This article is the text of comments prepared for a day-long meeting with the Minister of Finance, Paul Martin Jr., on December 13, 1993 in Ottawa. Some of the data have been updated or revised to reflect the latest available information.

In an earlier version of this paper, the data for tables 1 and 2, and for figure 1 were for all levels of government and were for the year 1988.

A more complete analysis along these lines can be found in the paper, "Why we don't want to solve the deficit problem," The Fraser Institute, 1992, or in chapter 6 of Government Spending Facts, The Fraser Institute, 1991

Education funding is of course primarily money spent by the federal government to fund programs operated by the provinces. That is also true of health care spending. In both cases, the federal government has changed the process by which this funding occurs in that some of the federal funding is now delivered in the form of tax points.

It might be argued in a theoretical sense that expenditures on transfer programs such as Unemployment Insurance and Canada Assistance Plan are a form of investment in infrastructure in the sense that they are an investment in people. While this theoretical possibility exists, the practical experience with these programs in Canada does not accord with it. In those areas where the application of Unemployment Insurance has been intensively studied, such as in Newfoundland, the overwhelming impression is that Unemployment Insurance has been the single most important contributor to the destruction of human capital and has had the result over a relatively short period of time of transforming a large segment of the population of that province into wards of the state. Not only has it had this debilitating effect on human capital, it has also greatly distorted the allocation of effort in our industrial structure as people have been induced to gravitate toward industries inherently uneconomic or cyclically and seasonally unstable because of the possibility of earning a high return from employment there once the UI benefit is taken into account.

The data are based on the Financial Management System statistics and interpolations and estimations devised according to a methodology discussed in Government Spending Facts, The Fraser Institute, 1991.

"March's Solution--Effective Federal Spending Cuts," Fraser Forum, March, 1993.

See Miles Corak, "Repeat Users of the Unemployment Insurance Program," Paper #43, Analytical Studies Branch, Statistics Canada, 1992. A summary can be found in Fraser Forum, January 1993, p. 16.

Canadian Institute of Actuaries, Canadian Retirement Income Social Security Programs: A Report of the Task Force on Social Security Financing, November, 1993.

Individuals should be permitted to purchase insurance against having to bear such a tax burden, thus spreading the incidence of the health care benefit tax over all high income individuals rather than having an incident only on those unlucky enough to be ill.

One potential explanation for Harcourt's sympathy is that he used to play basketball at the University of British Columbia, and continues to play "pickup" ball.

See the Vancouver Province Dec. 8, 1993, p. A62 and Dec. 9, 1993 p. A72.

Russians also lack, by and large, the subsidiary human capital of politeness to strangers. Russia is notorious for the surly and deceptive service you get, if any. And wherever the service is deteriorating, as in mid-century Britain, it is a sure sign of big trouble to come.

This is not, of course, a comment on the people for whom they claim to speak, most of whom came to Canada because they thought it would be nicer here than where they came from, mostly because there was so much of this kind of human capital here.

This is what William Golding wrote about in Lord of the Flies, and it is what Arnold of Rugby, founder of the English public school system, meant when he described the school's mission as making gentlemen out of savages.

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