Po­lit­i­cal Im­per­a­tives Ful­filled, On a Shaky Fis­cal Foun­da­tion

Policy - - In This Issue - Rachel Cur­ran

The 2018 bud­get achieves what bud­gets set out to do po­lit­i­cally to an im­pres­sive de­gree; it sat­is­fies cer­tain tar­get con­stituen­cies with­out alien­at­ing vot­ers who won’t vote Lib­eral re­gard­less of the gov­ern­ment’s fis­cal plans, writes Rachel Cur­ran, long­time ad­viser to Stephen Harper. But, adds Cur­ran, it’s miss­ing what Paul Martin and Jean Chré­tien would have con­sid­ered es­sen­tial.

All gov­ern­ment bud­gets are po­lit­i­cal doc­u­ments, to a greater or lesser de­gree, and there­fore pro­vide im­por­tant in­sight into a gov­ern­ment’s elec­toral strat­egy and pri­or­i­ties. As the Trudeau gov­ern­ment un­veiled its third bud­get on Fe­bru­ary 27 in ad­vance of the 2019 gen­eral elec­tion, it was clear that its sights re­main firmly fo­cused on two groups in par­tic­u­lar: (i) women, and (ii) NDP vot-

ers who mi­grated to the Lib­er­als in 2015. Those groups, of course, along with younger vot­ers, were the ones who pro­pelled the gov­ern­ment to its ma­jor­ity vic­tory in the last elec­tion, and who will be crit­i­cal to its elec­toral suc­cess in the next one.

Bud­get 2018 an­nounced a suite of ini­tia­tives and pro­grams de­signed to ap­peal to the gov­ern­ment’s par­tic­u­lar tar­get au­di­ences. It is dif­fi­cult to over­state the ex­tent to which gen­der is­sues and mea­sures de­signed to achieve greater equal­ity for women per­vade the bud­get text: from a new parental leave ben­e­fit de­signed to “set up pat­terns of equal par­ent­ing” and in­crease the par­tic­i­pa­tion of women in the work­force, to leg­is­la­tion in­tended to help close the gen­der wage gap, to a new Ap­pren­tice­ship In­cen­tive Grant for women, to in­creased fund­ing for fe­male en­trepreneurs and women in STEM fields, to mea­sures aimed at pre­vent­ing gen­der-based vi­o­lence, ha­rass­ment and dis­crim­i­na­tion, to a “na­tional con­ver­sa­tion on gen­der equal­ity” with young Cana­di­ans, and even to an en­tire chap­ter de­voted to gen­der­based anal­y­sis of the bud­get it­self, the gov­ern­ment has tied its colours firmly and squarely to the pro­mo­tion of women’s in­ter­ests.

Whether any of these ini­tia­tives will make a real and mea­sur­able dif­fer­ence in the lives of Cana­dian women re­mains to be seen, of course. Pay eq­uity leg­is­la­tion will ap­ply only to the small per­cent­age of work­ers who are em­ployed in the fed­eral gov­ern­ment and fed­er­ally-reg­u­lated sec­tors. At­tempt­ing to en­cour­age women to en­ter or re­join the full-time labour force more quickly af­ter hav­ing a child will be a fruit­less ef­fort if, as it seems, women are choos­ing of their own ac­cord to re­main at home or work part­time while their chil­dren are young. Mak­ing Sta­tus of Women Canada a full gov­ern­ment de­part­ment is likely only to ac­com­plish an ex­pan­sion in the size and cost of the fed­eral bu­reau­cracy, while pub­lic praise for cor­po­ra­tions who pur­sue greater di­ver­sity at se­nior man­age­ment and board lev­els will do lit­tle to in­crease fe­male rep­re­sen­ta­tion in the ab­sence of share­holder or other pres­sure.

Nev­er­the­less, many of the bud­get’s an­nounced ini­tia­tives are well-in­ten­tioned and will ap­peal broadly to fe­male vot­ers. And, as im­por­tantly, the only vot­ers who are likely to find the gov­ern­ment’s sin­gu­lar fo­cus on women par­tic­u­larly of­fen­sive are the same vot­ers who would never dream of vot­ing for the Lib­er­als in the first place. The se­cond group of vot­ers to whom the bud­get is de­signed to ap­peal is the NDP’s nat­u­ral con­stituency. The Lib­eral gov­ern­ment’s ma­jor­ity re­elec­tion is vir­tu­ally guar­an­teed with the con­tin­ued ir­rel­e­vance of the NDP and, with that in mind, Bud­get 2018 an­nounced an ex­panded Canada Work­ers Ben­e­fit de­signed to sup­port very low-in­come work­ers (a mea­sure first im­ple­mented, in­ci­den­tally, by for­mer Prime Min­is­ter Harper) and a new ad­vi­sory coun­cil on na­tional phar­ma­care headed by Pre­mier Wynne’s for­mer health min­is­ter, Eric Hoskins. While there was cer­tainly no prom­ise to ac­tu­ally im­ple­ment a na­tional phar­ma­care plan—the prospects for a com­pre­hen­sive plan re­main very un­likely, given the pro­hib­i­tive cost—it is pos­si­ble that a scaled-down pro­posal could ap­pear in the gov­ern­ment’s 2019 pre-elec­tion bud­get, or even in its next cam­paign plat­form.

