In fact, the news is much better than that. The fiscal and economic era we are about to enter is, far from a return to the 1960s, utterly unlike anything any of us have ever seen. But it is so largely because of the hell we have just been through. It is not so much a break with the past as the result of it.

Much has been written about the so-called New Economy, and the tendency of knowledge-based industries to avoid the extremes of boom and bust associated with earlier stages of our development: first as resource extractors, latterly as manufacturers.

But the surest guarantee against recession is the complete absence of inflation, and the strongest insurance that we will not go through another bout of accelerating inflation is that we have just been through one. The sub- 2 per cent inflation we enjoy today is quite different from the 2 per cent inflation of the early 1960s -- different, because more permanent -- precisely because of the madness of the intervening years.

Likewise, the surpluses we have begun to record, federally and provincially, bear only a passing resemblance to their forebears from decades past. A surplus at very low levels of debt, such as we remember from the 1960s, may as easily become a deficit the following year. Without the hefty debt interest charges that consume so much of present-day budgets, spending and revenues need never be far out of balance.

By contrast, this year the federal government will collect almost 50 per cent more in revenues than it spends on programs, in order to defray interest charges in excess of $40-billion. That may not be an ideal state of affairs, but it more or less guarantees that the budget, once in surplus, will remain in surplus: when revenues exceed spending to such an extent, it is almost impossible that they should not also grow faster, leading to larger and larger surpluses over time.

Perhaps the most exciting part of this new era, however, will be realized as we start to draw down those surpluses. Some have already begun to salivate at the tax cuts that will soon be possible: rather than the 25 per cent of personal income Canadians now hand over in taxes, we might dream of paying 10 per cent or less, as was typical of the 1950s.

Others would put the surplus revenues to work rebuilding the welfare state, after the cuts imposed in recent years. Indeed, one of the most striking charts in the budget shows that Canada spends just about the smallest share of its GDP on government programs of any country in the G-7: 34 per cent, all levels of government combined, only a hair more than the U.S. and Japan, and nearly 8 percentage points less than it did in 1992.

But the truth is we can have both: 21st century social programs, on 1950s- level taxes. How is that possible? Simple: because we're so much richer than we were. Throughout the last three or four decades, as the state waxed and waned, average incomes went on growing: GDP per capita is now nearly three times as great, after inflation, as it was in the mid-1950s. A tenth of today's incomes buys a lot more social justice than it did then.

We are entering what might be called the fourth age of the welfare state. The first, from the end of World War II up to about 1975, was the age of expansion: taxes and spending rose rapidly as the basic elements of the social safety net were put into place: pensions, health care, unemployment insurance and so on.

The second, from 1975 to about 1985, was the age of over-reach: spending rose even faster than taxes, as the state ventured into fields far beyond its essential redistributive role -- and borrowed the difference. The third, from 1985 until today, was the age of retrenchment: to service the debts incurred in the previous era, governments were forced to cut spending and raise taxes.

As painful as that was, the core elements of the welfare state remain intact.

Now, as the debt begins to recede, we will find that we can afford all of the social programs put in place up to 1975, at much lower tax rates. The federal government now spends about as much per citizen, after inflation, as it did in 1975. But where that cost about 19 per cent of GDP in 1975, it takes just 11 per cent of GDP to pay for it today. It's only the debt interest burden that keeps our taxes so high. And that is about to fall.

This will take some getting used to: we have tended to equate the postwar welfare state with debilitating tax loads. But it is true. We have not come full circle. We have entered a whole new era.