Likes and Dislikes about the Federal Budget

Posted by Devin Johnston on January 27th, 2009

Today, Finance Minister Jim Flaherty unveiled the much anticipated Federal Budget 2009. Among the details are $83.8 billion in deficits over the next four years, $20 billion in personal income tax relief over four years, $12 billion in federal infrastructure spending, etc. The combined spending and tax cuts will see Canada's national debt increase from $457.6 billion in 2007-2008 to a projected $542.4 billion in 2012-2013. Macleans editor Andrew Coyne opines that this is the end of conservatism in Canada. I think that it is safe to say the the Conservatives have made some significant concessions to the opposition parties here, while also retaining some of their own ideas about how to kick start the economy. On about 80% of the issues, I think that this is the most that the opposition can reasonably expect from a Conservative government. However, I still believe the budget should be defeated, for reasons I will get to at the end of the post. But first, my likes and dislikes about the budget.

• Like: Infrastructure spending. Wise infrastructure spending during a recession is immensely helpful. Not only does it create jobs (and the economic growth that follows from that), but it delivers a social return with a lasting impact. Expansions, repairs, and upgrades to post-secondary institutions are welcomed, as are investments in transportation infrastructure (particularly transit). The infrastructure spending falls well short of what a Liberal-NDP would likely deliver, however.
• Dislike: Burdening municipalities. Several people including NDP Leader Jack Layton and Toronto Mayor David Miller have been critical about the regulations attaching to federal funds for municipal infrastructure. In particular, municipalities are finding it difficult to actually access federal funds and are generally responsible for covering a substantial portion of the cost themselves.
• Like: Tax relief for the working poor and EI extension. The government is proposing to temporarily extend the maximum EI benefits by 5 weeks while raising the basic personal amount for income taxes by $720 retroactively.
• Dislike: General failure to prioritize social spending. The government's proposals fail to address the basic needs of those most vulnerable in an economic recession. Income tax cuts are cold comfort to those lacking an adequate income in the first place. There is no spending to create affordable child care, which would create jobs and enable single parents to participate in paid employment. Eligibility, benefit levels, and security of employment insurance remain both woefully inadequate and internationally embarrassing. Affordable housing also remains a critical issue across the country that is not adequately addressed in the budget. Such measures would have an enormously positive impact on the economy by enabling low-income people to spend money within their communities. They also create long-term savings for the government in terms of the costs of public health and public order.
• Like: The realization that a touch of Keynesianism is okay. Recessions are the time for governments to stimulate economic activity through investment, training, infrastructure projects, and other spending. The spending must be wise and targeted while also delivering social returns that benefit the whole of society.
• Dislike: The scale of deficit. Tommy Douglas once quipped that spending more money than you have isn't a socialist trait, it's a stupid trait. Unlike many on the left, I don't believe that a massive deficit of the scale proposed by the government is necessary or desirable. While a small and temporary deficit may be necessary, these numbers seem excessive to me. In particular, I worry that some of the tax cuts proposed by the government will permanently cripple the government's fiscal capacity without delivering any appreciable economic benefit to the country. I concur with something that Andrew Jackson posted at RPE: "Corporate tax cuts are a poor way to create jobs and help troubled industries because they are of no use to companies losing money, and have little or no impact on real investment".
• Like: Ran out of likes.
• Dislike: Assault on pay equity. The budget retains one of the two most controversial proposals from the government's failed economic update: an all out attack on pay equity. The fall update abolished the right to appeal pay equity cases to the Canadian Human Rights Commission and put pay equity on the table as a bargaining chip in employer=union negotiations. Human rights are not frivolities to be enjoyed only in good times. They are inherent, universal, and immutable rights naturally endowed to all human beings.

As I indicated at the beginning, I think that it is the furthest the Conservatives could possibly go. While it falls way short of what an NDP government would want, it is clear that the Tories have made significant concessions to the opposition. However, the assault on pay equity should be a total non-starter for any decent political party.

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