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Janice MacKinnon has recently published her political memoirs: Minding the Public Purse: the Fiscal Crisis, Political Trade-offs, and Canada's Future. In case you don't remember her, she was elected Member of the Legislative Assembly from Saskatoon Westmount in the NDP sweep in 1991, immediately became part of Roy Romanow's "war cabinet," and served for five years as the Minister of Finance.

Her story is a partisan defence of the Romanow government and the changes it made to the New Democratic Party. This is the first insider report of those years and should be required reading for those interested in Saskatchewan politics and the politics of the political left in Canada. She documents the shift in ideology of the Saskatchewan NDP from the social democratic Keynesian welfare state orientation of the T. C. Douglas and Woodrow Lloyd governments (1944-64) and the Alan Blakeney government (1971-82) to the neoliberal pro-business approach of the Roy Romanow and Lorne Calvert govemments (1991-2003).

The heart of her book is a defence of the fiscal policies of the Romanow government. The battle she describes is never with the political right and its allies in the business community. The struggle of the Romanow government was always with the "left" and "leftists," who include the trade union leadership - particularly those in the public service unions, social justice organizations, writers like Linda McQuaig and Murray Dobbin, Briarpatch magazine, the Canadian Centre for Policy Alternatives, the Saskatchewan Alternative Budget, and social democratic professors. In government, the new group of NDP leaders is constantly in conflict with the "old NDP" - those who had ties to the Blakeney government and wanted to continue to pursue an active, progressive government. They also have to do battle with the membership of the NDP, who are still foolishly tied to Keynesian social democracy.

MacKinnon praises the Blakeney government for balancing the budget on a regular basis, but she is critical of it for "raising the expectations" of the people of Saskatchewan, leading them to believe that they could afford extensive social programs like subsidized drugs for the elderly and dental care for children. She insists that the province does not have the resources to support such programs.

Setting the new direction of the party

MacKinnon does agree with Briarpatch and other leftists on one key issue. We argued (June 1992 issue) that the direction of the Romanow government was basically set at the April 1992 three-day meeting in Saskatoon between the inner circle of cabinet ministers and 35 important business leaders. At this meeting the NDP government assured business leaders, as Mackinnon puts it, "that we would not return to the 197 Os, with its high royalties and big government, but would create the right climate for investment." The new economic development policy was formally set forth in Partnership for Progress, released in November 1992. It pledged that the NDP government would create a "competitive tax regime" [with Alberta], reduce government red tape, train the workforce, and build required infrastructure and research facilities. Emphasis was to be put on creating "a regulatory and taxation environment in which it is easier for business to operate."

The new NDP policy ruled out regaining control over the privatized Crown corporations in the natural resource sector or creating new ones to aid economic development. At best the NDP would create "innovative public-private partnerships." Soon after this meeting the Romanow government established an industry-government committee to revise oil and other royalty rates. They were not raised back to previous levels, as promised in the 1991 election, but lowered below those set by the Tory government of Grant Devine. Other tax breaks for business followed.

Prior to the 1991 campaign the NDP caucus had pledged that an NDP government would introduce a social democratic tax policy, progressive taxation based on ability to pay. It called for corporations to pay their fair share of taxes and denounced the Tory government for cutting resource taxes and royalties. The 1991 election platform, The Saskatchewan Way, promised to repeal the Provincial Sales Tax, introduce the "wellness system" to health care, improve farm insurance programs, bring in an Environmental Bill of Rights, introduce a comprehensive energy conservation strategy, eliminate poverty in the first term of government, and balance the budget. A public opinion poll contracted by the NDP and released in November 1991 revealed that Saskatchewan citizens wanted a real change in policy direction, with first priorities on job creation and the elimination of poverty. There was no concern expressed in the size of the government deficit. As MacKinnon stresses, the first task for the new government was to change p ublic opinion.

Confronting the Tory deficits and debt

During the election campaign the leadership of the NDP stressed the fiscal mismanagement of the Tory government and the government's involvement in the financing of private corporate megaprojects. In November 1991 the new Romanow government appointed the Financial Management Review Commission, chaired by Donald Gass, a Saskatoon chartered accountant. Everyone knew that its job was to present the worst possible picture of the fiscal mess created by Grant Devine's Tory government. They did their job well.

The Gass Commission reported that the budget deficit for 199 1-2 was $975 million, nearly three times as high as the Tory estimate. The total public debt was set at $12.7 billion, of which $8.8 billion was accumulated budget deficits and $3.9 billion borrowing by the Crown corporations. It reported that provincial employee pension plans had an unfunded liability of $3.1 billion, and $1.7 billion in investments and loan guarantees were at risk. The commission concluded that the NDP government had "no alternative" but to reduce expenditures, to downsize the government, and to reduce "the expectations of what the Provincial Government is able to do." The accountants added that "our economy can no longer support the public sector infrastructure that we have built to serve the quality of life and the standard of living that we have come to expect."

The "left" feared the worst. The Saskatchewan Government Employees Union hired Professor Jim Sentance, chair of the Department of Economics at the University of PEI. A Keynesian economist, he attacked the accounting system used by the Commission, noting that it was not used by any other province. He pointed out that the borrowing and debt of the province "was in the same league" with the rest of Canada and was nothing exceptional. Much of the seemingly high budget deficit was due to one-time write offs of poor investments and the impact of the recession. But no one in the business community, the media or the political elite wished to hear this case. It was time for the new policies of neoliberalism, being implemented by Labour governments in New Zealand and Australia.

The first NDP budget, under Finance Minister Ed Tchorzewski, is described by MacKinnon as "a landmark in Saskatchewan history." The NDP government argued that the budget deficit had to be reduced by major cuts to social programs, including health and education, and off loading on the municipalities and school boards. Revenues were to be increased through a higher sales tax and tax on fuel, plus a 10 percent surtax on top of personal income taxes. Some business taxes were raised and others lowered. The inflated deficit was "cut" to $500 million.

The key issue of resource revenues

A quick glance at the provincial budgets over the 1980s clearly shows that the deficits were due to a decline in revenues caused by the reductions in taxes and royalties on the resource extraction industry. As Allan Blakeney and others often stressed, in a hinterland economy like Saskatchewan, unless a fair share of the economic rents from resource extraction goes to the public in the form of taxes and royalties, the government cannot afford to finance the social programs demanded by its citizens.

The share of resource industry sales going to the public treasury fell to a low of only 11 percent in 1991 from a high of 43 percent in the last years of the Blakeney government.

As Doug Elliott reported in Sask Trends Monitor (April 1990), if the Tory government had maintained the royalty rates at the levels set by the Blakeney government, the revenues collected over the 1980s would have covered the Tory deficits and debts.

It is really astonishing that Janice MacKinnon has no discussion of taxation and tax decisions taken by her government. All MacKinnon does is flatly dismiss the critics of the left. The right wing Fraser Institute ranked the Romanow government the second best government in North America. Why would they do that?

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