What Kind of a Budget?

I’m finding the run-up to the federal Budget (widely expected March 22nd) more than a little frustrating. There is certainly  no sharp public policy debate regarding budget priorities.

The dominant media frame reinforces the Conservative message that 1) recovery is underway 2) the federal books have to be balanced and 3) tax increases are bad.

This frame excludes discussion of the need to respond to the continuing jobs crisis amidst a still quite tentative recovery.

As of January, the national unemployment rate was still 7.8% and the youth unemployment rate was 14.4%. The “real” unemployment rate, which accounts for those who have given up looking for work and involuntary part-timers, was 11.8%, down only modestly from 12.3% a year earlier. (That number is not seasonally adjusted and is always fairly high in January.)

The pundits seem to agree that the GTA will be a key battleground if the Conservatives are to gain seats. The unemployment rate in the Toronto CMA last month was 8.7% and it is well over 8% in several Ontario cities hard hit by the manufacturing crisis.

How can jobs, then, not be a key issue?

The Conservative ads extol the Economic Action Plan programs, but these have now expired and are not about to be renewed. I don’t hear a lot of ideas from the Conservatives beyond assurances that “the fundamentals are sound” and unconvincing claims about the magical power of corporate tax cuts.

And the opposition parties seem to be pretty silent on how to create jobs.

In fairness, Jack Layton’s proposed retrofits program would be a  job creator and the NDP platform will be much broader than the limited set of demands given to Harper.  From the Liberals I have heard little about jobs, and a lot about the importance of balanced budgets.

Hopefully this void in the debate will be filled by the pending release of the CCPA’s Alternative Federal Budget which will put forward a detailed job creation agenda, and show how unemployment can be reduced through targeted public investments in areas like infrastructure and the environment while also gradually bringing down the deficit.

I’m still a bit puzzled about where Flaherty will end up in terms of Budget themes.

The Conservatives are under some pressure from true fiscal conservatives to speed up the pace of deficit reduction. Just about everyone who follows the fiscal math closely – Kevin Page, the Parliamentary Budget Officer; the IMF; and former Finance Deputy Minister Scott Clark – agrees that a modest deficit will remain due to recent tax cuts (especially the two point cut to the GST rate) even as and when the economy returns to potential. That suggests the need for deeper spending cuts if fiscal discipline is indeed a Conservative priority, and if tax increases are pretty much ruled out as an option.

Flaherty can put off the really big decisions on the rate of increase of federal transfers to the provinces for another year, and make reasonably optimistic fiscal assumptions to balance the books. But that still leaves him largely unable to come up with much in the way of significant pre election spending or tax cut goodies in the Budget. (Unless he can think of some potentially voter attractive spending cuts, such as attacks on public sector workers.)

As for the Opposition parties, I don’t hear anyone questioning the pace of deficit reduction or proposing significant tax increases or revenue-raising tax fairness reforms with the exception of the corporate tax rate issue.

That still leaves Jack Layton and perhaps Ignatieff free to push one important big idea – expansion of the Canada Pension Plan – and to propose some modest social spending initiatives.  But the debate so far seems a bit thin to drive an election.

For inspiration – here is Joe Stiglitz on what progressives can and should be saying as an alternative to austerity.