Is Trudeau’s honeymoon over? The budget’s grim economic vision

John Geddes on a federal budget that preaches patience and defers promises


Justin Trudeau’s honeymoon with the Canadian public remains, pollsters agree, in full bloom. But rare is a romance that doesn’t wilt a little the first time household bills and mortgage papers are spread out on the kitchen table. Today’s federal budget—which projects a $29.4-billion deficit for 2016-17, without even hazarding a guess about when the federal books might be balanced again—applies that test on the national scale.

Of course, the Prime Minister didn’t have to personally deliver the sobering news. That task fell to Finance Minister Bill Morneau, the soft-spoken rookie Toronto MP, who ran his family’s business—Canada’s largest pension-management company—before jumping into politics and winning a Toronto riding last fall. In his first budget speech, Morneau’s choice of historical comparison point for the challenges facing the country didn’t exactly lighten the mood. “After the dark days of the Great Depression and the Second World War,” he said, “Canadians believed the future could be brighter.”

Can it be that dire? Not really. But last year’s devastatingly effective Liberal election campaign was built on the premise that a decade of Stephen Harper’s Conservative rule had left Canada’s middle class bereft of hope. So Morneau cast Budget 2016 as a new dawn. Its biggest measure is undeniably ambitious: Starting this July, the new Canada Child Benefit (CCB) will combine and streamline a raft of existing federal payments to parents into one bigger tax-free benefit.

Related: Jennifer Robson on the Liberals’ ambitious child care plan

Nine out of 10 families will receive more than they did under the old array of programs. A typical family with two kids under 18, and an income of $90,000, will get $5,650 a year, up $2,500. Morneau boasted, not without some justification, that the CCB ranks with universal health care and the Canada Pension Plan in Canada’s “long and proud history of big, bold, transformative public policies.”

At a cost of $4.5 billion more than the existing programs, the streamlined child benefit was the costliest measure Morneau presented under the heading “help for the middle class,” overshadowing even the $1.3-billion middle-income tax cut he announced late last year. His other key grouping was “growing the middle class,” where the budget listed $852 million in 2016-17 for public transit infrastructure, $650 million for green infrastructure, and $1.2 billion for social infrastructure—a mixed bag that includes a hefty $500 million for energy and water retrofits and renovations in existing social housing.

Still, last year’s Liberal election slogan about having a “plan” for the economy seemed to give way to planning to have a plan. “Within the next year,” Morneau said, “the government will put forward an new innovation agenda, which will outline a new vision for Canada’s economy as a centre of global innovation, renowned for its science, technology, resourceful citizens and globally competitive companies.”

Related: Paul Wells on the work not done by the budget

Among the major elements in that agenda that won’t take shape right away is a “pan-Canadian framework on clean growth and climate change,” for which new funding shoots up from a mere $36 million in 2016-17 to more than $1 billion in 2017-18. Another deferred priority is beefing up benefits under the Canada Pension Plan, a controversial file on which Morneau offered less a policy than a pledge. “I am personally committed to reaching an agreement with my provincial and territorial counterparts before the end of the year to enhance our Canada Pension Plan,” he said.

Riding high in the polls, the Liberals seem to have calculated that Canadians will give them some time to sort out their direction on climate change, the CPP, even the overall economic direction. But on First Nations, Trudeau had left little doubt that serious action would come immediately, and the budget allocates $8.4 billion over five years for Indigenous people. In 2016-17, $413.5 million is earmarked for First Nations education, ramping up to more than $1 billion by 2020-21. Another $1.3 billion is spread among a range of initiatives in 2016-17, from community infrastructure to urban Aboriginal programs. But education is the focus. “We will build schools, we will hire teachers,” Morneau said. “We will ensure that Indigenous children get the education they deserve.”

The budget’s detail and clarity on the Canada Child Benefit and First Nations—two areas where a federal government can act decisively if it’s willing to spend—stood in contrast to the many unanswered questions left surrounding broader economic policy. Morneau’s promised “new innovation agenda” remains a mystery. What’s clear is that the outlook for the next few years is discouraging. Based on forecasts by private economists, the budget projects that growth in gross domestic product after inflation, or real GDP, will be a dismal 1.4 per cent this year, and average a sluggish 1.9 per cent from through to 2020.

That level of economic growth will never feel buoyant. If Canadians who voted Liberal last fall expected to feel more prosperous fast, they are liable to be disappointed. Morneau somberly called for patience. “Today we have taken some big steps in a long journey,” he said. “We act for the years and decades to come. We act for our children and our children’s children.” That sounded less like the language of a political honeymoon than a plea to keep it together for the kids’ sake.

Read Maclean’s full coverage of the 2016 budget


Is Trudeau’s honeymoon over? The budget’s grim economic vision

  1. It used to be that there would be information reported on what was the budget-and then on the amount of the projected deficit or surplus.

    Except of course during the Harper era when the public was never advised of the huge deficits he rolled. up And he was able to get away with his attack ads on Trudeau-The budget will balance itself!

