Hedging our bets
Federal Finance Minister Bill Morneau likely started making revisions to his 2017 federal budget plans last Nov. 8, the day Donald Trump was elected president of the United States.
Trump campaigned on a protectionist America-first policy, such as renegotiating the North American Free Trade Agreement, implementing border taxes and keeping U.S. companies and jobs at home. It would have a negative economic impact on Canada, which our finance minister had to consider as he prepared to deliver his second budget March 22.
The visit by Prime Minister Justin Trudeau to Washington last month eased some of those concerns. Since that state visit, Trudeau has been in the U.S. several times – recently assuring the oil industry in Texas that a balance is possible between oil and the environment. He was in New York City this week to attend a Broadway performance of Come From Away, which dwells on the warm welcome extended Americans who landed in Gander, N.L. following the terror attacks on the World Trade Centre.
Also on hand for the premiere was Ivanka Trump, who is working with Canada on a bilateral initiative to enhance business opportunities for women entrepreneurs on both sides of the border. Having the president’s daughter and close advisor on Canada’s side is a valuable bonus.
As he finalizes his first budget of the Trump era, Morneau is happy to have some assurances that Canada might escape the worst of U.S. campaign vitriol, but he must still deal with the president’s repeated promises of major tax cuts for U.S. businesses and citizens. Our finance minister must consider the impact of those tax cuts on Canada.
Last year, the Liberals broke pledges to run annual deficits of no more than $10 billion and to balance the books in four years, opting for a plan to run deficits as a way to invest billions into infrastructure projects. It appears the 2017 budget will follow the same course.
Morneau promises that his federal budget will be fiscally responsible, which translates into help for businesses and not so much for ordinary Canadians. He is stressing infrastructure investment in communities, skills training and greater workforce participation, preferring to let the private sector do what it does best – create jobs and grow the economy.
Interestingly, President Trump is promising the same for the U.S., laying out plans for the greatest infrastructure spending spree since the 1950s when much of the country’s aging interstate highways, bridges and dams were built.
Morneau seems more concerned with stimulating the economy than providing promised tax relief for Canadians or reducing the public debt. Like Trump, he believes that helping businesses will create jobs, grow the economy and thus raise federal revenues to help shrink the deficit. A majority of Canadians feel the same way.
Businesses don’t like uncertainty. Finance ministers even less so. With Trump, we’ve come to expect the unexpected. Morneau is well advised to hedge his budgetary bets.