While most federal Liberals will spend the summer choosing sides in the
civil war between the Chretienistas and the Martinites, we trust that
our modern day C.D. Howe, aka John Manley, Minister of Everything will
concentrate on the nation's finances.

After a good, but hardly stellar, outing before the commons finance
committee in June, Finance Minister Manley must stay focused, skip a few
of his shifts at the Tim Horton's drive-thru and start to craft his
first budget. He must stand firm against the big spenders at the cabinet
table (his boss and everyone else) and he must debunk the Martin "mystique".

Both the IMF and the OECD forecast Canada to pace G7 growth this year
and next. This translates into higher government revenues for federal
coffers. It also explains the saliva puddles that commons employees
wiped from the federal cabinet table in late June after the last cabinet
meeting before summer recess.

Speculation abounds that Parliament will prorogue on September 13th thus
delaying the return of the House to October to coincide with the Queen's
visit when she could read the Speech from the Throne. A speech tailored
to the Jean Chretien's incessant - not to mention destructive - search
for a "legacy" that all but assures a return to runaway Trudeauesque
spending.

But Mr. Manley must resist with all his might. And Canadian taxpayers
and the international financial community must publicly, repeatedly and
vehemently tell John Manley that such a 'back to the future' approach
will not be tolerated.

As for the Martin "mystique", Mr. Manley need not be spooked by his
predecessor's record of quasi-success. A new paper by Thomas Courchesne
from the Institute for Research on Public Policy (IRPP) offers much
needed perspective on the Martin fiscal legacy.

Granted the federal Liberals have run five consecutive surplus budgets
since 1997-98, but this was principally accomplished by savaging CHST
transfers to the provinces and profiteering from worker and employer EI
overpayments to the tune of $42 billion as of March 31st. Prior to this,
Ottawa ran 27 consecutive budget deficits. And Canada's debt-to-GDP
ratio, while falling, is still the second highest in the G7.

Courchesne notes the foundation of many fiscal policy gains were laid by
the former PC government - despite their inability to rein in spending
and obsession with the constitutional file - such as bracket creep
(which finally ended in Budget 2000 thanks to the leadership of the
CTF), tax policy overhaul, low-inflation targets and free-trade. Combine
these structural changes with Paul Martin's fortune of serving during
the largest U.S. boom in economic history and his record is merely
mortal, not Herculean.

So what should John Manley do? From a taxpayer perspective, he should
offer a compelling vision by getting back to basics. This will be the
theme of the CTF's pre-budget lobbying efforts: Back to Basics - An
ABCDEFG Budget Plan.

A - Abolish the capital tax. Taxing plant and equipment assets is
punitive, stifles innovation and retards economic growth. We need to
catch up and surpass the Americans and Europeans in modernizing our
production facilities and workplaces, not penalize firms through
perverse capital taxes.

B - Basic standard of living. The feds must transform the basic personal
exemption (BPE) into a basic standard of living credit (BSLC) and lay
out a three-year plan to raise this amount to $10,000 en-route to
$15,000 over six years. A minimum wage job in Canada comes with a gross
salary of $15K; taxing anything below this just condemns people to
perpetual serfdom.

C - Corporate Welfare: End it now. Wind up industrial subsidy programs
and regional development initiatives and replace them with equivalent
business tax reductions in the neighbourhood of $4 billion. It's time
for government to stop picking winners and losers and let the market
decide.

D - Debt Reduction: Devise a schedule and enshrine it in law so we can
aim to completely reduce the $547 billion debt over the next 30 to 40
years. Canada still blows $41 billion annually (24 cents of every tax
dollar) in debt interest payments alone. It's time to accept
responsibility for this mess and stop perpetuating the fiscal crime of
intergenerational tax evasion against our kids.

E - End EI and CPP employer overpayments. As employees move between
jobs, a whole new set of payroll taxes are paid by workers and
employers. While workers can recoup this money at tax time, employers
cannot and it costs them an estimated $750 million annually.

F - Forces. Start to repair the damage of 30 years of starving the
Canadian armed forces. Minister Manley should challenge Defence Minister
McCallum to see who can read the latest commons Defence committee report
first; it's chalk full of realistic recommendations.

G - Gas taxes for cities. Adopt the CTF's Municipal Roadway Trust
formula to devote $2.2 billion in gas taxes each year for the next three
years to roadway development in Canada's cities.

In September I'll cost out these proposals and further explain the
benefits for Canadian taxpayers if they're adopted.