    It seemed that no one was on their game enough to call attention to this astounding act of hypocrisy such that after the Macleans debate one of the top Google queries was about Conservatives and deficits as people found out for the first time that the Harper Government churned out sizable yearly deficits despite all their empty blather.

    Now it seems that the press has been so well trained by the Conservative PR brigade that they report breathlessly on the deficit amounts of the new budget and hardly even bother to report anything else.

    • $5.8B in 2008-09, $55.6B 2009-10; $33.4B in 2010-11; $26.3B in 2011-12; $18.4B in 2012-13; $5.2B in 2013-14 – a total of $144.7B. And, no surprise at all, $3B in 2014-2015 not the $2.4B surplus promised. One might also note that that last one only arrived after much delay where spending was delayed and revenue was increased by selling off assets.
      No one has mentioned the outstanding liabilities of financial guarantees to the oil and gas sector which if price declines persist will be realized as government debt.

      • If the deficit for 2016-17 actually turns out to be under 30 billion we will be lucky – the changes that it will blow through 40 billion is more likely. Once the spending starts rolling and Liberal entitlements get swept under the carpet, all bets are off on the final tally.

        • MAUREEN – No one has mentioned yet what the contingency is; i had read 6 billion plus by all accounts they downgraded a number of factors recommended such as 25$ a barrel for oil over the 40$ suggested and a lower growth economic number i.e 1% instead of 1.4%.
          Do not be surprised if the deficit at the end of the year is closer to 20 billion.

      • Let’s not forgot those years when Harper was in a minority government and the opposition was cheering on the spending. If they were unhappy with it, they had the hand on the hammer and could have unseated Harper. Yet they didn’t. Why? They were encouraging him to spend more, more, more and then later blamed him for deficits when it was a world-wide recession. All the while the voted in favor of those budgets.

        • Hmmmm strange comments…. Rona is call for more spending….What up with that?

        • Gage – the opposition did not want an election and When it mattered to Harper he made every vote a confidence measure. You will recollect they finally did gang up on him for lack of stimulus (2009 budget?) and did what no other PM has ever done and hid behind a prorogue instead of facing a non confidence vote.

  2. for the same deficit the Liberals could have done away with the GST. from 5% to 0%.

    That would have streamlined business and made thousands of Government Jobs redundant

  3. Let’s hope that innovation includes some effort to resuscitate the manufacturing sector which lost 38% of its share of jobs during Harper’s reign: that would be a big boost for the middle class.

    • US manufacturing went in the toilet as well. Did you know Bombardier told their union they are outsourcing jobs to Mexico for a new small plane? The only manufacturing that grew while the dollar was on par and companies could have invested in new equipment was oil field manufacturing. That grew in Alberta. It wasn’t Harper that killed your manufacturing. It was cheap labor in developing countries like India, Mexico, China. I bet even buy products from those countries. Have you looked at the price of a “Canada Goose” winter coat? Canadian-made products are pricey. We make too high of wages. We need to get into speciality item manufacturing that people are willing to pay big money for. Have you heard of the child’s toy Sophie the giraffe manufactured in France?

  4. “But on First Nations, Trudeau had left little doubt that serious action would come immediately, and the budget allocates $8.4 billion over five years for Indigenous people.”

    I have been doing some investigating and can’t figure out what happens when money crosses the line between Canada and a First Nation. (Many billions of dollars do every year.) As far as I can tell, it vanishes into thin air, because no matter how much goes in, nothing gets done.

  5. Hi GeraldR,

    Regarding your two comments on this article, your personal bias is apparent, but to be fair, I certainly have my own as well. In the spirit of fairness however, let’s consider some of the facts that you have conveniently omitted. First, the CPC posted two consecutive surpluses during their first two years in office. This was then interrupted by the $5.8 billion deficit, which was the result of the 2008 financial crisis (something Liberal supporters like to ignore). From there, the CPC put forward a budget for the 2009-2010 fiscal year that boasted modest stimulus spending and austerity measures, which ultimately yielded a small surplus (also known as a balanced budget).

    Perhaps you recall this moment in history, because what followed was a fairly significant shift in the federal fiscal policy of this country. The opposition parties, sensing an opportunity to overthrow the CPC, banded together and formed a coalition. They then took to the media and proclaimed that Harper was not taking the financial crisis seriously as it lacked the stimulus spending that would be necessary to “save” the country. For the good of the nation, they HAD to vote against the budget so that they could table their own, which would have had massive stimulus spending. Harper, as a politician is wont to do, acted in his self-preservation and had the budget redrafted, this time with the massive stimulus spending that the opposition wanted. In essence, Harper called their bluff and the Liberals voted in favour of the new budget.

    Now, if we fast forward to the 2015 election, the Liberals, and all of their mindless supporters (I am lumping you into the latter group) suddenly forgot their involvement in the budget and claimed that the deficits were the result of CPC fiscal mismanagement. Even more confounding, Trudeau painted the illogical picture that the CPC went into deficit all on their own (even though he himself voted in favour of the 2009-2010 budget), which was poor management, but that, if elected, he would propose further deficits, which is now suddenly… good management? Their supporters, mindless as they are, ate it up and now here we are: being led by a vacuous, self-indulgent prime minister who seems more at home sipping champagne at the White House than he does actually governing the country (that last part is my own personal bias seeping through, my apologies).