Other mea­sures de­signed to ap­peal to NDP sup­port­ers in­clude sig­nif­i­cant new in­vest­ments in en­vi­ron­men­tal and con­ser­va­tion ini­tia­tives, a re-com­mit­ment to im­po­si­tion of car­bon pric­ing na­tion­ally in 2018, en­hance­ments to CPP ben­e­fits for dis­abled in­di­vid­u­als, in­creased fund­ing through CMHC for rental hous­ing con­struc­tion loans, and over $1 bil­lion in fund­ing this year alone for indige­nous health and child and fam­ily ser­vice ini­tia­tives.

For young vot­ers who sup­ported the Lib­er­als in 2015, there was sur­pris­ingly lit­tle be­yond an ex­pan­sion of the Canada Sum­mer Jobs pro­gram and a com­mit­ment to an­nounce a new Youth Em­ploy­ment Strat­egy over the next year. How­ever, for the 25odd rid­ings with mi­nor­ity lan­guage com­mu­ni­ties, there was a sig­nif­i­cant in­crease in fund­ing for of­fi­cial lan­guages. For sea­sonal work­ers in At­lantic prov­inces, there was a prom­ise to re­struc­ture the Em­ploy­ment In­sur­ance pro­gram to pro­vide ad­di­tional in­come sup­port—as if the pro­gram were not al­ready suf­fi­ciently im­bal-

Bud­get 2018 an­nounced a suite of ini­tia­tives and pro­grams de­signed to ap­peal to the gov­ern­ment’s par­tic­u­lar tar­get au­di­ences. It is dif­fi­cult to over­state the ex­tent to which gen­der is­sues and mea­sures de­signed to achieve greater equal­ity for women per­vade the bud­get text.

While there was cer­tainly no prom­ise to ac­tu­ally im­ple­ment a na­tional phar­ma­care plan— the prospects for a com­pre­hen­sive plan re­main very un­likely, given the pro­hib­i­tive cost—it is pos­si­ble that a scaled-down pro­posal could ap­pear in the gov­ern­ment’s 2019 pre­elec­tion bud­get, or even in its next cam­paign plat­form.

an­ced in that di­rec­tion. The req­ui­site nod to the econ­omy, not to men­tion univer­si­ties lo­cated in im­por­tant ur­ban rid­ings, was made through (pre­an­nounced) ma­jor spend­ing on sci­ence and in­no­va­tion.

Bud­get 2018 is a doc­u­ment de­signed, then, to achieve max­i­mum po­lit­i­cal ad­van­tage. To be clear, this is not to say that par­tic­u­lar ini­tia­tives are un­wor­thy or un­nec­es­sary be­cause they are also po­lit­i­cally ad­van­ta­geous. Any gov­ern­ment will try to po­si­tion it­self, ideally, at the nexus of good pol­icy and good pol­i­tics. De­pend­ing on one’s per­spec­tive, Bud­get 2018 con­tains a mix of good, in­dif­fer­ent, and ter­ri­ble pol­icy, but it ap­peals to the gov­ern­ment’s cur­rent and po­ten­tial sup­port­ers while avoid­ing any ob­vi­ous tar­gets of at­tack, and thus must be counted a po­lit­i­cal suc­cess.

The bad news, how­ever, is that the bud­get rests on a fis­cal foun­da­tion that is ten­u­ous at best. The Lib­eral gov­ern­ment con­tin­ues to run suc­ces­sive large deficits with no plan to bal­ance the bud­get, or even to rein in spend­ing to any notable de­gree (an­nual pro­gram spend­ing growth in ex­cess of 6 per cent fol­lowed by a sud­den, un­ex­plained drop in fol­low­ing years is sim­ply not cred­i­ble). New spend­ing ini­tia­tives are both large and on­go­ing, mean­ing that the full fis­cal im­pact has yet to be re­al­ized; Paul Martin and Jean Chré­tien could pro­vide the cur­rent gov­ern­ment with a use­ful primer on the longer-term dan­gers of struc­tural spend­ing in­creases.

The bud­get text at­tempts to ar­gue that the gov­ern­ment is main­tain­ing a down­ward deficit and debt ra­tio track, but this tra­jec­tory is achieved (barely) in 2018-19 only through the magic of ac­crual ac­count­ing—namely, by book­ing all vet­er­ans’ Pen­sion for Life ex­penses in 2017-18 and re­mov­ing them from ev­ery sub­se­quent fis­cal year, thereby in­creas­ing the size of the 2017-18 deficit and re­duc­ing the size of fol­low­ing ones. The yearover-year deficit ac­tu­ally in­creases be­tween 2016-17 and 2017-18, with ev­ery ex­pec­ta­tion that the same re­sult will oc­cur in 2018-19. There is, ad­di­tion­ally, through­out the bud­get an ef­fort to avoid book­ing new spend­ing in 2018-19 wher­ever pos­si­ble and move it out to later years.

