In the first budget of Justin Trudeau’s government, Finance Minister Bill Morneau has gambled that Canadians are more concerned about a sputtering economy than the dangers of taking on more debt. Announced Tuesday, the 2016 federal budget breaks the Liberal commitment to run “modest” deficits of about $10 billion a year with a projected deficit of $29.4 billion this year and $29 billion the next.
Here’s some reaction on the government’s decision to open up the spending taps and on what it decided to spend that money on.
The economy and jobs take centre stage
“The magnitude of the shock facing the Canadian economy is substantial,” the budget document states as part of the government’s justification to go much deeper into the red than planned.
The Canadian Labour Congress agrees. “This budget is a step in the right direction for our economy, particularly the Employment Insurance improvements, which will make a big difference for unemployed Canadians, and help stimulate the local economies that need it most right now,” said congress president Hassan Yussuff in a release.
Another labour organization, Unifor Canada (which represents some TVO employees) was more measured in its praise: "It makes sense for this first budget to emphasize projects and programs where the money can flow right away, but Canadian families need longer term solutions on which they can build their futures," Unifor national president Jerry Dias said in a statement. In particular, Unifor is disappointed there wasn’t more money for the auto industry and no mention of added help for the aerospace industry, particularly troubled aircraft maker Bombardier.
Some representatives of the business community are also reacting positively to the federal plan. "Today's budget made several important measures to support Canada's innovative and economically critical manufacturing and exporting sector," stated Canadian Manufacturers & Exporters senior vice president Mathew Wilson. He added his organization was especially happy about what the budget had to say about promoting advanced manufacturing, including new product development, commercialization and production.
But not all business groups are happy. The Canadian Chamber of Commerce believes the budget measures are “spread too thin” to be fully effective. “Done right, the government’s commitment to building infrastructure can be an important investment in the future. However, every dollar being committed is borrowed money that we can’t afford to waste,” president and CEO Perrin Beatty said in a press release.
And the Canadian Federation of Independent Business says federal government broke an election commitment to middle class small business owners across the country. “[T]he new government promised to reduce the small business corporate tax rate to nine per cent by 2019. That promise was broken today as it announced the rate will remain at 10.5 per cent after 2016," president Dan Kelly stated. “This decision will cost small firms over $900 million more per year as of 2019.”
There are also those who think the budget doesn’t go far enough. The Canadian Centre for Policy Alternatives says the deficit, amounting to “at most” 1.5 per cent of GDP, is relatively smaller than any federal deficit run between 1974 and 1996 and federal government spending as a share of the economy remains at near-historic lows. “The Liberals are spending in the right places, but the amounts aren't up to the task. The deficit is too small to really tackle Canada's biggest economic challenges: unemployment and slow growth," said centre chief economist David Macdonald.
Big bucks for infrastructure
One of the Liberals’ signature promises during the fall election was to boost spending on infrastructure. The budget follows through on that with $11.9 billion committed to infrastructure over the next two years.
The Canadian Construction Association is understandably thrilled to see billions of dollars more going into infrastructure projects that their members will be hired to build: “Infrastructure renewal is critical to the future of Canada,” president Michael Atkinson said. He added the association is optimistic that funds will be available for the 2016 construction season.
But the Council of Ontario Construction Associations was more reluctant to shower the government with praise: “The government’s recommitment to their campaign promise to invest $120 billion over the next ten years is reassuring. However the budget contained scant detail of how projects will be selected or on specific projects. … The government must be highly selective with regard to its infrastructure investments. It must select projects that will contribute to improved productivity in the Canadian economy,” it said in a statement.
But about that deficit…
Plenty of fiscal conservatives do think the projected deficits are much too high. “Growing the middle class? More like growing the national debt,” tweeted Christine Van Geyn, Ontario director of the Canadian Taxpayers Federation. To the news that the government expects total deficit spending of $113 billion between now and 2020-21, Van Geyn simply wrote “I feel ill.”
Writing in the National Post, Andrew Coyne said the Liberals have delivered “a budget from the 1970s, to meet the problems of the 1980s.” He argued the Liberal claim that the middle class is struggling and falling further behind the wealthy isn’t borne out by the statistics and so “the budget’s whole premise is a fraud.” He cautioned that if projections for economic growth fail to materialize, the government’s books are in serious trouble.
Maclean’s columnist Paul Wells concurred: “If your goal is to undo the Harper legacy, you can’t undo only half of it. Morneau projects much higher spending than Harper at unchanged revenue levels. He’s hoping economic growth will pick up enough to cover the gap. If it does, no harm done … But I’m pretty sure you can’t order up a growth boom the way you call for a pizza.”
But economist Mike Moffatt argued in Canadian Business that the government’s growth targets appear realistic. On oil prices, a key premise in any forecast of the Canadian economy, he writes “there is a reasonable chance prices end up matching or exceeding the estimates in Budget 2016.”
Indigenous groups hopeful with new funding
The prime minister has promised a renewed relationship between the government and indigenous peoples. And there is $8.4 billion earmarked in the budget to improve life in aboriginal communities.
“We are very encouraged to see that there will be $2.6 billion in new education funding over the next five years,” Ontario regional chief Isadore Day said in a statement. “Also, we commend the $2.24 billion in water and waste water over the next five years so that every First Nation child has access to safe drinking water no matter where they live.” However, Day also said the money promised for housing and child services falls far short of what is needed and urged the government to fully implement the United Nations Declarations on the Rights of Indigenous Peoples.
Métis Nation of Ontario president Gary Lipinski called the budget historic. “One of the most critical commitments made in the budget is the $96 million over five years the federal government is committing to engage Indigenous governments like the [Métis Nation of Ontario] in order to make progress on the issues that are important to us. This is truly dealing with Indigenous governments on a nation-to-nation basis,” he said in a release.
The budget also tried to follow through on promises to another key group of voters in the Liberal Party’s election win: students and young workers.
"Students became a powerful political force during the last election, and the promises made and delivered to us in this budget are proof of that," Bilan Arte, national chairperson of the Canadian Federation of Students, said in a press release. Some of the highlights of the budget for the federation include a 50 per cent increase in Canada Student Grants and committing an additional $165 million towards the Youth Employment Strategy. One sore point: no commitment of additional funding to indigenous students through the Post-Secondary Student Support Program.
Climate funding welcome, but seen as a small start
Another Liberal goal is to be seen as being much more proactive on the issue of climate change than the Conservative government of Stephen Harper. A commitment of $5 billion towards “green” infrastructure and $1.75 billion for environmental measures and to kick start clean energy is part of that.
“After nearly a decade of federal budgets that pitted the environment against the economy, it is refreshing to see a budget that acknowledges a prosperous Canada depends on healthy ecosystems and a transition to a clean economy,” Alvin Singh of the David Suzuki Foundation wrote. “At the same time, we're concerned that the level of investment doesn't match the urgency of the environmental challenges Canada faces.”
Similarly, Clare Demerse of Clean Energy Canada, a think tank, praised the budget’s investments in clean technology but said it was only the first chapter in what needs to be a much longer effort. “Budget 2016 comes just weeks after First Ministers launched a process to reach a national climate plan, which should be ready to go into effect in early 2017—so next year’s edition will need to build significantly on the work this budget has started," she said in a statement.
Image credit: Sean Kilpatrick/CP/nationalpost.com
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