    Regarding the loss in the manufacturing sector under Harper’s reign, I would look to Ontario premiers McGuinty and Wynne, with particular focus on their “green energy” initiative that drove energy prices up and manufacturing companies away, before pointing the finger at Harper.

  6. Of course the honeymoon is not over – what a silly question. The MSM is still in love with anything Justin claims to be true and the MSM isn’t done with bashing the Conservatives (that will go on for at least another three years).

    Occasionally the MSM will point out uncomfortable facts, but they will be swept under the carpet as soon as the reporter can manage a selfie with Justin.

  7. Yep….budget was about what I expected.

    My income tax rate increases to 33%, meaning I’ll be supporting more deadbeats and layabouts, and I will no longer be getting a cheque returning a small portion of what I pay because I have a son.

    Instead of “wealth Distribution” being a solution to Canada’s poverty issues….why don’t we try to formulate an “Effort disitribution” to justify the discrepency. If I work harder than you do….I deserve more of what I earn. If I am smarter than you are (and I am) then I deserve more of what I make.

    If you keep rewarding shiftless behaviour, you just get more of it. Why do you think the averge Food stamp recipient in the USA is also most likely to never hold a job? Do we really want this in Canada?

    • Let’s hope you never get sick or lose your job, because then all those “deadbeats and layabouts” will be supporting you and you clearly don’t deserve it. Part of what I love about Canada is that we have a social contract to support each other regardless of our innate intelligence or the class we are born into. Count yourself lucky that you are rich enough to pay the higher tax rate, and I hope you teach your son to be more generous and caring than you seem to be.

      • Keepcalm….

        spoken like one of the true deadbeats of which I refer.

        I’m tired of people being generous with MY money. If you didn’t earn it….you don’t deserve it. What part of that don’t you get?

        As for being generous…………why is it demanded of me, but not expected from folks like you?
        I don’t mind supporting people who try. I don’t want to pay a cent to deadbeats who EXPECT the government to pay their way. (because as you know, it isn’t Governments paying their way…it is people like me)

        • Well I’m not a deadbeat – I have a job and I pay taxes too. But I don’t pay as much as you because I make a lot less, and I’m just starting out in my career. I don’t like paying taxes just as much as the next person, but I recognize it as a necessity in a country where governments pay for all kinds of services I use all the time, like public transit, roads, health care and education. I went to free publicly funded elementary school and high school, and my university education was partially funded by the government. All of these things are necessary in a first world country and I don’t begrudge the government a portion of my paycheck for that. Even at a marginal rate of 33% you would have to be making over 400,000 to even pay half of your income in taxes, and even then you would still get to take home 200,000 a year, which is many times the average wage in Canada. So yes, it is ungenerous of you to be sitting there with all that money and complain about the hardship you face from this slight increase in taxes.

          • Keep calm, it is not the amount of money I make that is the issue. It is the principle. I simply don’t like a bunch of people who I do not support using the power of the state to impose their will upon me. They have no right (in my mind) to tell me where my money should go; particularly, when it is patently obvious that they don’t know squat about economics or business.
            As I have written here before….if you had $200,000 to invest, who would you give it to? Would you hand it to Justin Trudeau, or would you want someone like Stephen Harper handling your money?

            I don’t begrudge paying taxes that are equitable. I believe in a FLAT TAX as everyone pays the same. A progressive tax system, is simply class warfare cleaned up so people can practice it without sounding hostile.

            Do I do better than a lot of people; well sure I do. But I also work harder than most people, and I have set of skills that people pay money for. I don’t sit around the park smoking pot, or drinking beer. I did without a lot of things when I was younger, and I bought and paid for my first house before I was 30. I wasn’t rich. I was persistent and disciplined.

            More people should emulate my earlier behaviour before they start demanding my money.

    • Big deal J—-AZZZ I just finishing paying my daughters education at SFU…. and am very proud to do so. We went thru 3 recessions, double digit mortgage rates…………………….. walk in my shoes biotch. No child monies…. No nothing just bills…. tell me all about it,,,,Wimp

    • When you include provincial taxes the top rate is around 50%. That’s not fair. I’m not in that bracket anymore, but does anyone REALLY believe you should pay half your income in taxes??? Only in Canada do we complain that taxes are too low. Canada’s “middle class” is already better off than every other industrialized country. The “middle class” here don’t need extra help. That’s just empty political rhetoric.

      • NIght Ranger,

        It was actually Thomas Mulcair who said, “A tax rate of more than 50% is not taxation, it is confiscation” (he was talking about Quebec at the time)

        when the NDP leader thinks personal taxes are too high…….you know it’s trouble.

  8. Did Liberals…Trudeau inherit a $13 billion surplus including a $3 billion contingency fund? Nope they have a $.75 USF dollar, a $ 30. barrel of oil!! Thanks to SH’s “marriage”.

  9. There was never a honeymoon.
    No honey, no moon.

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