Don’t lose your nerve

Have we already seen the best of the Trudeau government? Just 16 months after the Liberals took power and dramatically changed the country’s political agenda, have they run out of things they really want to do?

Canadians could be forgiven for drawing that conclusion, at least based on Finance Minister Bill Morneau’s second budget, a modest document with a great deal to be modest about.

The most generous conclusion would be that the government is wisely hitting the pause button while it waits for the dust to clear south of the border. It wants to see where the Trump administration will land on its promises of dramatic tax reform and will produce the real second Morneau budget in its fall economic update.

A less optimistic conclusion would be that the Liberals are in danger of losing their way. The upheavals of the past year have left them unsure of which way to jump, so they have chosen to barely move at all — all the while emitting a cloud of economic buzzwords designed to persuade the public that they must be doing something.

At this point, we don’t know which scenario will turn out to be the most accurate. But the risk for the government is that this may represent a significant lost opportunity to press ahead with its agenda.

For regardless of the many uncertainties that surround the unpredictable, even bizarre U.S. administration, second budgets are usually important moments. By then, a new government has been in office long enough to be confident about what it’s doing, but far enough away from the next election to take some risks.

Instead, the Trudeau government seems to be trapped uneasily between the last election and the next one.

Morneau’s first budget reflected the halcyon days of 2015 — what now seems a long-ago time before Brexit, before Trump, when opening the spending taps was popular among both voters and economic experts. The government went big, introducing an expensive new child benefit plan, an ambitious infrastructure program and much more. It was a welcome break from the previous orthodoxy of penny-pinching and balanced budgets at all cost.

A year later, in a darker and more confusing world, Morneau has no second act to offer. His budget offers more signals than substance. It outlines new investments of only $1.2 billion, a fraction of 1 per cent of federal spending. And much of the money pledged in high-profile areas won’t kick in until 2018-19 — just before the next election.

The government promises $7 billion over the next decade on child care, which it says will create 40,000 new subsidized daycare spaces over the next three years. It’s a welcome part of the Liberals’ efforts to help families (and in particular working women) but it’s a fraction of what’s needed to build a robust national child-care system.

On affordable housing, the government promises little new money this year but as much as $1 billion in 2018-19 — once again, close to the election.

Morneau also sends out copious signals in the area of innovation, perhaps his department’s most overexposed jargon phrase. But there’s a lot less substance amid the well-meaning rhetoric about building skills and investing in innovation “super-clusters.”

Perhaps the biggest lost opportunity is the government’s failure to act on one of its best ideas from the 2015 campaign — reviewing the tangled web of federal tax loopholes and doing away with the most wasteful, ineffective ones. The Liberals estimated the government could save $3 billion a year just from ending tax expenditures that don’t actually lead to anything worthwhile.

Yet two years later they have done nothing on this front, instead kicking the entire issue of tax policy down the road to the fall. At that point, presumably, it will be clear what the Trump administration intends to do on taxes and Ottawa can adjust accordingly.

This approach is understandable, but ill-judged. The government ought not to put every issue on hold while waiting on Trump, but keep up its momentum. Otherwise, it risks finding itself even more boxed in next autumn and even less inclined to act boldly.

The danger here is that this still-young government will quickly find that its best days are behind it. Indeed, judging by this budget, they already may be.

Finance Minister Bill Morneau’s second budget may represent a significant lost opportunity for the Trudeau government to press ahead with its agenda