Updated: Wed Jan. 28 2009 5:06:34 PM

ctvtoronto.ca

A former Ontario NDP finance minister lambasted for running a deficit to fight the recession in 1991 has given a thumbs-up to a Conservative federal deficit budget authored by a disciple of the "Common Sense Revolution."

Floyd Laughren told ctvtoronto.ca on Wednesday that he thinks the budget of federal Finance Minister Jim Flaherty is "on the right track.

"My only caution would be that they concentrate on infrastructure and not program spending, because it's the program spending that gets you into structural deficits," he said.

The NDP formed a majority government, taking office in October 1990. Laughren, appointed deputy premier and finance minister, delivered his first budget on April 29, 1991.

"We had a choice to make this year -- to fight the deficit or fight the recession. We are proud to be fighting the recession," Laughren told Queen's Park.

That deficit came in at just under $10 billion. However, he said the budget would be balanced by fiscal 1997-98.

To say there was a backlash would be putting it mildly.

"I've still got some scars," he said ruefully.

Some in the media referred to Laughren as "Pink Floyd."

Laughren said that as the recessionary bite on Ontario took a big chomp out of revenues and caused social assistance costs to surge.

"There were a number of reasons for that. It was the beginning of free trade ... and there were a lot of adjustments being made and restructuring in the economy. So it really hit hard in Ontario because of our manufacturing," he said.

"I could remember going to federal-provincial finance ministers' meetings and they all looked at me like I was from some other planet. And here I was running these big deficits and they didn't get it. They just assumed it was a typical left-wing spending spree," Laughren said.

In his own party's caucus, some on the left said they should just tax corporations to balance the books, he said.

But corporate tax revenues had plunged by about two-thirds. "There was nothing to tax there. It would have been really stupid," Laughren said.

Laughren said he remembers Progressive Conservative leader Mike Harris and his caucus yelling at him, "'You don't have a revenue problem. You have a spending problem.' To them, that's what was causing the deficit."

Jim Flaherty wasn't in that caucus. He didn't enter elected Ontario politics until 1995, when Harris came to power on the strength of his "Common Sense Revolution." That manifesto, which Flaherty helped author, promised deep cuts in both spending and taxes. Harris would name Flaherty as finance minister in 2001.

Laughren said the number of entitlements in the system make it tough to arbitrarily slash spending.

However, in a 1994 Toronto Star article, economist Warren Jestin said Ontario had been spending more than $1.20 for every dollar in revenue collected, which he said was the worst record of any province.

As outlined in Tuesday's federal budget, the feds will be spending about $1.15 for every dollar in revenue.

Taxes, deficits and deathbed conversions

Laughren's last full budget in 1994 promised no new taxes. He raised taxes by $520 million in his first budget.

The federal Tories are promising some modest, permanent tax cuts for those making under $80,000 per year.

Laughren said he wasn't a "big fan" of cutting taxes to provide stimulus, saying spending on projects generates more economic activity.

"That is the ideological component of this budget," he said.

Laughren believes the Tory government would not have tabled such a budget had it not been in a minority situation.

During the fall federal election, Prime Minister Stephen Harper had insisted his government would not go into deficit. In the update, Flaherty had predicted a razor-thin balanced budget for this year.

But around the world, governments were urged to provide stimulus, even at the risk of deficits, to fight the rising tide of economic gloom and restore confidence brought on by collapsing credit markets and financial institutions.

The NDP, Liberals and Bloc Quebecois had threatened to vote down the Tories over the economic update and offer a coalition government as a replacement. Harper prorogued Parliament in response.

"I think it was the fear of execution. I think when they heard the hammers go back on the rifles, they thought that maybe they should reconsider," Laughren joked.

"I think in a weird sort of way, it save the Tories from themselves, because by now they would have had to change their tune by now," he said.

"I'm a fiscal conservative and it troubles me to run deficits," Flaherty told a business audience in Whitby on Wednesday. "But having said that, this is what our country needs today."

Laughren said to him, this just shows how times have changed.