Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, November 1, 1994 TAG: 9411010105
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: TORONTO LENGTH: Medium
After decades of heavy spending on social programs, this vast, underpopulated northern land has run up a national debt of $550 billion, and is accumulating more at a rate of $85,000 a minute.
Add debt owed by the provinces and the figure leaps to $700 billion, about $25,000 ($18,750 in U.S. dollars) for every man, woman and child in the country.
That is slightly higher than in the United States, where the $4.6 trillion debt works out to about $18,000 per person.
``We are in hock up to our eyeballs,'' Finance Minister Paul Martin told the House of Commons Finance Committee. ``That can't be sustained.''
Canadians must decide between higher taxes or, a more likely alternative, meaningful cuts in the social programs they long have held dear.
``Canadians believe they are already taxed to the hilt,'' Martin told the committee before it set off Monday for a series of hearings around the country.
``But it must be made clear that if Canadians want to avoid more taxes, they must be prepared to support smaller programs - including programs that benefit them.''
Canadians made the philosophical choice that they wanted universal health care, generous old-age pensions, extended unemployment insurance and a myriad of other social programs - and that they were willing to pay the price.
But the days of such generosity are gone.
``We are really in a crunch situation,'' said Frank Atkins, a professor of economics at the University of Calgary. ``We did choose to have all these programs once. Those were different economic times.''
In the 1993-94 fiscal year, one-quarter of all government spending - $38 billion - went to pay interest on the national debt. That is expected to be 29 percent by 1996-97. The government soon will have to collect $3 in taxes for every $2 in services.
About 20 percent of U.S. government spending goes to pay interest on the national debt.
Canada's budget deficit in 1993-94 was $42 billion. The United States, which has roughly nine times as many people, had a budget deficit of $203 billion in fiscal 1994.
Prime Minister Jean Chretien's No. 1 campaign pledge in last year's election was to reduce the deficit to 3 percent of gross domestic product, or about $25 billion, by the 1996-97 budget.
Fully 60 percent of the budget goes directly to people in the form of pensions, unemployment benefits, aid to natives and veterans, or to the provinces to pay for health, education and social assistance.
``The safety net needs to be there,'' said Atkins. ``But it needs to be overhauled.''
Some see an alternative to program cuts.
``Frankly, there is room for increased taxation,'' said Toronto dentist Sheldon Hoppe. ``The high earners can still afford to pay more tax than they're paying.
``Everybody I see, the professionals, seem to have the cash to take vacations, to buy new houses, to send their kids to the university. They could easily pay more.''
On top of income taxes, a 7 percent federal goods and services tax is tacked onto virtually every purchase in Canada. This is added to provincial sales taxes, which range as high as 12 percent.
Mike Fox, a retired high school teacher from the tiny northern Ontario town of Levack, said Canada's middle class is well-off.
``As a member of that class, I have no problem with what Mr. Martin calls loopholes. The cracks are being filled and the people who can afford it are going to have to pay. I am among them. I won't be paying reluctantly.
``The only thing is I hope the government is going to be equally diligent about getting more from well-to-do individuals and corporations, getting them to pay what they owe.''
He also pointed to last week's revelation that hundreds of millionaires have collected benefits such as unemployment insurance, child care, tax breaks and old-age pensions.
Nonetheless, many Canadians fear Martin's well publicized comments are setting them up for a hammer blow at beloved programs.
Governments have been struggling for years against skyrocketing health costs while continuing to ensure no Canadian goes without care. Devastated areas such as Atlantic Canada, where the cod-fishing industry has collapsed, rely heavily on long-term unemployment benefits. Many people there struggle to get 10 weeks of work a year in order to qualify for 42 weeks of unemployment payments.
The question now is: Will the face of Canada change? Will that generous quality that has made it one of the most attractive nations in the world be the seed of its own downfall?
``I think Canadians still have the same underlying principles,'' said Atkins, the economics professor. ``The new economic reality is that the huge boom times are over and what we'll have in the future is normal kind of growth. We'll have to adjust the way we think to that kind of reality.''
by CNB