Ottawa can’t cut its way to a stronger Canada
By Lethbridge Herald on September 20, 2025.
Katherine Scott
Troy Media
Canada is on the verge of repeating one of its greatest policy mistakes. Faced with economic uncertainty, the federal government looks set to revive the deep cuts of the 1990s—cuts that gutted public services, widened inequality and left lasting damage still felt today.
Some business groups and conservative think tanks are seizing on this crisis to push for reduced federal spending, weaker oversight and an expanded role for private business and tech platforms in public services. Their message is simple: government is bloated, the deficit is dangerous, and the private sector can do better. But Canadians have heard this story before, and we are still paying the price.
The business press continues to treat Jean Chrétien’s former finance minister, Paul Martin, as a fiscal saviour. His 1995 budget is still hailed as a “Maple Leaf Miracle” for balancing the books. But the truth is more complicated. The government justified the cuts as necessary to calm financial markets and avoid a debt crisis after warnings from credit rating agencies that Canada’s debt load was unsustainable. For millions of Canadians, however, the result was no miracle at all.
It meant slashed unemployment benefits, reduced social assistance, collapsing health care systems, overcrowded classrooms, years-long waitlists for social housing and tens of thousands of lost public sector jobs.
The effects are still visible today. Hallway medicine remains the norm. Canada faces a massive housing shortfall. Universities and colleges struggle to stay afloat, forcing tuition hikes and program cuts.
These challenges trace directly back to the austerity measures of the mid-1990s, compounded by $100 billion in personal and corporate tax cuts introduced a few years later. Far from a triumph, Martin’s austerity was a profound failure of national vision—one that continues to weaken the country.
The cuts were staggering in scale. The 1995 budget carved $25.3 billion from direct spending over three years, averaging a 20 per cent reduction across federal departments. Transfers for health, education and social services were slashed by $7 billion. Access to unemployment insurance was sharply restricted, benefit levels were frozen for a decade and entire areas of federal responsibility were offloaded onto provinces and municipalities without adequate funding.
At the same time, Crown corporations were privatized, subsidies to businesses eliminated, user fees and cost recovery measures expanded and departmental management operations “rationalized.” One-quarter of the federal public service was let go.
All this took place against the backdrop of new free trade agreements with the United States and Mexico. As Canadian factories closed, the country lost tens of thousands of manufacturing jobs. Between 1988 and 2001, Canada created less than half as many full-time jobs as in the previous 13 years. Whole communities were left behind.
The lesson is clear: deep cuts combined with economic upheaval left lasting damage. Yet Ottawa appears ready to take the same gamble again.
Today, in his hunt for defence dollars, Prime Minister Marc Carney is again turning to the neoliberal playbook—shrinking government, cutting taxes and leaving more to the private sector. But Martin’s 1995 budget and the decades since have shown this approach often leads to higher costs, uneven access and declining quality in public services.
Yet austerity continues to be sold as fiscal prudence. Driving a truck through federal revenues with tax cuts that favour middle- and high-income families while gutting the public service does nothing to strengthen Canada. Instead, it undermines our capacity to meet the very challenges we face: from a shifting global security environment to the urgent need for affordable housing and a sustainable health care system.
Canadians understand the need to invest in defence. We recognize the seismic shifts underway in the global order and the demands they place on our security. But meeting those needs cannot come at the cost of dismantling the very programs that make our society equitable and our economy resilient.
Slashing essential services in the name of deficit reduction will only deepen inequality and limit opportunity. It risks creating a country where fewer and fewer Canadians can afford a decent home, get timely health care or send their kids to college or university.
What Canada needs now is not a weaker government but a stronger one, with the resources and resolve to act in our collective interest. That means protecting and rebuilding the public programs and services that millions rely on every day. It means investing in people and communities, not hollowing them out in the hope that private markets will pick up the slack.
The private sector will not save us. That responsibility rests with us—and with the government Canadians elect to act in our name.
Katherine Scott is a senior researcher at the Canadian Centre for Policy Alternatives.
© Troy Media
20-19
Agreed!