A BUDGET ABOUT NOTHING.

As federal budgets go, the 2019-20 pre-election document presented by Minister of Finance Bill Morneau on Tuesday was humdrum affair, with nothing harmful nor helpful for the average voter in putting food on the table. The deficit continues at roughly $20 billion annually over the next two years with federal net debt as a share of GDP holding steady at a bit more than 30 per cent of GDP. Federal gross liabilities, though, are a whopping $1.1 trillion, over one-half of GDP, and that’s ignoring unfunded age-related spending and tax liabilities.

Program spending will rise by five per cent in 2018-19, which is faster than GDP growth. Money is being sprayed onto hundreds of programs to satisfy endless special interest groups. The few new tax measures added are mainly technical in nature and of little interest to the broad public.

What is more interesting is what is not in the budget. The document does lots of trumpeting about increasing job growth. A new, well-designed training credit at least fits into a growth agenda. But other than that, Morneau had little to say about labour productivity, which is key to prosperity. Mostly, the budget just treated us to more tiresome mantras about helping middle-class jobs.

I can understand why the government may not want to discuss productivity, which was emphasized during the Chrétien and Harper years. The Trudeau government’s focus has been on redistribution, to make the rich pay more. And this budget offered yet one more soak-the-rich measure, with a rather odd tax treatment of stock options for highly paid executives. But like most attempts to stick it to the wealthy, people will find ways to avoid it and it won’t stop executives from cashing in.

Of more concern is that growth in output per working hour stalled in 2018 in contrast to a 1.3-per-cent increase in non-farm labour productivity in the U.S., the best in a decade for them. While Canada watches the U.S. boom, we’ve had little by the way of deregulation and tax reform to boost our own fortunes this past year. The federal government introduced accelerated depreciation in the November economic update in the hope of boosting investment critical to labour productivity. Tinkering with tax depreciation schedules won’t address more important competitiveness issues, including our high corporate income tax rate of 27 per cent, just a few points less than the top rate in the OECD.

It is not clear private investment will respond strongly to accelerated depreciation, used in the past for manufacturing without huge success. While business investment grew by seven per cent in the U.S. in 2018, the best in years, Canada struggled in 2018 with non-residential investment declining 4.5 per cent. Much of this due to regulatory impediments that have hurt the oil and gas sector, but the output of goods-producing industries, including manufacturing, has also declined recently, which will ultimately discourage investment. As the budget points out, 2018 did see some improvement in non-oil-and-gas investment in the first half of the year compared to the lacklustre previous two years. But overall, our private investment performance has remained weak since 2015.

The budget thus fails to fully address competitiveness issues facing industry. There are some innovative policies planned with respect to so-called “Regulatory Roadmaps" that specify some specific areas for reform, but it is unclear those will sufficiently address the areas where Canada does worst on international rankings: timely approval of permits, completion of contracts and getting goods to tidewater (not just oil and gas). The finance minister has made clear that he has no plans for future tax reform. And the massive Bill C-69, now before the Senate, is expected to make it more difficult for resource projects to be approved.

Besides productivity, the federal budget has no plan to balance the budget — ever. Forgetting the silly notion that deficits are an “investment” rather than deferred taxes to be paid by future generations, one might argue that a tighter fiscal balance is not appropriate given stagnating GDP growth and current uncertainties. But if we are running a deficit, federal priorities seem out of sync with mounting pressures facing the Canadian economy.

One of the biggest pressures is for better federal fiscal arrangements with the provinces in response to rising health and education costs. Gross public debt across all governments is now almost $2.5 trillion, with provincial governments bearing the lion’s share. If the federal government wanted to address some of these issues it could at least use its deficits wisely, to reform fiscal arrangements with the provinces rather than just further engorging the already burgeoning agenda of federal spending programs. This is particularly important as the resource provinces in the Atlantic and the West are quite unhappy with the federal government in failing to absorb risks associated with a cyclical economy, as Quebec continues to benefit from equalization at the expense of hard-hit resource-based provinces.

Or, if it’s stimulating the economy that the federal government wants to use deficits for, it could have reduced taxes rather than bumping up spending. Tax cuts would immediately put money in the pockets of all those middle-class families trying to cope with the cost of housing, food and energy. A reduction in federal personal income taxes, GST or excise revenues can also give more room to provinces to raise their own taxes, since they bear the fastest-growing costs.

None of the big issues facing Canada — lagging productivity, fiscal imbalances and the urgent need for competitive tax reform — got a lick of attention anywhere in the 464-page budget document. The Liberals may come to regret their decision to avoid anything substantial, and not just because they missed the chance to improve Canada’s economic prospects. In a few days, most Canadians will probably have forgotten about this uninspired federal budget, and we’ll all return to watching the Snc-lavalin soap opera scandal.