For Trudeau, it’s just a start, though it’s a good start

Posted on March 25, 2016 in Governance Policy Context – Business
Mar 25 2016.   By: David Olive, Business Columnist

The big story of Tuesday’s milestone federal budget is Canada’s remarkably altered set of priorities. Variations on a theme of investing in people, they include cities, where more than 80 per cent of Canadians live. They include ending abysmal living conditions in aboriginal communities, which are an international disgrace.

And the budget marks the return to a role for Ottawa as a major provider of social housing. Affordable housing is a precondition of social stability and widespread prosperity, no less than Medicare has been.

The headlines suggest that the big story of this budget is the eye-popping $29.4 billion federal deficit projected for this fiscal year.
It isn’t.

The Liberals have prudently assumed a modest 0.4 per cent annual growth rate in GDP during their current mandate to bring that deficit down.

Yet economic growth is almost certain to be more robust than that. Most economists forecast average Canadian GDP growth of 1.5 per cent to 2.5 per cent over that four-year period.
The Tories accuse the Grits of embracing a “reckless” course.

But by using worst-case scenarios in their GDP forecasting, the Liberals are actually erring on the side of pleasant surprises. Economists suggest that the Grits could have shaved $6 billion off their deficit projection for this year if they’d based their assumptions on entirely reasonable expectations of stronger GDP growth.

And Bill Morneau, the federal finance minister, could have forecast outright surpluses as early as next year had he simply revoked the Harper government’s GST and corporate tax cuts.

These cuts mean the federal treasury forfeits more than $27 billion a year. They have neither spurred economic growth nor stemmed the tide of defections by corporations seeking lower wage costs, not tax rates, in the U.S. and Mexico.

The Harperites’ corporate tax windfall didn’t stop the shuttering of Hamilton’s Stelco works, or Caterpillar Inc.’s relocation of London, Ont.’s world-class locomotive operation from London, Ont., or HeinzKraft Co.’s partial abandonment of Leamington, Ont.

Canada has the money to invest in itself.

With a debt-to-GDP ratio of 32 per cent, which the Grits vow to maintain through their mandate, Canada is among the best-financed of world economies. The U.S. ratio is about 75 per cent; Japan’s is more than 200 per cent.

To govern is to choose.

The current government’s priorities include a boost in child care assistance (an additional $2,500 or so a year per child for most families); bigger tax-free student grants, geared especially to students of low-income families; and a higher maximum Guaranteed Income Supplement (GIS) for low-income seniors. (It is still often the case that to be old is to be poor.)

Without describing it as such, Morneau’s budget is geared to narrowing a dangerous gap between rich and poor that steadily widened in the Harper years.

Even before the budget, the Trudeau government in February reduced middle-class tax rates. And the budget boosts the aforementioned child care benefit, cuts EI premiums, and extends eligibility periods for EI benefits in distressed regions.

Economists and the business community have largely applauded this budget because it frees up more consumer spending power among Canadians to stimulate an anemic economy.

Regarding the estimated $143 billion deficit in municipal infrastructure, a senior minister in the Harper government once shrugged: “Ottawa doesn’t do potholes.”

The new government does potholes, a metaphor for municipal infrastructure. The budget’s $120 billion for infrastructure spending includes big-ticket items like public transit. It also includes fiscal grace notes like funds for schools to repair classrooms rendered unusable due to ceiling cave-ins and the like.

Economists regard such investments as imperative if a country seeks to be, or remain, globally competitive. The ability to move people and goods more quickly and with less hassle holds the obvious promise of relieving stress and boosting efficiency.

An infrastructure renaissance will also showcase Canada’s emerging “clean tech” industry. Twenty-first-century materials and methods, many of Canadian origin, will be used in every new and retrofitted structure. Clean tech exports are counted on to reduce our reliance on volatile commodities.

And with 1.4 million Canadians unemployed, and a jobless rate of 7.4 per cent (the U.S. rate is 5.1 per cent), there’s no time like the present to get on with rebuilding the country.

Progressives will understandably balk that not enough money has been spent in given areas. New Democrats, for instance, accuse the Grits of “shortchanging” First Nations, despite the budget’s outsized increase in spending on this priority.

But this budget isn’t the magic wand that cures income inequality, arguably the root cause of most problems in the country. It does promise, however, to be the first of many Grit budgets that will cater mostly to the 99 per cent, many trapped in economic hardship, rather than the one per cent.

The budget also establishes precedents.

In providing billions of dollars for social housing, the feds are returning to a crucial initiative largely abandoned by Ottawa since the years when the PM’s father was in office. There is also money in this week’s budget to create shelter spaces for homeless Canadians and victims of domestic violence.

In each case, the funding is insufficient. But the precedent that Ottawa will now bring its considerable resources to bear on problems long dismissed by the feds as the sole responsibility of provinces, territories and municipalities is a bedrock advance that advocates of economic justice can build on.

The Grits still have a long to-do list, obviously. The budget had little to say about non-aboriginal education, in which Canada has slipped to 13th-place from 6th in international student test stores. You can’t build a globally competitive society with anything less than adequately funded education.

The budget also had little say on health care. And there was no mention of rolling out a version of the progressive Quebec day care model across the country, which former Prime Minister Paul Martin was poised to do a decade ago. Day care is a $12,000-a-year proposition for the working parents of an infant or toddler. Having a second child is unaffordable for many couples, which helps explain Canada’s rock-bottom fertility rate.

And while the budget provides impressive funding for environmental initiatives, we will have to wait for a carbon-tax regime, or “polluter tax,” that discourages wasteful consumption of fossil fuels. So far, Prime Minister Justin Trudeau’s negotiations with the provinces and territories on this issue have been fraught.

Those are challenges for the days to come.

It is said that nothing in life is more difficult than to make a start. In tone and substance, this week’s budget is an encouraging start in directing the country to a better place.

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