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.


 

Sunny ways, half measures

  1. Just thanking my lucky stars he hasn’t increased the capital gains inclusion rate, nor has he prevented small business owners from splitting income with family members like he said he was going to. The CMA had all the physicians lobbying hard against that one (most GPs and virtually all specialists are incorporated, and pay dividends to spouses and family members through family trusts to spread out taxable income into lower brackets), and it looks like Junior has listened. I’m actually kind of impressed – just months ago he sounded determined to end all forms of income splitting. Still, he’s got another 3 budgets to go. We probably shouldn’t be too congratulatory yet.

  2. This is the water-into-wine-part

    loaves and fishys come next.

    • What an odd comment from a self-proclaimed atheist.

      • Atheists have read the bible…….that’s why we are atheists.

  3. The kind of budget one would expect from a prime minister who grew up affluent and financially secure, never having to ever worry about having to earn a living. Inherited money often makes for poor financial judgement. Justin is used to spending other peoples money, His most lucrative employment to date was shaking down charities for speaking fees while he was already an elected MP.

    “There will be NO growth in the spring.”

    The best and brightest sons and daughters of the Laurentian elites are fools.

    • I know it will come as a shock to you wheatabix, but MOST Canadians are comfy and middle class

      we are not the oppressed peasants of your 1918 revolution

      • Yes, I believe it will be a shock for you sociopath Em, that the only people with job security in Canada hence those paying income tax are civil servants.

        • The Libs just devoted half a billion to tracking down tax cheats. You might want to be careful what you admit to on a comment board ;-)

      • Emily wrote:

        “but MOST Canadians are comfy and middle class”

        Emily, I actaully agree with this. In fact, these folks can thank Stephen Harper for that, as it was his focus on tax reductions that allowed us to overtake the United States middle class.

        This begs the question though….if the Canadian Middle class is doing better than any other group of middle class folks in the world…why is Trudeau so intent upon imposing massive deficits to help this group out? It couldn’t be just crass politics could it?

    • Is there anything in the budget that Liberals did not promise during election they would do if elected?
      According to you; he is doing this because he was born in affluent and financially secure family!!
      Mr. Trudeau got very strong mandate from Canadians last October and he is implementing what he promised to do.
      Putting him down because your Cons lost badly it shows us only that 184 to 99 loss to Liberals, you did not get over it yet?

      • He didn’t run on a $30 billion per year deficit. He ran on cannabis legalization which has yet to materialization and apparently 22 thousand have been arrested since his being named PM. Stop spending our money and get on with what you where really elected to do.

      • Acutally,

        the $30 Billion deficit was supposed to be for the first THREE budgets. Not the first one.

    • Yeah,

      And soon the best and brightest sons and daughters of the Laurentian elite will be travelling the world on our dime once the new Katimavik funding kicks in.

  4. Really? The big dire finish is the GST might have to be increased? That’s a pretty first-world problem.

  5. This is to say nothing of the fact that both the OECD and the IMF told the G20 countries in late February to prop up their economies by fiscal policies, including liberal spending. I think the world was to understand that we should do that or else prepare for the worst.

    (For the benefit of those who can’t think outside partisan politics, I’m a non-partisan voter who held a membership with two different political parties at different points in the last election period, and did not vote Liberal.)

    • Because stimulus worked so well in Europe. The only country in the EU recovering properly is the UK, and they broughr in austerity show the rest of the EU was stimulating itself. The US started recovering after the fiscal stimulus ended. Japan has bee self stimulating for 25 years. Canada recovered in the late 1990s after the biggest bidget cuts in history, at both federal and provincisl levels. Need mkre examples? How much longer do you suggest we keep listening to the failed experts?

      • Fucking phone – I can’t type worth fuck on this thing.

  6. Profilgacy will get you nowhere, Justine, except to an early downgrading of Canada’s sovereign debt and a repeat of the agony the people of Canada went through in the ’90’s when the Min of Finance Guru told Paul Martin he had to cinch belts when what he wanted to do was spend and tax. Slash and burn, baby!

    • That is the cycle the Liberals depend upon. The spend like a kid who has stolen the neighbours credit card, then the Conservatives have to come in and clean up the financial mess. And folks who make the hard decsions are always the bad guy.

      • How much did the previous Conservatives government reduce the deficit?

        How much did the previous Liberal government reduce the deficit?

        I’m not happy with the level of spending that this budget has, but please try to reflect reality.

        • Partridge,

          The Conservatives INCREASED the debt as we both know. I’m not happy about anyone increasing deficits or debt. The difference of course, is the previous Government increased spending during the world wide recession that affected all countries.
          Trudeau is increasing spending…..just because.

        • Given the new taxes I”ll have to pay….I can’t afford them any more.

    • Agony??? Be serious

      Don’t make stuff up

  7. A large and rapidly growing segment of the population pays no PST/GST/HST. If the needs of the libs are to raise consumption taxes, especially seeing their largess on the Aboriginal file, the backlash potential is high. In some of the western provinces (particularly in SK), the Aboriginal population (and you only have to be 1/256th Ab to qualify) is likely to exceed the non-Aboriginal population sometime in the not-too-distant future. Problems abound . . . .

  8. Welcome to Sunny ways.

    this is good budget for the folks who don’t really make an eonomic contrbution to the country, but it does pretty much guarantee future votes for the Liberal Party.

    but hey…if you voted Liberal, and you DO Pay taxes….you can’t say you weren’t warned.

    Further, we all knew that Trudeau was going to increase everyone’s taxes; even taxes for the poor. Trudeau isn’t concerned about Canadians, he just wants them to love him. He is after a legacy, he doesn’t care about the economy.

  9. Federal government exists to be welfare program for middle class people with social science degrees that no private employer would higher.

    Provs handle health, welfare and education, the three things people care most about, what does the Fed government do other than transfer money to Quebec and run up huge debt and deficits for no apparent reason.

  10. Excellent analysis.

    Why can’t the Liberals just be honest. Raise the taxes to pay for all the spending then electorate can make a realistic choice.

  11. The question that I have is why is Eastern Canada addicted to middle east blood oil? Would it not make more sense to have Canadians work and profit from oil rather than send your money to the middle east?

    • Well, see, an Albertan, once told us “let the eastern bastards freeze in the dark”, so we had no choice but to go foreign.

      • That was because, at the time, eastern Canada didn’t want to pay the going (world) price for domestic (western) oil. So I guess you’re saying to spite their face (i.e. punish the west) they went international where they HAD to pay world price.

        • Alberta wanted world price, no discount for fellow Canadians, so, if we were going to pay full price anyway, we might as well get it from the world.

          • Yeah, you’re right. Why keep the taxes, jobs, know-how, technology, here in Canada, when we can just import the raw product from outside and avoid all that. Do fellow Canadians get special discounts on aircraft, base metals, hydroelectric, aluminum, wood products, maple syrup, etc., etc., etc. just because it’s produced by Canadians and sold to Canadians ?? Oh wait, no that just applies to those evil Albertans.
            Your nonsense never ceases to amuse!!!

          • Stop whining A) you have confused private companies and government

            and B) I am an hour away from the American border, we should turn them down and pay extra to Alberta because you insult your customers and then want “goodies”?

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