For all the talk about headcount, federal spending on goods/services (which includes the whole public sector) is exactly where it was at the end of the Chretien/Martin era relative to GDP, a period where the federal government was running surpluses.
The biggest changes since then that have put the country in deficits are:
1) Tax and social security revenue from individuals has dropped by 0.6% of GDP (roughly equivalent to about $19B). Income tax reductions and slashing the GST are the big things there.
2) Direct transfers to households have increased by 0.8% of GDP (roughly equivalent to $25B). OAS is the biggest culprit here, but no one seems interested in changing the fact that couples earning up to $180K in retirement can still get the full payment.
3) Increase in healthcare costs. This one is pretty unavoidable though.
So saving a few billion by cutting the public service may help a bit, but it's kind of just window dressing.
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