New video tells how the Liberals' 1995 budget started profound reforms, paid big dividends and should still be the model in 2012


OTTAWA, March 16, 2012 – As it prepares its 2012-13 budget, the federal government has an opportunity to balance the books, reform spending and give the economy a boost by learning the lessons of the historic budget tabled by then-Finance Minister Paul Martin in 1995. In a short new video released today by the Macdonald-Laurier Institute, Managing Director Brian Lee Crowley illustrates how the reforms of the 1990s hold the key to tackling Canada's challenges successfully today.

The Liberals' 1995 plan relied chiefly on spending cuts rather than tax increases to balance the budget while simultaneously reforming spending programs. Large cuts were made in transportation, industry, regional development, and scientific programs and the size of the federal government declined dramatically. The result of this new discipline was a quick return to fiscal surpluses coupled with stronger economic performance. The payoff in improved economic performance meant that Ottawa could cut taxes —including personal and corporate income taxes, capital gains taxes, and the corporate capital tax— which in turn further reinforced the country's turnaround. Reforms also continued on to fixing entitlement programs such as the Canada Pension Plan, transfers to the provinces and social welfare.

The reforms of the 1990s resulted in a financial turnaround that was one of unprecedented success among Western countries. In less than a decade, Canada was able to transform itself from what the Wall Street Journal called "an honorary third world country" into an economic and financial outperformer. Canada not only fixed its immediate problems, it set itself up to experience some remarkable payoffs in terms of prosperity and economic growth. These reforms made a powerful contribution to Canada's  weathering the recession better than any other industrialized country.

According to Crowley, "What made reform possible was the depth of the crisis Canada faced, the extent to which the Canadian electorate demanded an end to irresponsible public finances, and the degree to which the entire political class responded. Governments at all levels then moved on a broad front, making it clear that no established interests would be exempted from contributing to the cost of slaying the deficit, lowering both taxes and the debt, and making the Canadian economy an outperformer."

The video shows that Canadians and their politicians can tackle big spending and entitlement problems successfully. Governments that do so can enjoy political success. More importantly, having done it once there is no reason to think we cannot do so again today.

The video is based on the MLI's first book, The Canadian Century, by Brian Lee Crowley, Jason Clemens and Niels Veldhuis. In 2011, it won the highly coveted Sir Antony Fisher Memorial Award for excellence in think tank publications from the Atlas Economic Research Foundation.

For more information, please contact Tripti Saha at or call (613) 482-8327, ext. 105.

The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank in Ottawa focusing on the full range of issues that fall under the jurisdiction of the federal government.

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