Enough to make my head spin
But budget won’t upset many of us
The 2017 budget has the virtue of being as thin as a conscientious supermodel — 278 pages of flowery verbiage dressed up in the thin veneer of marketing speak. The whole thing will be forgotten by the weekend.
Of course, if you happen to believe that the $25.4 billion deficit projected in last fall’s fiscal update was profligate enough, you will welcome the fact that this effort is slight enough that, were it a person, it would be in danger of going up with the blinds.
The budget proceeds to sprinkle net new spending of “just” $4.4 billion over a six-year period — an outbreak of Olympian selfdenial by a government that proved its spendthrift credentials last year.
As a result, the $25.4 billion deficit projected last fall becomes $25.5 billion in the coming year, before the addition of a $3 billion rainy-day contingency fund.
Perhaps it is the Trump effect. Perhaps it is fiscal reality biting, even if there remains an abiding belief internally that “the public doesn’t care about deficits.”
Whatever the cause, Finance Minister Bill Morneau has brought down a cautious budget that won’t upset many people. In sidestepping controversy, Morneau ensures that program spending as a percentage of gross domestic product crests at 14.5 per cent in the coming year.
There are some minor tax hikes — I take personally the extra 23 cents on a bottle of Scotch — and some indefensible tax credits have been eradicated, among them the $200 milliona-year public transit tax credit.
Many potentially lucrative but politically sensitive exemptions remain untouched, however.
The Age Credit, for example, which costs the treasury $3.4 billion a year, stays in place since it is claimed by 5.2 million seniors who receive the money on turning 65 regardless of income. No finance minister wants to be blamed for taking away money that might be the difference between a surf ’n’ turf dinner in Sarasota and the early bird special.
Likewise, there were concerns that the government would raise the capital gains inclusion rates from 50 per cent to 75 per cent, which would have created a massive differential with rates in the U.S. Again, the government decided discretion is the better part of valour.
The main objection to this budget is that the government appears to believe that movement should be mistaken for action.
The introduction touts that single Canadians who have benefited from last year’s middle class tax cut are, on average, $330 better off, while couples who benefited are, on average $540 to the good. But this is playing with words. It does not mean the average Canadian is richer by those amounts, it refers to the average gains of those who benefited. The median tax-filer earning $45,000 a year doesn’t earn enough to benefit and is, therefore, excluded from the number.
The spin is relentless in this moving “story of people and progress” — it’s like being flogged with warm lettuce.
This is the innovation budget. And if you don’t get it on first reference, the word is repeated more than 200 times. The goal is to invigorate business investment in this country — the Holy Grail for governments of all shades, at all times. It never happens, for a variety of reasons — the preponderance of branch plant companies; complacency bred from regulatory protection; currency depreciation; easy access to U.S. markets; our having a resource-based economy.
Perhaps that should not deter the current masters of the political universe from trying. But the budget creates great expectations — a doubling in the number of this country’s high-tech companies to 28,000 by 2025 — and you don’t get points for good intentions.
Much in the budget appears to be bureaucratic tinkering. A number of Canada’s innovation programs are to be “streamlined” into a new super-sounding Strategic Innovation Fund, but simply merging the automotive and aerospace funds and giving them a new name is not the cutting edge of innovation. Real reform would have made a bonfire of slush funds like the Atlantic Canada Opportunities Agency, but that might have upset some people.
The detail provided about infrastructure programs, the funding for which was announced in budget 2016, is overdue — as the Parliamentary Budget Office noted, billions of dollars already approved by parliament in the current year have not yet been spent. But there seems no pressing need to have included much of the new policy in a budget, beyond fleshing out a rather bony document.
Public works spending, and the anticipated starburst of innovation, are the great Liberal hopes for economic growth. The fervent belief is that the $186 billion earmarked for infrastructure spending between now and 2028 will offset a fall in the ratio of working-age-Canadians-to-seniors from five to 2.5 in the next two decades.
The grand design is that the measures unveiled in these two budgets will forestall a doubling of the national debt and deficits until 2050 — a prediction made by the finance department in a report late last year.
But we all know what the road to hell is paved with. The good news for now is that the Liberals have slowed, if not stopped, construction on the path to fiscal perdition.
Meeting their own targets requires spending growth to fall to an average of 2.4 per cent in the coming years, from the current level of 4.9 per cent — fiscal discipline at odds with recent spending behaviour.
Welcome to the new age of Liberal asceticism.