May 26, 2005 Toronto, Ontario Check against delivery Good afternoon. I’ve spent the last couple days in Edmonton and Calgary, where the Queen and Prince Philip were concluding their visit to mark the centennials of Alberta and Saskatchewan. Meeting the Queen, talking with her, it was impossible not to be struck by what a remarkable constant she has been during a half-century of change in the Commonwealth and around the globe. We spoke about this. And it occurred to me that while change is always with us, what’s unique today is its pace and scope – never has it been so rapid, never so sweeping, and rarely has it had the potential to have such a significant and lasting impact on Canada. Let me begin today by touching on two of the major forces that will exert the greatest influence on our nation in the years ahead. First, the realignment of global economic power. What’s been talked about for years is now well underway: the world is coming to be dominated by a few titans – the United States, a largely united Europe, and now the emerging powerhouses of China and India. As we all know, these two Asian countries, which between them represent more than a third of the world’s population, have achieved economic take-off. This is the infancy of a massive new middle class, a billion strong or more – a brand new consumer society whose rise will be achieved in the socio-economic equivalent of a snap of the fingers. For many of the established, industrial nations of the world, the emergence of China and India is a double-edged sword of promise and predicament. For Canada, with our small domestic market and our export capacity, I believe it places within our grasp unprecedented potential. The second force that will influence Canada can be found in our demographics. Put plainly, we’re growing older as a society, and this has real implications. Fewer workers supporting more seniors. Potential skills shortages. Greatly increased demands on health care and other public services. New Canadians will soon supply all the net growth in our labour force – we need to help them adapt more easily to living and working in Canada. Young Aboriginal Canadians now comprise the fastest growing segment within our population – we need to help them share more fully in our national prosperity. Two significant forces – a changing world and changing demographics. How do we prepare for the pressures they will exert on Canada? The answer is that we must do what government has too often been unable or unwilling to do. We must plan ahead – and that is what I’d like to talk to you about this afternoon. I remember traveling to a number of the world’s financial capitals in 1994. I met with people whose institutions held Canadian debt. They looked me straight in the eye and they called Canada a basket case. It was quite an experience for a rookie finance minister. They told me: If you don’t clean things up, you’ll soon be coming here on your hands and knees, begging to borrow money – and we’ll comply, but at rates that will make your head spin. Their view of Canada was clear: our fiscal recklessness over decades was a giant boulder plummeting down from above. And we were the coyote, holding up a little umbrella and a sign that said: “Yikes!” Never again can we allow government to live beyond its means like that. The penalty is too great. We must be vigilant and we must be disciplined, for that is the eternal price of fiscal freedom. My government’s plan begins, today and always, with an unflinching commitment to fiscal responsibility. That means three things. It means getting our debt-to-GDP ratio down to a level that will give us the flexibility we need to confront unexpected problems and cope with the costs of an ageing society. Thirty-six cents out of every dollar collected by government used to go to pay interest on the federal debt. Now it’s 19 cents. When I took over as Minister of Finance, our debt-to-GDP ratio was almost 70%. Think about that: our debt was equal to almost 70% of our GDP – and growing. Now it’s at 38%. But we’re not there yet. Over the next nine years we’re going to get it down to an acceptable 25%. Next, to ensure our fiscal sovereignty, our commitment to financial responsibility means seeking to limit the amount of our debt that’s in foreign hands. A decade ago, 44% of our debt was under foreign control. Now it’s 15%. And finally, it means keeping the budget in balance. For decades, Canada didn’t just have deficits – we had a culture of deficit. Liberal government, Conservative government – it didn’t matter. Nothing ever changed. We put an end to that. We balanced the books. Eight consecutive years in surplus now. Indeed, we’re the only member of the G-7 not in deficit. Think about that – the only one. Economists will tell you that it’s fine for governments to run the occasional deficit, so long as things balance out over the course of the economic cycle. But I did budgets for nine years, and I know that the most important tool to control spending is discipline. There is a line, and you cross it at your peril. Let yourself slip into deficit, and you may well discover – as so many industrialized nations have found this decade – that it’s nearly impossible to reverse course. That’s why we will be steadfast in our commitment to staying in surplus. Now some of you are probably thinking to yourselves – fine, he says no deficits, but he’s been spending too much lately. Martin’s lost it! He’s gone over to the dark side! Well let’s talk about that. Let’s cut through the opposition claims and get to the facts. A couple weeks ago, I was in Nova Scotia, announcing an agreement with the province on early learning and child care. I looked at the papers the next morning -- Martin continues spending spree! blared the headlines. You’d think I was out there dishing out 20-dollar bills to toddlers – telling them, here, go buy yourself something that squeaks, courtesy of the government of Canada. Well, let’s walk through this. Early learning and child care is one of the priorities we campaigned on last year. The money for it was set aside in the budget -- $5-billion. And now we’re working with provinces and territories of all political stripes to invest that money and build the national program we promised. So in effect, we’re being criticized for honouring our pledge. We’re being attacked for doing exactly what we said we’d do. I’ve been in politics awhile, and I’m used to being criticized. But this is a new one for me. We’ve also been criticized by our political opponents for the budget agreement we reached with the NDP, which represents an overall increase in spending of about 