Sunny ways, half measures - Macleans.ca

Sunny ways, half measures

Paul Wells on the work not done in the 2016 federal budget

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You know, the longer Stephen Harper isn’t prime minister, the longer he isn’t prime minister. Every new government cheerfully consigns some of its predecessor’s work to the memory hole; the Trudeau Liberals, persuaded that the work of Harper’s life was to bury their party and its works, have set about returning the favour. Farewell then, Children’s Fitness Tax Credit and Children’s Arts Tax Credit. Bye-bye, cuts to veterans’ benefits. Hello again, Court Challenges Program and Katimavik.

I ran into a CBC employee who was amazed by the scale of new taxpayer investment in his shop ($150 million a year, $675 million over the budget’s five-year horizon). If you hate the CBC, there’ll be lots more to hate under Justin Trudeau. But then, you probably voted Conservative, so we don’t hear you, neener neener neener.

Stephen Harper didn’t talk to the provinces? Trudeau and his ministers will talk their faces off with the provinces. I borrowed an electronic copy of the budget on a USB stick and ran a text search; this budget commits Team Trudeau to “work with provinces and territories” on Canada Student Grants; on a flat-rate student contribution; on labour-market training; on labour-market information; on green infrastructure; on a national housing strategy; on an early learning and childcare framework; on an innovation agenda; on a Post-Secondary Institutions Strategic Investment Fund; on a “Cluster Mapping portal”; on a “Framework on Clean Growth and Climate Change”; on infrastructure for alternative transport fuels; on an enhanced Canada Pension Plan; on a multi-year health accord; on gang violence (they’re against it, or at least the feds are, I mean, I don’t want to presume anything before the talks with the provinces start); on heavy urban search and rescue; and on some other stuff. You get the picture. Federalism: More, please.

Related: John Geddes on the budget sting after Trudeau’s honeymoon

Taken piece by piece, there are not a lot of surprises here. Trudeau campaigned, and has governed, in a way that left little room for surprises. There was a lot of stuff in his platform. Each minister received detailed orders to deliver on a share of those plans, in the form of specific instructions in public mandate letters. The budget allocates dollars to tick off those boxes. Because there were a lot of boxes, there are a lot of dollars. The biggest-ticket items—about $10 billion over two years for an enhanced Canada Child Benefit and a comparable amount for infrastructure spending—are no surprise at all.

What is more of a surprise is the abandonment of any pretense of restraint in the box-ticking. The spending taps are wide open, and what’s your problem? Trudeau ran last fall against two glum budget-balancers, Harper and Tom Mulcair. He alone promised deficits—wee ones, $10 billion a year, vanishing by the time he would face voters again. And he won the election.

It didn’t take Trudeau long after the election to jettison that pesky $10-billion cap, given the daunting magnitude of the challenges facing the nation. But as recently as his year-end town hall meeting with Maclean’s in December, he was still adamant that he’d reduce the deficit to zero by the time he next faced the electorate, probably in 2019. Besides, he said, hefty doses of “stimulus” are sustainable as long as the size of the accumulated federal debt continues to decline as a fraction of the total economy.

Trudeau came out of the election, to sum up, with three tests of fiscal virtue: a $10-billion total annual deficit cap; a return to balanced budgets before the next election; and a constantly declining debt-to-GDP ratio. He didn’t take long at all to dump the first condition. With this budget he has now abandoned the second, and the third hangs by a thread. Never mind the $29.4-billion deficit Bill Morneau predicts for this year; what’s daunting is the $17.8-billion deficit he projects for 2019-20, the next election year. No wonder the word “deficit” does not appear at any point in Morneau’s budget speech. It’s hard to know how to say some things.

Related: Welcome back to the age of big government in Canada

Ah, but the debt-to-GDP ratio. It ends, in Morneau’s little chart, at 30.9 per cent of GDP in 2020-21, having begun at 31 per cent in 2014-15. That’s a decline. It’s totally a decline. But the number goes on a little journey on its way to that smaller-by-a-sliver end point. It peaks at 32.6 per cent in 2016-17 and doesn’t fall back below its starting point for another four years. By 2021, Morneau projects the Trudeau government will have added $113 billion to the federal debt. That’s almost as much as Harper added, but Harper was in office for twice as long.

I am conscious of being a spoilsport. Why all this navel-gazing over debt? Big-city mayors, university presidents, provincial premiers and Aboriginal leaders will be beaming with delight at this budget’s largesse. In a few narrow domains I keep an eye on, there is much to admire. Post-secondary student aid is targeted at the neediest recipients, not wasted on the rich. New money for science research granting councils is un-targeted, and there’s a promise to spend the next year “examin[ing] the rationale for current targeting” of federal science funding. It’s possible to hope for a future in which scientists spend more time doing science and less writing grant applications. I don’t even mind all that consulting with the provinces on all those other files I listed above: it’s usually a good idea for different levels of government to check each other’s work.

But this budget is built a little wonky because, precisely by the assumptions Justin Trudeau is bringing into government, it leaves work undone. If your goal is to undo the Harper legacy, you can’t undo only half of it. Morneau projects much higher spending than Harper at unchanged revenue levels. He’s hoping economic growth will pick up enough to cover the gap. If it does, no harm done, and it’s reasonable to expect a second term for this government after the next election.

But I’m pretty sure you can’t order up a growth boom the way you call for a pizza, which means that at some point those deficits and that debt will start to look like a problem. Then Bill Morneau or his successor will need those missing revenues. At that point, reversing one more element of the Harper legacy will be nearly unavoidable. I believe this budget paves the way for an eventual GST increase.

Read Maclean’s full coverage of the 2016 budget, including our live lock-up show, here.