For what it is it makes sense, but aspects should worry us. The first budget from Finance Minister Bill Morneau was a “change” budget. Whether you liked the new direction or not, it was a natural extension of the Trudeau platform and campaign.
Then, along came an international economic slowdown. And more importantly, along came Donald Trump. Now the government needs to make decisions recognizing the culture of instability and unpredictability in Washington. Increasing corporate taxes might make sense, but surely not when it’s expected Trump will slash U.S. corporate tax rates. If Congress lets him, which is far from certain. That uncertainty on a single issue is magnified many times across the economic spectrum. Morneau and Trudeau had no choice but to be circumspect.
Banking on growth makes sense when there’s evidence to support doing so. Lawrence Schembri, deputy governor of the Bank of Canada, said this week that the economy has made good progress since the oil price plunge in 2014. Retail, wholesale and manufacturing sales have all been stronger than expected as well as has international trade and job creation. But crazy policy from Washington could change all that in a relative flash.
That sets the scene. What about the budget specifics? Most of worst fears expressed by business didn’t materialize. No major changes to capital gains tax. Almost all new spending is reined in - $1.2 billion is actually new while much more is from the last budget and much of that has been pushed back for years.
There is some good news. Parents will get more flexible leave by taking lower employment insurance benefits over a longer period of time – up to 18 months.
There’s $11 billion for affordable housing, but again, that’s part of the $93 billion announced in the last budget, and it falls short of what the Federation of Canadian Municipalities called for – $12 billion.
There’s $7 billion over 10 years to create new child-care spaces – up to 40,000. But a go-slow approach on child care doesn’t allow more women to enter or re-enter the workforce, which means the economic benefit from that won’t be realized.
There’s more deficit, for more years, which is the biggest worry. The government doesn’t forecast a return to balance until after the next election, which hands opposition parties serious ammunition and goes against the grain for average Canadians who worry about future generations.
This is a hold-the-course budget, even the government acknowledges. That may be necessary given global economic uncertainty and unpredictability in Washington. But if the budget doesn’t fill you with confidence overall, you’re in good company.
- The Canadian Press