Budget 2012 not that austere compared to 1995-1996

Andy Radia
Politics Reporter
Canada Politics

Jim Flaherty's 7th budget — and first with a parliamentary majority to back it — was tabled in the House of Commons, Thursday.

CTV News reports the document proposes $5.2 billion in cuts to departmental spending and includes plans to eliminate the penny, slashes 19,000 public sector jobs and extends the age of eligibility for Old Age Security by two years after 2023.

"The choices we have made are substantial, they are responsible and, in our view, they are certainly necessary," Flaherty told reporters inside the lockup in Ottawa.

Certainly by definition, Budget 2012 is an austerity budget.  The document highlights moderate cuts and it will be painful for some, especially for those in the public sector.

But as Andrew Coyne of PostMedia News tweeted, program spending in 2012-13 still remains higher than under any previous government.

Canadians are fortunate that we don't have to endure the same types of deep cuts taking place in other countries.

And compared to the Chretien/Martin budget of 1995, this really isn't all that austere.

According to a report written by the Fraser Institute, the financial situation the government faced in fiscal year 1994/95 was daunting: the deficit had reached $36.6 billion, 4.75 per cent of GDP, and interest costs paid by the government on the national debt reached $44.2 billion, consuming 33.8 per cent of budget revenues.

The deteriorating finances forced the government to act.

The 1995 budget cut program spending by $10.4-billion, or 8.8 per cent, to $107.9-billion in 1996-97 from $118.3-billion in 1994-95.

The Chretien government also announced major cuts in transfer payments to the provinces for financing health, welfare and postsecondary education. According to the Globe and Mail, the changes reduced Ottawa's annual contribution to social programs by $2.5-billion in 1996-97 and by $4.5-billion in 1997-98.

Business subsidies were slashed. Corporate taxes were increased, and a 1.5 cent excise tax on gasoline was introduced.

The 1995-96 budget also reduced public sector employment by 45,000 or 14 per cent over 3 years.

Now, that was an austerity budget.

Chretien/Martin Budget 1995 vs. Harper/Flaherty Budget 2012:

1995-96 2012-13
Program spending cuts ($) $10.4 billion/year in 2 years $5.2 billion/year in 2 years
Public service job cuts 45,000 over 3 years 19,200 over 3 years
Cuts to provincial transfer payments $4.5 billion in 2 years $0
New taxes New corporate taxes; 1.5 cent excise tax on oil $0
Retirement reforms Tightened up regulations for registered retirement saving plans; hinted at changes to OAS in the future. OAS reform - age of eligibility changes to 67 in 2023