Publications, opinions, and speeches
The Red-Ink Budget
Published on 18/02/2009
The 2009 federal Budget stated that it has four main goals:
- Support the economy when it is most needed.
- Support Canadian families and sectors most affected.
- Ensure maximum impact for Canadian jobs and output.
- Protect Canada’s fiscal position by targeting new spending in the next two years.
These are indeed the goals that a Budget at this dire juncture in our economic fortunes should pose for itself. However, we restate these aims to be more explicit and more readily assessed:
- Stimulate the economy to speed up the recovery.
- Ameliorate the impact of the recession on Canadians who are hardest hit.
- Make effective investments that create jobs now but have high returns for the future.
- Position Canada to return to a fiscally prudent position when the economy recovers.
How does the 2009 Budget measure up in delivering on these four goals?
In respect of stimulating the economy, we agree that the Budget has provided the right amount of stimulus, but argue that the funds could be more effectively deployed. Instead of the Budget’s Robin Hood-in-reverse income tax cuts that favour the affluent, we would invest in income security programs that put cash into the hands of low- and modest-income consumers and the unemployed.
In regard to amelioration of the worst effects of the recession, the Budget failed to address the lack of Employment Insurance coverage for most of the unemployed living west of Quebec. This must be considered a major failing, only offset in part by the modest improvements for those who are already entitled to Employment Insurance, the substantial increase in Working Income Tax Benefit for the working poor, and investments in social housing and vulnerable communities.
The small increases in the Canada Child Tax Benefit will do little to improve support for families with children, and poor families will see no gains whatsoever. Low-income Canadians will get nothing from the much-touted income tax cuts, while the wealthy will get the largest tax breaks – albeit the proverbial drop in the bucket in comparison to their income. Doubling the refundable GST credit to put more cash into the hands of low- and modest-income Canadians would have made far more sense than profligate tax cuts.
In respect of creating jobs now that lay the foundation for the future, the Budget went some distance in respect of the areas in which it has sole jurisdiction, such as First Nations infrastructure, federal buildings and other federal assets. The Budget also announced a moderate increase in training dollars, although it did not adequately provide for unemployed workers ineligible for training provided by the Employment Insurance program. While the infrastructure provisions outside of federal jurisdiction – for general infrastructure, housing and so on – are reasonable in amount, we are concerned about the deliverables. The Budget was silent on the need to invest in child care, a crucial element of social infrastructure that can create jobs in addition to helping families find quality, affordable care for their children.
In regard to defining a path back to fiscal prudence, our assessment of the Budget found that the government did well in revealing the state of fiscal affairs for the next two years, but relied on a rosy and somewhat unlikely scenario for the medium term. This is a crucial task that remains to be undertaken, including setting out some of the hard choices Ottawa will need to make. In the end of the day, the Budget had nothing to say about how we get back to fiscal prudence or even what that would mean.
Overall, we give the Red-Ink Budget a provisional pass and put it on probation for the coming year – which happens to coincide with the outcome in the House of Commons.
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