One thing you’ve got to admit about Mike Harris is his fine sense of timing. Certainly, the timing of his imminent departure from the Ontario Premier’s job, with the economy poised for a nosedive, is impeccable. What may be less obvious is how lucky his timing was in arriving in the Premier’s Office. The guy is hung with horseshoes.

Of course, the prevailing view is that luck had nothing to do with it, that it was Harris’s bold initiatives — along with those of Alberta Premier Ralph Klein — that finally broke a political tradition in which “deficit financing was still the opiate of the political class,” as Margaret Wente put it in The Globe and Mail last week.

Thus, Harris and Klein showed a nation of strung-out deficit junkies how to set things right and, Wente continues, “Now everyone has kicked the deficit habit.”

It’s a powerful mythology, but it brushes over a few important details — like why there were such big deficits in the first place. Profligate spending, a fondness for deficits are the usual answers. Usually left out is any mention of the recession of the early 1990s — the most brutal one this country has seen since the Great Depression.

Recessions notoriously cause deficits, because high levels of unemployment deprive governments of revenue and leave them faced with huge social costs, unless they are willing to let the unemployed starve. The recession of the early 1990s had an additional factor that pushed up the deficit — extremely high interest rates, which added greatly to government financing costs. In fact, these high interest rates, part of the Bank of Canada’s over-zealous war on inflation, played a key role in bringing on the recession in the first place, as leading economists like Pierre Fortin and Lars Osberg have demonstrated.

In other words, it was the Bank of Canada’s commitment to an extremist anti-inflation agenda — not runaway spending — that caused the huge deficits of the early 1990s.

This was certainly the case in Ontario. Ontario was actually deficit-free in 1989-90, just before the recession hit. Within three years, the provincial deficit had climbed to a massive $12.4-billion.

Legend has it that Harris then arrived and single-handedly drove the deficit into the ground. But in fact, the deficit was already on its way down when Harris took over the reins at Queen’s Park in 1995; it had been on the decline for the previous two years — the last two years of the New Democratic government of Bob Rae.

It’s unlikely that Rae deserves much credit for this — any more than he deserves the blame for the recession that brought on the massive deficits in the first place. As the Bank of Canada started letting up on interest rates (they dropped from 12.7 per cent in 1990 to 4.9 per cent in 1993), the recession subsided and the economy started to improve. In 1994, when Harris was still in opposition, the Ontario economy grew at a strong rate of 5.5 per cent.

When Harris came to power, he largely stayed the course on deficit reduction, reducing the deficit not much faster than the Rae government had in the final two years of its mandate. But, while Rae would forever be vilified for big deficits, Harris was quickly able to take spin control of the deficit issue. His people — and an enthusiastic business community and media — portrayed him as the king deficit-slayer, a beacon of hope in the land of the deficit-addicted, the model for sensible government everywhere.

Just to set the record straight — a number of lesser provinces actually beat Ontario to deficit-free status, including Newfoundland, Prince Edward Island, Manitoba, Saskatchewan and Alberta. (Of course, with its massive oil and gas revenues, Alberta can bat deficits away like bothersome flies on a summer night. It’s perhaps unfair to even lump it in with other provinces that lacked the foresight to locate themselves near oil wells.)

Interestingly, Ontario was actually a bit of a laggard in the anti-deficit race, producing a surplus finally in 1999-2000, only a little ahead of the much-maligned British Columbia government.

Of course, the business community, no matter what it says, isn’t really all that concerned about big deficits, as long as it likes what the government is doing.

Certainly, the business community cut the Harris government a lot of slack over the relatively slow pace of its deficit reduction, largely because Harris shifted the burden of deficit reduction in ways that business approved of. Among other things, Harris quickly cut welfare payments by 22 per cent, thereby ensuring that the poorest citizens of the province would be obliged to hand over one-fifth of their income each year to the anti-deficit cause.

This and other social spending cuts allowed Harris to introduce significant tax cuts, without losing pace on the deficit reduction front. Instead of cutting the unpopular provincial sales tax, Harris opted for across-the-board income taxes. This ensured that the smallest tax benefits would go to those at the bottom end of the ladder and the biggest benefits would go to those at the top.

Through all this, the economy continued to improve. This enabled the Harris team to claim that the tax cuts were the secret to the revived economy and the healthier provincial finances. A more likely explanation is that Harris was lucky that U.S. Federal Reserve chair Alan Greenspan kept interest rates low in the U.S., fuelling the longest sustained boom in American history, and thereby creating a huge market for Ontario’s exports.

So lucky Harris certainly was. I guess another lesson is that in politics, it’s not the size of your deficit that matters, but who gets stuck paying it.

Linda McQuaig

Journalist and best-selling author Linda McQuaig has developed a reputation for challenging the establishment. As a reporter for The Globe and Mail, she won a National Newspaper Award in 1989...