It is dif­fi­cult to imag­ine that the gov­ern­ment will be in any bet­ter po­si­tion to con­trol its spend­ing next year, im­me­di­ately prior to an elec­tion. Rev­enue is booked from in­creased taxes on to­bacco, and planned tax­a­tion of le­gal­ized cannabis, as well as vague pro­pos­als to “close tax loop­holes.” And, of course, the gov­ern­ment also re­al­izes sig­nif­i­cant rev­enue from its plan to tax pas­sive in­vest­ment in­come held within pri­vate cor­po­ra­tions, though the pro­posal ap­pear­ing in Bud­get 2018 has been scaled back sig­nif­i­cantly fol­low­ing a well-doc­u­mented backlash from Cana­dian farm­ers, small busi­nesses and skilled pro­fes­sion­als. How­ever, in the ab­sence of new tax in­creases, the gov­ern­ment will con­tinue to strug­gle might­ily to hold the deficit at its cur­rent level, never mind re­duce it or move in the di­rec­tion of bud­get bal­ance.

While this might be sus­tain­able if the sta­tus quo— namely, strong eco­nomic growth and low in­ter­est rates—re­mained un­changed, it is un­sus­tain­able in the face of in­evitable fu­ture eco­nomic down­turns or rev­enue/ spend­ing shocks, in­clud­ing the po­ten­tial ter­mi­na­tion of NAFTA. It is un­sus­tain­able in light of the U.S.’s re­cent ac­tion to re­duce tax rates, which has sig­nif­i­cantly af­fected Canada’s com­pet­i­tive­ness. It is un­sus­tain­able in par­tic­u­lar if we can­not get our re­sources to tide­wa­ter, while our com­peti­tors po­si­tion them­selves to ex­port to a grow­ing Asian mar­ket. And it is cer­tainly un­sus­tain­able in the face of loom­ing de­mo­graphic change; our health care sys­tem is al­ready in cri­sis, with prov­inces un­able to ded­i­cate the re­sources nec­es­sary to en­sure bare-min­i­mum stan­dards.

Add these pres­sures to the reg­u­lar pres­sures a fed­eral gov­ern­ment al­ready faces—some of which ap­pear in Bud­get 2018, in­clud­ing ma­jor new funds to bol­ster cy­ber­se­cu­rity, money to deal with the Phoenix de­ba­cle, im­prov­ing client ser­vices at the Canada Rev­enue Agency in the wake of a sting­ingly-crit­i­cal Au­di­tor Gen­eral’s re­port, in­creased fund­ing (again) to the Cana­dian Air Trans­port Se­cu­rity Au­thor­ity for se­cu­rity screen­ing at air­ports, new money to man­age ir­reg­u­lar mi­gra­tion flows at the U.S. bor­der, fund­ing to con­duct the 2021 cen­sus, and a one-time in­fu­sion of cash to re­spond to clearly crit­i­cal RCMP pres­sures—and it is ev­i­dent that the cur­rent gov­ern­ment’s ap­proach to man­ag­ing the coun­try’s fi­nances can be de­scribed as care­less at best.

In sum, then, as a po­lit­i­cal doc­u­ment, Bud­get 2018 is a suc­cess. It re­sponds to the con­cerns of the gov­ern­ment’s tar­get voter groups while sprin­kling new funds across a wide va­ri­ety of pro­grams and or­ga­ni­za­tions whose vo­cal sup­port of the gov­ern­ment’s agenda can now be counted upon. How­ever, it also ex­poses the de­gree to which Canada is in­creas­ingly un­pre­pared for any ma­jor cri­sis—and how, in ar­guably the best of eco­nomic times, we are choos­ing to spend be­yond our means in­stead of pre­par­ing for the fu­ture. Some gov­ern­ment, some day, will be forced to reckon with that choice.

Rachel Cur­ran is a se­nior as­so­ciate with Harper & As­so­ciates Ltd., and is an in­struc­tor at Car­leton Univer­sity’s Rid­dell Pro­gram in Po­lit­i­cal Man­age­ment. She also ap­pears as a reg­u­lar pan­elist on CBC’s“Power and Pol­i­tics”. rachel@harperas­so­ci­ates.ca

Bud­get 2018 con­tains a mix of good, in­dif­fer­ent, and ter­ri­ble pol­icy, but it ap­peals to the gov­ern­ment’s cur­rent and po­ten­tial sup­port­ers while avoid­ing any ob­vi­ous tar­gets of at­tack, and thus must be counted a po­lit­i­cal suc­cess.

Adam Scotti photo

Fi­nance Min­is­ter Bill Morneau ta­bles Bud­get 2018 in the House on Fe­bru­ary 27.

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