Martin won't budge on 'fiscal integrity' as economy slows
By SHAWN MCCARTHY, The Globe and Mail
PARLIAMENTARY BUREAU CHIEF
Friday, September 21, 2001
OTTAWA -- The Liberal government will protect its "fiscal integrity" despite a deepening economic downturn and new spending demands for the military and security agencies, Finance Minister Paul Martin says.
In an interview yesterday, Mr. Martin rejected calls for a spending package that would help boost the economy, and suggested the Liberal government will not sink back into deficit.
"I don't believe that massive spending or massive tax cuts are going to counter a global slowdown," the Finance Minister said.
"And I come back to the necessity of maintaining Canada's fiscal integrity. In the end, it is our fiscal integrity that counts."
He said deficit financing would rob Ottawa of the flexibility it needs to respond to the unexpected. It could also drive up interest rates, which would undo any economic benefit from increasing spending, he added.
However, Mr. Martin refused to rule out the prospect that the Liberal government could find itself in deficit again if the economy turns really ugly or the campaign against terrorism escalates into a major military confrontation.
"I am not rigid. In the end, what counts is that, under whatever set of circumstances you're dealing with, you do the right thing. And that's what we're going to do."
The Finance Minister would not estimate how much additional spending the government would undertake as part of the international campaign to combat terrorism and efforts to improve domestic security.
Senior Liberal sources said they do not expect massive new spending requirements. The Canadian Forces, RCMP, Immigration and Customs all received significant increases to their budgets last year. And the United States has not asked Canada for a major military contribution for its military actions.
Both Mr. Martin and sources in the Prime Minister's Office say the government intends to carry through its plans for new spending on economic development, the environment and natives.
Canadian Alliance finance critic Jason Kenney said his party is urging the Liberals to add as much as $3-billion a year to defence, police and border security.
"That could easily be accommodated by offsetting spending in low-priority areas," Mr. Kenney said. He added the Liberals should shelve programs like the proposed multibillion-dollar plan to provide rural and remote communities with high-speed Internet.
Opposition MPs and economists say Ottawa has little room to manoeuvre and was flirting with the prospect of deficit down the road even before the terrorist attacks.
Toronto-Dominion Bank economist Don Drummond said he expects Ottawa, which posted a $17-billion surplus last year, will have a $9-billion surplus for the current fiscal year -- even with the deepening economic slump. But by 2003-04, he projects the surplus will be cut to $4.7-billion.