1%. Understand three things about that agreement. First, it explicitly declares that we will not return to deficit. That’s not a guideline – it’s a condition of the agreement. Second, Canadians sent us to Ottawa with a minority government, and a minority government means you work with the opposition. That’s not just some quaint political tradition – it’s a matter of cold arithmetic. A minority government cannot try to pass a budget by pretending it has a majority. Ask Joe Clark. Third, the areas in which new spending is to be directed are all consistent with the priorities we funded in the budget and intend to continue funding: education, cities and communities and the environment. Let me take a moment on this last point: I know there are some of you in this room who won’t agree with my approach, who think I should simply cut taxes deeply and walk away from investments that might seem expensive, like affordable child care and protecting our environment. That’s a legitimate point of view, but it’s not mine. For me as Minister of Finance, balancing the budget was never an end in itself. I am not a Conservative. We worked hard as a government, a Liberal government, to get to a surplus position – not to thrill economists (if such a thing is technically possible) but so we could actually do something for Canadians; so we could make a positive difference in people’s lives, instead of simply shrugging and saying, “Sorry, we can’t afford to help you. We can’t afford to do anything.” Today, Canada’s economy and public finances are national strengths that increasingly set us apart. We have the best growth in living standards among the G-7. The fastest job growth. The best rate of debt repayment. Low inflation. Low interest rates. Unemployment that’s 30 per cent lower than a decade ago. For Canadians, it’s easier to find a good job, buy a house, pay the bills. As stewards of Canada’s finances, we helped build this record of achievement. And we will protect it. I will protect it. We will stay the course. The first casualty of the deficit years was long-term planning. Throughout those decades in the red, the federal government was always concerned with the now -- with the urgent pressures, the need to borrow, the rapidly escalating interest payments. But this is a different era, and the times demand a government committed to foresight, dedicated to maintaining a budget surplus, and determined to work not only for the Canada of today but for the Canadians of tomorrow. Now, so far I’ve spoken of fiscal discipline. That’s the starting point. The next step is to take the dividends that flow from our surpluses and to reinvest them in Canada – in making it more productive, more competitive, in making it ready to face the future. To begin with, that means paying down debt. This is not some exercise in accounting. It is an imperative. We have already ensured the viability of the Canada Pension Plan for generations. We are well ahead of most countries – but with the baby boomers poised to begin retiring soon, other challenges remain. As a government, we have already reduced the federal debt by more than $60-billion. But we cannot let up. Paying down debt is absolutely essential if we are to be fiscally strong and resilient. Next, reinvesting in Canada means cutting taxes. We have reduced taxes by a cumulative $100-billion over the past five years, the largest tax reduction in Canadian history. We brought the federal statutory corporate tax rate below that of the United States. And on the assumption the nation’s social programs are protected,, we’re going to continue to bring taxes down – to benefit families, to encourage entrepreneurs and investors, to help Canada thrive in an integrated North American economy and in a world of economic giants. Reinvesting in Canada means investing in innovation. Since 1997, we have doubled support for university and hospital-based research – an increase of more than $13-billion. Our research universities are now at, or near, the top of world ranking in many fields. Nobody talks seriously about a brain drain anymore. Looking ahead, we are going to keep investing aggressively in Canada’s research infrastructure – both basic and applied. Why? Because ingenuity and specialization are crucial if Canada, a nation of only 32 million, is to prosper among the titans of tomorrow. Reinvesting in Canada means working with the provinces and territories. For instance, we recently signed an agreement with Ontario – an agreement that’s focused largely on improving worker training and immigrant settlement. Both pursuits are essential if Canada is to successfully confront the global and demographic changes heading our way. We have reached agreements with other provinces, and I’m sure we’ll sign more as needs arise. This has been the case since Confederation. I believe strongly that exercising leadership in our federation means understanding and responding to the unique challenges of each part of the country – providing, and always providing, we have the fiscal capacity to do so. You cannot have a nation as large and as diverse as Canada and not understand that meeting regional needs is in the national interest. The key principle is fairness. Of course the national interest will lead primarily to national solutions, but it is also in our collective interest to care and help when, for instance, the forestry sector in British Columbia is threatened by the spread of pine beetle, or when beef producers are devastated by the closure of the U.S. border. Fairness is not found in dividing each federal dollar into 13 slices. Nor is it to be found in adding up a balance sheet at the end of each day to see if it was profitable to be part of Canada. Finally, preparing Canada to face the future means reminding our American friends that free trade actually means free trade. NAFTA has been a success, but there remain some troubling issues – foremost among them the fallout from BSE and the harassment of our softwood lumber exports. We cannot let this stand. We will not let up in our efforts. A couple months ago, I was in Texas, where I signed a new prosperity partnership with President Bush and President Fox of Mexico. The agreement declares that it is in our shared interests to respond to the rise of China and India by forging a more integrated North American economy. But this will only work if the Americans refrain from violating the spirit of the trade agreements that unite us in commerce. NAFTA needs a dispute settlement mechanism that is objective and binding, one that brings things to a conclusion in a reasonable period of time – and whose decisions government