This plan is crazy like a fox
As an economic document, the 2018 federal budget will be forgotten before the end of February, unless you are a scientist or a smoker ( the former got more government grants, paid for, in part, by the latter.)
But as a political platform, it is so cunning you could put ears on it and call it a fox.
After two years of reckless expenditure, Bill Morneau’s difficult third budget has cut the rate of net annual spending increase in half — to 2.4 per cent in the coming year, from 5.9 per cent in the current.
While there is no identified path to budgetary balance, deficits are forecast to fall every year over the next five years, and the ratio of debt in relation to the size of the economy is set to tick gently downward.
The Liberals will be able to enter an election year boasting the economy is strong and growing while the public finances are under control.
At the same time as he has shored up the Liberal- voting constituency that worries about such ephemera as runaway spending and debt repayment, the finance minister has presented a blueprint to appease the Liberals’ bleeding-heart base.
The burglary of the national pharmacare plan from the NDP is shameless, but entirely predictable.
Tuesday’s budget revealed the creation of a pharmacare advisory council, led by former Ontario health minister Eric Hoskins. Its existence will allow the Liberals to float the idea in their 2019 election platform — presumably with the anticipated $ 19- billion price tag backloaded well into the next decade.
After all, as the Liberals have proven over the past two years, policies are adopted to get elected, not necessarily to be implemented.
Given Morneau’s goal of conserving his resources until next year’s pre- election budget, the emphasis in this year’s edition on the long- term aim of closing the gender gap in pay and employment made sense. The story the finance minister recounted in his budget speech Tuesday of Joan the Plumber, who went back to school to learn a trade after raising her family, is one the government hopes will become more common. And it has the added benefit of selling well with progressive voters.
Then there’s the $ 400 million in new money earmarked to support Canada’s official languages — spending that will go down particularly well in the 25 or so swing ridings outside Quebec where more than one in five voters speaks French ( constituencies like OttawaOrleans, St. Boniface in Winnipeg and a handful of francophone ridings in New Brunswick).
This budget may lack substance but stylistically it allows Justin Trudeau to continue to trumpet the optimistic “hope and hard work” refrain that got him elected in 2015. The Liberals have the support of more than half of those voters who selfidentify as “left of centre,” compared to one- quarter who routinely say they support the NDP. This budget should help sustain that winning formula.
To dismiss the impact of the budget on the economy is not to suggest taxpayers’ money was not tossed around with gay abandon. The deficit will come in at $19.4 billion this year, down from $19.9 billion in the fall fiscal update. However, the fall number included a $ 1.5 billion adjustment for risk, which the 2018 budget does not, while the new document reveals $ 3.5 billion less in direct program expenditure than was anticipated in the fall.
The bottom line was flattered by the revelation that $2.6 billion of infrastructure expenditure this year ( and $ 2.1 billion next) will not roll out as planned. It’s just as well the economy has not needed road- and bridgebuilding as stimulus for growth — the government has been unable to get that money out of the door in timely fashion.
In short, the deficit should have been much lower — and would have been, had Morneau not spent an additional $ 6.5 billion on 309 line items.
Two initiatives are worthy of note: the scaled- back reforms to the passive investment tax proposal, which the government hopes will take the heat out of criticism from the small business community; and the series of measures to promote science, research and innovation.
Increasing the number of women in the workforce ( and helping ensure they are better paid) may offset the expected economic declines brought on by an aging population. Bringing in measures that make Canadians more innovative and productive are prudent and overdue.
But these are longer-term fixes. More immediately, the business community was looking for a response to the tax and trade challenges coming from south of the border.
“This budget is a missed opportunity,” said James Moore, the former Conservative cabinet minister and now an adviser at Dentons. “Donald Trump has changed the reality of the Canadian economy on the trade and tax side. The business community was looking for clear signals that the government understands that our status as an attractive place to invest is in doubt.”
Those signals were conspicuously absent. Morneau mentioned that the “fiscal envelope” is strong enough to allow Canada to respond to what’s happening in the U.S.
“We will do our homework to stay competitive,” he said in a Tuesday press conference, noting that those calling for him to cut corporate taxes in response to Trump were the same people who berated him for racking up deficits.
What he didn’t say is that keeping Canada competitive would not have been consistent with the Liberal Party’s cunning re-election plan.