The Impact of the Federal Deficit and
The federal government's changing position in relation to revenue collection and social spending was discussed in Chapter 6. When the welfare state was planned, Canada was well able to consider extensive financial redistribution polices from central sources to individuals and provincial governments. But in the mid 1970s the situation changed, and gradually the federal government found that it was not able to meet the demands upon it without going into debt. There were many reasons for this change, both internal and external. Since then Canada has fallen deeper and deeper into an annual deficit and accumulating debt situation. At the beginning, this indebtedness was seen to be a management problem for the federal government to resolve, but as the debt has grown, it has now become the most discussed political issue at all levels of government across Canada. This chapter will try to trace the response of the federal government to the deficit and debt issue up to 1993 and the way in which this response has affected social programs delivered at provincial and local levels.
The Liberals were in power in Ottawa from 1935 to 1984 with only two short interruptions. The first of these — the Diefenbaker years, 1958 to 1963 — happened during what has been called the postwar consensus on the importance of having a welfare state and the second — the Joe Clark government of the early 1980s — was a brief interregnum in which the consensus was not challenged.