are prepared to be bound by. The agreement will be forever flawed without one. Debt reduction, tax cuts, investments in innovation, federal-provincial co-operation, free and fair trade -- these are all essential parts of any equation that will add up to increased productivity in Canada. And this is crucial for our ability – for your ability – to exploit the huge new markets that are opening up. For this reason, we will continue to invest in the drivers of economic growth, as we seek to create greater wealth at lower cost. That being said, let me be clear: the definition of these drivers cannot be narrowly defined -- for our productivity and our ability to compete depends on our willingness to reinvest the fiscal dividend in the kinds of programs that enhance our quality of life, that set Canada apart, that give opportunity and security to our people. This is why last summer’s agreement on health care is so important. For years there was dysfunction in the manner in which the federal and provincial governments discussed and negotiated health-care funding and progress on health reform. We understood that the only way to make the progress that Canadians deserve – the only way to begin preparing for the increased costs of an ageing society – was with an agreement that’s long-term, that lays out adequate, predictable funding, that addresses the most pressing issues, such as access and waiting times. Working with the provinces and territories, that is what we achieved –an agreement that by this year-end will lead to the measurement of waiting times and the establishment of real benchmarks that will guide efforts to bring them down; an agreement that will ensure true accountability to our citizens. This is an investment in our collective future. Pursuing the enduring goals of prosperity and security also require the national government to set out the new national projects that are essential at each period in our history. For years now, cities and communities have struggled to maintain important public services and infrastructure. And they’ve been doing it with limited sources of revenue that don’t keep up with economic growth. Our government understands that the quality of life of Canadians – now and in the future – is and will be profoundly influenced by the health and vitality of our cities and towns. We want and we need our communities to be great places to live, to work and raise a family. And the way to do this is to ensure that they have the revenue they need to run public transit, to maintain parks, to build infrastructure. It is also to bring municipal governments to the national table, and to give them a voice as we establish the objectives of the nation. That is why we have worked toward a long-term solution. First, a rebate on the GST. And now, the transfer of a portion of the gas tax – a move that will mean billions more in revenue going into important local projects that will make a positive difference in the lives of Canadians. This is an investment in our collective future. Finally, our national program of early learning and child care. I believe that the federal government owes a duty to contribute to a culture of learning that goes beyond our current support of post-secondary education, that goes to the heart of when learning begins. Understand we are not just talking about child care. The focus here is on development, on giving children a leg up. That means each child will get a better start and a better chance of thriving in the later years of school and in life. Quite simply, it is the right thing to do for our kids. And it’s the right thing to do for our country. Indeed, the Bank of Canada has called early learning the single most important investment that we as a nation can make in our own future. The market for high-quality jobs is increasingly global, and the competition is increasingly intense. We have got to stay ahead of the curve. That is why we’re placing such a high priority on early learning, and that is also why we’re increasing our support for post-secondary education. These are investments in our collective future. Better health care, vibrant cities and communities, affordable child care, improved access to education: these initiatives support our plan to work with all orders of government to ensure Canada prospers in the face of global and demographic change; they serve as a declaration that we are determined to prepare our nation for the challenges of tomorrow. In a sense, the government is like a family – a family that for years struggled to escape from the vicious circle of debt. A family that each year added more to what it owed. Now, our family has done the hard work of putting its financial house in order. The chequebook is balanced. We are united by our determination that we will not go back to those hard days. We are united by our determination to build for the years ahead. Ladies and gentlemen, this is Canada’s time. I look to the future and I see such promise, such potential. I travel this land and I see a country and a people that are poised to seize the opportunities that lie ahead. There is so much we have going for us as a nation. I believe in a government that recognizes the forces that will shape our world and then makes sure that we are ready to confront them, all of us, together. I believe in a Canada that has a strong national government that is a force for good, making a positive difference in people’s lives, representing our values and our interests on the world stage. I believe in a Canada that keeps its economy strong, keeps unemployment low, and protects its prosperity by refusing to go back into deficit. I believe in a Canada that values and protects its publicly funded medical system, so care requires a health card, not a credit card. A Canada that supports and helps to strengthen its cities and communities, so our rural municipalities can thrive, so our major cities can serve as our signatures to the world A Canada that invests in the future of generations to come with affordable, high-quality early learning and child care, and a post-secondary education system that’s second to none. This is the Canada I believe in. This is the Canada we are working toward. Because I believe that as a generation, we will ultimately be judged not by the conventional wisdom of today but by the Canadians of tomorrow. They will look back. They will understand that we had the means to plan ahead. And they will see that we acted – that we reinvested in the great shared project we call Canada; that we were up to the challenge of using opportunity in our day to build for them an even brighter future. Thank you.
