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

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