Social Policy in Ontario

Deficit budget sets new tone for Canada

Posted on March 23, 2016 in Debates

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TheStar.com – Opinion/Commentary – After decades of tax cuts and deficit-aversion politics, this budget is a step forward
Mar 23 2016.   By: Peter Bleyer and Trish Hennessy

The Trudeau government’s first federal budget has managed to strike a rare accord in Canada: although premised on deficit financing, this budget has won acceptance from some Bay Street and progressive voices.

It has done so by going where no federal government in Canada has been willing to go in decades: by not shying away from deficit financing, it assumes renewed federal leadership for investments in everything from crumbling infrastructure to reducing income inequality and poverty.

Set in historical context, it is an ambitious budget. It’s hardly perfect, but it’s more balanced in terms of public priorities than any federal budget in a long time.

For more than 20 years, federal budgets have worked to shrink the public’s expectations of the role of federal government in our lives, suggesting that the best government could do was offer a buffet of tax cuts at budget time.

After decades of tax cuts worth billions in lost revenue and deficit-aversion politics dominating the political agenda, this budget sets a different tone.

For instance: the rhetoric of poverty reduction was actually matched in this budget with welcome changes to the Canada Child Benefit and Guaranteed Income Supplement — both of which will have a big impact on reducing poverty for families with children and for seniors.

Changes to Employment Insurance will increase access for recent immigrants and precarious workers. The extension of benefits for regions that are hard hit by the drop in commodity prices are also welcome.
And investments in this budget in Aboriginal Peoples represents a stark departure from the previous administration.

There will be those who cling to a false narrative from yesteryear: that government deficits should be avoided come hell or high water.

That narrative locked governments into prolonged inaction as roads, bridges, sewer and water systems that our grandparents’ generation built began to crumble; as poverty remained unchecked.

That narrative prevented governments from acting when an economy started to wane. Even governments that have stated “activist” intentions have too often backed down at budget time, claiming the deficit made them do it.

To those who eschew deficits, some context: federal government spending as a share of the economy remains at near historic lows. The projected deficit of $29.4 billion, which is 1.5 per cent of GDP in 2016-17, is relatively smaller than any federal deficit run between 1974 and 1996. The Canadian Centre for Policy Alternative’s Alternative Federal Budget estimates the deficit could be $40 billion and still maintain respectable deficit to GDP ratios.

Meanwhile, interest rates are at historic lows. Now is the time for governments to use their purchasing power to make investments that will increase economic growth.

It’s also important to remember that every deficit creates a surplus elsewhere. Every billion dollars in federal deficit means an extra billion in the pockets of Canadians through new transfers or higher wages, extra money for the provinces, and extra opportunities for businesses.

And let’s get real about the pressures on all levels of government in Canada today: the prospect of slow growth, the impact of an oil crash that may never fully recover, the reality of an aging society — these will require sustained investments and leadership from the federal and provincial governments.

Economic growth forecasts continue to be downgraded, in Canada as around the world. Without growth leadership from business investments and exports, and in the absence of stronger income growth for Canadian households, government remains the only actor that is able to move the needle on a sluggish economy.

But it isn’t just about economic growth. We know Canadians’ well-being is measured in more than a simple GDP metric. Even with this budget’s timely and needed investments, the federal government spending as a share of the economy is at the lowest level in 60 years.

Sixty years ago we hadn’t even put a man on the moon. There was no universal public health care. No public pension plan.

One budget does not a success story make. But, overall, this budget looks different than what Canadians have become accustomed to seeing. It’s a step forward.

Peter Bleyer is executive director of the Canadian Centre for Policy Alternatives. Trish Hennessy is director of the Canadian Centre for Policy Alternatives’ Ontario office.

< http://www.thestar.com/opinion/commentary/2016/03/23/deficit-budget-sets-new-tone-for-canada.html >

Tags: budget, economy, featured, ideology, participation, poverty, standard of living, tax

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