When it comes to the Conservative government's current plan to balance the federal budget, philosopher George Santayana's famous phrase, Those who do not remember the past are condemned to repeat it, is right on the money.

The Harper government is pinning its hopes for a balanced budget on a combination of higher revenues and successfully slowing the growth in spending.

Specifically, the Conservatives expect revenues to grow at an average rate of 5.6 per cent over the next five years while they plan to hold spending increases to an average of 1.8 per cent.

This same approached failed drastically in the 1980s and early 1990s. Successive federal governments attempted, but ultimately failed, to balance the budget by trying to slow the growth in spending.

There's nothing in the current Conservative government's track record suggesting the results will be different this time. Even before the financial crisis and its massive stimulus spending, the Conservative government increased spending at an average rate of 5.5 per cent.

Indeed, if the Conservative government sticks to its current plan, there is a serious risk that the results will mirror those of the 1980s: persistently large deficits, mounting debt, and ever-rising interest costs.

But Finance Minister Jim Flaherty has an opportunity to establish a legacy in the coming budget by simultaneously solving the principle short-and long-term problems facing the country. A visionary budget could resolve the deficit within two years and place the country on a much stronger footing when it comes to Canada's key government program: health care. The secret to achieving both lies in understanding the successes of the Chrétien-Martin budget of 1995.

The Liberals' 1995 budget was one of the most important budgets in Canadian history. It called for reduced program spending by $10.4 billion, or 8.8 per cent, over a twoyear period, but more significantly, Jean Chrétien and Paul Martin exceeded their goal and reduced spending by 9.7 per cent. The enactment of meaningful spending reductions coupled with stable revenues meant a return to a balanced budget in just two years (1997-'98).

To achieve similar success, Flaherty must first ensure that program spending is returned to pre-stimulus levels instead of the current plan, which grows spending from the new base established by the stimulus package.

Reductions in program spending of $15.7 billion, or 6.3 per cent, by 2012-'13 are required to bring spending in line with pre-stimulus levels (nowhere near the spending reductions that followed the 1995 budget).

Like the 1995 budget, the Conservatives should prioritize spending so that important areas are spared deep cuts while lower-priority areas carry a greater burden for the reduction in spending. A good starting point would be to significantly reduce corporate subsidies, an area the Liberals cut by 60 per cent in the 1995 budget, and one that has grown substantially as of late under the Conservative regime.

The second major success of the Liberals' 1995 budget was the significant changes it made to transfers to the provinces. The reduced transfers were coupled with greater provincial autonomy and responsibility for social services, which meant the provinces had incentives and the ability to design and deliver better social services.

As expected, the increased flexibility accorded to the provinces resulted in an outburst of innovation and experimentation. The results were largely positive: welfare dependency was reduced, employment rates increased, services were often improved with less money spent, and provincial governments trimmed social assistance spending.

These lessons should be applied to health care today.

Spending on health care is squeezing government budgets across the country and could consume more than half of provincial budgets within the decade, which means tax increases, more debt, and/or severe cuts to other areas of spending such as education.

The solution lies in getting better health-care services for less money. To that end, the federal government should reduce health transfers to the provinces by $3.1 billion per year over the next two years and in exchange, amend the Canada Health Act to allow the provinces to more easily experiment and innovate within a universal, portable framework.

This would give provinces incentives and clearer lines of accountability to the electorate to provide value-for-money for healthcare resources. Some provinces might experiment with health savings accounts, mandated insurance schemes, or perhaps expanded government provision. Provinces would no doubt learn from one another from both policy successes and failures, as they did in the 1990s.

The 1995 federal budget cemented a legacy for Chrétien and Martin; it's time for Harper and Flaherty to establish theirs.