Gender gap likely to be focus of budget
With less than a week until the federal budget, many Canadians are eagerly awaiting the finance minister’s fiscal update.
But what if Bill Morneau has nothing important to communicate?
Just as aspiring rock bands encounter difficult second album syndrome, so governments experience meaningless third budget disorder.
The Liberals proved they could spend like Russian oligarchs in their first two budgets — a precedent they would undoubtedly like to repeat next year before the general election.
The 2016 budget increased spending by $17 billion, or 6.7 per cent. The second year in office saw program expenses rise another $16.2 billion, or another six per cent. This took spending, as a percentage of gross domestic product, to 14.3 per cent for the last fiscal year. The most recent update suggested this ratio would remain flat this year, indicating a break with free- spending tradition.
The Trudeau government may have a $ 3- to $ 4- billion windfall, thanks to last year’s galloping economic growth (meaning the deficit will be a mere $15 billion).
But the bottom line is Morneau is going to have to keep his chequebook in his pocket, if he is going to stick to the promise of a gently declining debt- to- GDP ratio — the only fig leaf of protection he has from opposition criticism that spending is out of control.
But f i scal restraint is hardly a message to inspire the massed ranks of mueslieating, petition-signing CBC listeners.
So what to do? How about crafting a narrative around the relative under- performance of women in the workplace?
The budget is likely to be heavy on measures that attempt to fix the gender gap but which don’t cost much — money for training to get more women into betterpaying jobs in engineering, technology and the trades; initiatives that make it easier for women to access venture capital and so on.
Morneau is said to believe that nothing will address the demographic challenges facing the country like increasing opportunities for women in the workplace.
There is also likely to be some fresh money designed to address the declining share of output devoted to research and development. The panel charged with reviewing the federal government’s support of science last year called for an increase in spending from $ 3.5 billion to $ 4.8 billion a year.
The government’s own advisory council on economic growth, chaired by Dominic Barton, recommended overhauling the $5 billion Ottawa spends on business i nnovation programs, funnelling the money toward direct i nvestments, rather than tax i ncentives. Crucially, the council suggested the government reallocate funds f rom existing programs, rather than find new money.
Morneau has a point when he says that increasing the number of workers and making them more productive is, generally speaking, a good thing.
But these are long- term fixes and many people are calling for more urgent action to address what they perceive as a dramatic slide i n Canada’s competitiveness.
An article by Bloomberg News on Wednesday noted that Canadian energy stocks have seen a $ 56- million outflow since the start of the year, versus a $ 32- million inflow for an exchangetraded fund of U. S. energy companies.
Portfolio managers said a new regulatory regime, higher taxes and the imposition of a carbon tax is working against investment in Canada.
Rafi Tahmazian of Canoe Financial in Calgary explained why he was trimming his Canadian holdings.
“My job as an investor is to gauge and make investments based on my confidence in a leader of a company and a country or province or state. And I have zero confidence there right now,” he said.
Government officials make no secret of the fact that there will be no “kneejerk reaction” to U. S. tax cuts or the uncertainty over NAFTA discussions.
There is confidence in the resiliency of the Canadian economy, with growth, employment and consumer confidence all at satisfactory levels, while measures taken to address personal debt levels have had some success in cooling an overheated housing market.
Morneau doesn’ t have the financial room to match Donald Trump’s tax cuts, or even the proposal that would allow U. S. companies to immediately write off capital investments, so it is no surprise that he is likely to focus on the long- term trends in the economy.
Officials say that Canadian corporate tax rates will remain competitive and that the government will keep a close eye on the impact of U.S. changes.
But they are also dismissive of the paramountcy of tax rates as a determinant on investment.
“The ‘ sky is falling’ narrative is a bit dramatic,” said one official.
Perhaps. But many Canadians would welcome some attempt to change the negative sentiment that this is a land trying to tax its way to prosperity, one where the burden of red tape means things move at the same pace as its glaciers.
Instead we will have the gender gap narrative — a virtue born of necessity.
I HAVE ZERO CONFIDENCE THERE RIGHT NOW.