So far as the budget contains any news, it’s mixed at best

It’s hard to hate this budget: There’s just so little there to hate. To be sure, the budget is bloated, cynical, dirigiste and incoherent, but it is bloated, cynical, dirigiste and incoherent in ways that for the most part have already been announced. Hate, like love, is most passionate in first bloom.

The absence of fresh disasters might in fact be occasion for a little discreet celebration. So much of what is wrong with this budget — the handouts to the manufacturing sector, the regional development pork-barrels, the hugely expensive sheltered workshops disguised as aerospace and shipbuilding programs, the needless intrusion of the federal government into funding municipal infrastructure — simply amounts to extending previous programs, or implementing past initiatives.

Certainly it would be hard to accuse the government of breaking the bank. That happened in 2009-10, you’ll recall, when spending increased by $37 billion in a single year. Since then it has been steadily chipping away at that mountain of profligacy, with the result that recent federal budgets have invariably been described as “austere” — though spending remains higher, after inflation and after population growth, than at any time in our history.

So it continues: Program spending is scheduled to increase this year over last by less than $2 billion, or about three-quarters of one per cent. Compare projections for spending over the next several years with those contained in last year’s budget, and you find it’s about $2 billion or $3 billion less each year. By 2018, real per capita spending will be 12 per cent less than it was in 2010, the most sustained reduction in decades. Austerity. Yet the next four years will be among the biggest spending years in our history, exceeded only by the past five.

Well, fine. Measured relative to the economy, the federal government will have been trimmed back to where it was a decade ago. The deficit, notwithstanding some slippage — now projected at $19 billion for the current fiscal year, almost twice the $10-billion forecast in last year’s budget — seems set to resume its decline, assuming this year’s slower growth proves transitory.

The more pressing question, then, is not so much how much the government is spending and taxing, but how it is doing so: Is it spending and taxing in ways that help to improve Canadian productivity, the country’s most critical economic challenge over the long term, or is it doing so in ways that will probably retard it? Here the news, so far as the budget contains any news, is mixed at best.

Let’s start with the best. The Canada Job Grant announced in the budget — that is, after being leaked last week to the National Post’s John Ivison and others — is potentially transformative: a radical, market-oriented plan to take the funding, and therefore control, of job training out of the hands of federal and provincial bureaucrats, and direct it to the institutions of employers’ choice. I say potentially, because much still has to be negotiated with the provinces and employer groups, who would be obliged to match the federal contribution: a first tranche of $500 million this year, with another $2.2 billion to be negoti- ated later. But it’s hard to see what bargaining position the provinces would have.

There are also some useful changes to the tax system, designed to make it more “neutral” — that is, to leave decisions on which firms or industries to invest in to investors, based on the actual returns accruing to each, rather than using the tax system to try to lure them into investments paying lower returns. So, goodbye to the Corporate Mineral Exploration and Development Tax Credit. Bon voyage, certain special deductions available only to credit unions. And here’s your hat, Labour-Sponsored Venture Capital Corporations tax credit, what’s your hurry?

But if “Enhancing the Neutrality of the Tax System” is indeed the goal, then why does the same budget seem so committed to Making the Tax System More Complicated and Distortionary? Why extend the accelerated capital cost allowance for manufacturers? Why the tax credit for clean energy generation? The special lower tax rate for small business? And hundreds more like them? For that matter, why the subsidies to every industry, lovingly detailed over dozens of pages?

That is what most stands out about the government’s approach to the economy: the all-embracing, indiscriminate, self-contradictory incoherence of it. It’s dumb enough for the government to favour one industry over another, since the gains to that industry only come at the expense of every other. But to coddle every industry — manufacturing, farming, fishing, mines, autos, even venture capital, they’re all there — is merely to redistribute resources from every industry to every industry, with the same predictably futile results as one might expect from maintaining a regional development agency, as we now do, for every region of the country.

So while the general theme of the budget, productivity, is unassailable — who is against skills training, or research, or infrastructure? — the general problem is that it pursues these in the most top-heavy, government-driven way possible. There’s a place for government support for basic research, for example: the kind that has no clear commercial application. But this government also thinks businesses need the state’s direction to commercialize research.

A section of the budget devotes itself to “Strengthening the Competitiveness of the Manufacturing Sector.” How to do that? I don’t know: how about making them compete? For example, by eliminating the tariffs protecting them from foreign competition. Yet the only tariffs the budget proposes to reduce are for children’s clothing and hockey equipment. Why not the rest?

Another section is headed “Promoting an Entrepreneurial Culture in Canada.” Here’s how they propose to go about it: by giving out Entrepreneurship Awards. For the love of all that’s holy — the “award” for entrepreneurs is supposed to be success. If we want more entrepreneurs, how about we teach them to be, you know, entrepreneurial: self-reliant, innovative, customer-focused, not a bunch of browners trotting off to Ottawa for a pat on the head?

Or — just a thought — if we want more venture capitalists, how about we let them venture their own capital?