Days after taking office, Paul Martin imposed a freeze on a host of capital projects and government hiring, and created a committee to review all federal government spending. Whether Martin is simply reversing Jean Chrétien’s spending spree to free up money for his own priorities, or truly wants to reform Ottawa’s spending habits, remains to be seen. What we do know is that Paul Martin’s creation of the Expenditure Review Committee will likely cost taxpayers a great deal of money and bear little fruit.

The Expenditure Review Committee (ERC) will be created to examine program spending by the feds with an eye towards both reducing costs and streamlining government spending. The review will occur in two stages. First, the ERC will review each program’s relevance followed by an assessment, “on whether any proposed adjustments are sustainable over the long term”. The Committee is expected to submit its first set of recommendations to the Prime Minister in the autumn of 2004.

Back in 2002, Canadian taxpayers paid $15 million for the Romanow Commission on the future of Canada’s health care system. We got little, if anything, in return for all that money. Even though Canada spends more on an age-adjusted basis than any of the industrialized countries which provide government-sponsored universal access health care, Romanow concluded that more money was the only solution. Expect similar results from the Expenditure Review Committee. Despite evidence to the contrary, the federal government will conclude that it must continue to play a major role in agriculture, healthcare, R&D, culture, regional development, industrial development, and the list goes on and on.

The Expenditure Review Committee will assess program spending against seven specific tests ranging from the Role of Government Test (is there a legitimate and necessary role for government in this program area or activity?) to the Value for Money Test (are Canadians getting value for their tax dollars?). According to the Department of Finance, “All ministers will be required to discuss with the committee the policy purpose and effectiveness of their department’s programs and present options for the future, including cancellation, reduction or structural change.”

While it sounds great in theory, the reality however, will likely be much different. It is highly doubtful that Ministers will appear before the Committee to explain how their own portfolios ought to be downsized, programs under their control eliminated, and their own power significantly diminished. Rather what we can expect is for them to argue how valuable agricultural, cultural, regional and industrial subsidies are to Canadians; how Canadian healthcare must, at all costs, remain publicly administered; how the CBC is critical in maintaining Canadian values; how R&D would not be properly funded were it not for government dollars; how our retirement system is world class and could not possibility be managed by individuals themselves; and above all how they need more money and staff to be more effective.

Canadians do not need another committee to examine how “valuable” our government spending is. We need a government committed to a real downsizing of government. The reasons stem from proven academic research: high levels of government spending result in lower rates of economic growth, reduced productivity, and ultimately less prosperity. Harvard economist Robert Barro found that government consumption, that is, expenditures by the government not deemed to be public investment such as education and defense had no direct effect on productivity and hence GDP growth. Most recently, Harvard economist Alberto Alesina and his colleagues investigated the effects of large changes in government spending on business investment. They concluded that dramatic increases in government spending as a percent of GDP result in significantly lower investment as a percentage of GDP.

Canada garnered significant benefits from the fiscal reforms Paul Martin started as Finance Minister in 1995. Specifically, Canada’s GDP growth rate was higher than the US’ rate in four of the five years between 1998 and 2002 – a feat not achieved for the past 25 years. Given the increases in federal spending during the past few years and the recent tax reforms in the United States, Canada must continue with the reforms started 1995 to achieve similar economic results. With 15 years of political experience under his belt, Paul Martin shouldn’t need a committee to review spending; he should starting cutting programs that he knows the private and/or voluntary sector can better deliver.