remarkable turnaround and it's impressed the bean counters at the International Monetary Fund. That world body predicts that Canada will be the only Group of Seven (the world's most advanced economies) country to be operating at a surplus in 2001. But, before we jump for joy and go on a spending spree, we have to remember that it's only in our annual budgets that we're taking in more than we're spending. We've still got the debt (the accumulation of all those past deficits) to deal with. This $750-billion monster must still be fed with interest payments and eventually paid off.

However, on a day-to-day basis, many of our governments have brought their spending under control. The deepest cuts have been made by Alberta, Ontario, and Nova Scotia. It's been painful, and it's going to hurt even more.

Many of the country's social programs are run by the provinces but paid for, at least in part, by funding from the federal government. Because it pays the piper, Ottawa claims the right to call the tune by setting national standards for programs such as health care. But, Ottawa has cut back the money it transfers to the provinces for social spending. This prompts some provinces - Alberta and Ontario lead the outcry - to say the feds no longer have the right to dictate national standards. Alberta Premier Ralph Klein had a nasty run in with Ottawa in 1995. He wanted to open private health care clinics. Alberta was told to back off or lose its federal funding. Ontario Premier Mike Harris has weighed in with his view that the design and delivery of health, welfare, and education services in Canada should be transferred from Ottawa to the provinces. Again, the major complaint seems to be that Ottawa, in cutting back its funding, can no longer impose its standards. Why not go the whole way, says Mr. Harris, give the provinces a bigger slice of tax revenue and let them run their own programs? This issue is being hotly debated in the corridors of power, and it seems likely that some new federal-provincial arrangement will emerge.

To some extent, a transfer of power from Ottawa to the provinces has already taken place. A cornerstone of the national welfare state was the Canada Assistance Plan (CAP). Under this program, Ottawa split the cost of specific social services with the provinces. In return, the provinces had to meet strict conditions in how the funds were spent. In April 1996, CAP was killed off. It has been replaced by the Canada Health and Social Transfer; a huge lump-sum payment from Ottawa to the provinces to cover post-secondary education, welfare and health costs. Under the new scheme, the provinces get less money in total and fewer strings attached to how they spend it. Terrance Hunsley of the International Institute on Social Policy doesn't like this: "What we're going to see is fewer social services, lower-quality services, services with higher fees, and a deprofessionalization of services."

There are already plenty of casualties that bear out Mr. Hunsley's prediction. The unemployment insurance system has taken a major hit. The program is now available to fewer people and it's less generous to those who do get it.

Several provinces have been slashing and burning welfare: Ontario cut its welfare rates by 22% in 1995; British Columbia won't pay welfare to people who have lived in the province for less than three months.

While government cuts the payments it makes to people it increases the fees it charges for some services.

University tuition fees have shot up. Between 1985 and 1995, tuition at Laval University increased by 271%, at Memorial University, Newfoundland by 130%, at the University of Saskatchewan by 210%. Hundreds of thousands of senior citizens must now pay for prescription drugs they once received for free. The cost of everything from a passport to a hunting permit has gone up too.

And, hospitals are firing registered nurses (RNs). Some of the work they did is now handled by registered nursing aids - people with less training than RNs. Funding cuts mean that many childcare centres can't afford to hire people with early childhood education certificates; instead, they employ unqualified minders who can do little more than crowd control.

Politicians have been saying that the cutbacks will make the delivery of services more efficient and they've used the snappy little phrase "More for less" frequently. But, to most Canadians the cutbacks look a lot like "Less for more."


1. Assign a group of students to research the growth of social programs in Canada and to plot their introduction on a time-line.

3. Discuss the following statement: "Canada's identity has been built on a foundation of social programs that are available to all Canadians in equal quality no matter who they are or where they live. Handing such programs over to ten separate provincial governments will destroy the universality of social programs and seriously diminish Canadian nationhood."
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Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Social Programs; in Canada, dramatic spending cuts were recently implemented in order to balance budgets
Publication:Canada and the World Backgrounder
Date:Oct 1, 1996
Previous Article:The discipline of the marketplace.
Next Article:Contrarians.

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