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The Progressive Economics Forum

The Alternative Federal Budget 2013 – Doing Better, Together

These are the remarks by David MacDonald and I prepared for the press conference marking the release of the AFB 2013 in Ottawa, March 12, 2013.

Time flies and our Alternative Federal Budget is now in its 19th year.  Year after year it has shown that we can have a Canada where we all do better together.

This year the AFB is more inclusive than ever with 27 chapters written by over 90 contributors each laying out progressive policy ideas ready for implementation.  All policy proposals are fully costed and put within a realistic macro-economic framework to determine their impact on the deficit, debt and employment.

Approximately a year ago we warned that government austerity was going to further slow fragile growth.  Low and behold Canadian governments have already started to contributed to slower growth in 2012.  If the Parliamentary Budget Office is correct,  by 2014 Canadian governments — mostly due to federal cuts — will slice deep into what little economic growth we are seeing.

The failed experiment of austerity has taught us one thing: you can’t cut your way to growth. Government austerity is part of the problem, not part of the solution to slow growth.  Yet the federal government seems intent on pursuing this fiscal fantasy.

Mr. Flaherty has hinted the next budget will introduce even more cuts than those already baked into the system from the last 3 budgets. That threatens our economy, which has been close to stalled in the last 6 months. And it’s offside from the concerns of the majority of Canadians who are worried about their jobs, their pensions, and infrastructure in bad need of repair.

We need to remember that governments are not disconnected from the economy.  How they spend or don’t spend has a significant impact on whether our economy grows or shrinks

Canada doesn’t have a deficit problem, it has a growth problem.  Projected economic growth is down approximately a third from where it was in the 2000s.  This is not a short term issue but something likely to continue for years to come.  The impact of slow growth is that 1.3 million Canadians remain unemployed four years after the recession “ended,” about a third of which are youth.

Within Canada, the federal government is uniquely positioned to restart the economy by delivering much needed programs and creating jobs.  The federal debt burden is the lowest in the G8 by a fair margin.  In fact, the federal government would have to run a deficit six times larger than it did this year to move to second place.

Want balanced books? The Alternative Federal Budget says there`s more than one way to get to zero.

Our budget would push against the winds of slow growth by creating at its peak 300,000 full-time jobs reducing unemployment to pre-recession levels of about 6%.  The deficit in the short term would be higher but throughout the forecast horizon, the debt burden would continue to decrease. Our plan eliminates the deficit in the same timeframe as the feds.

Here’s how:

First, everyone knows if we don’t fix aging infrastructure now, we’ll pay more later. Interest rates have nowhere to go but up, and wages will rise as retirements accelerate. The AFB says there’s no time to waste and launches a focused 10-year fix-it strategy to repair the public infrastructure our communities and businesses rely on, day in and day out.

We don’t make life harder for 1.3 million unemployed Canadians – and tens of thousands of discouraged workers who have given up looking for a job — by making EI more difficult to get than at any point since the early 1940s, or by flooding the labour market with temporary foreign workers. Our plans lower the unemployment rate to 6%, restoring purchasing power and setting the foundation for sustained recovery.

The AFB tackles poverty and income inequality by investing in the areas Canadians say need to be a priority: education, affordable housing, public pensions, healthcare, and national child care.

For those who are sick and tired, and not just of politics, the AFB offers homecare that puts the emphasis on care, supports the provinces’ efforts to improve Pharmacare, and puts our money where our mouth is, making sure every young person gets access to primary dental care, thus avoiding preventable disease and billions in costs. That’s how we bend the cost curve: together.

The Alternative Budget reverses the long-term neglect of housing, water supplies, and education of our First Nations, and addresses the inexcusably high levels of violence against women.

Our carbon plan transforms Canada from an international laggard on the environmental scene into an environmental leader, with a forward-looking green strategy that would make all Canadians proud.

We take some of the dead money sitting on corporate balance sheets and bring it back to life, by increasing corporate tax rates to pre-crisis levels and using the cash to improve foundational services.  We apply a withholding tax on the growing amounts of Canadian cash flowing to tax havens, money that’s not being used for anything as it ducks being taxed. We believe it’s time for a financial transactions tax, following the recent lead of 11 European nations. We introduce a small inheritance tax on estates over $5 million to help offset the costs of looming intergenerational inequalities.

Finance Minister Flaherty suggested just a few days ago that balancing the books will take more sacrifice.  We agree. Our plan asks those who have done best in the wake of the biggest global economic crisis since the 1930s to put their shoulder to the wheel with the rest of us, to get things moving for everyone again.

But Finance Minister Flaherty wants sacrifice for different reasons, and from different people. Why do we need more cuts to balance the books by 2015? It’s an election year, and during the election campaign of 2011 the Conservatives promised two big new tax cuts as soon as the books were balanced – doubling contribution limits to the Tax Free Savings Accounts and introducing income splitting for families with young children. Both disproportionately benefit high income Canadians. Both come with a price tag of billions of dollars each.

By 2015 the well-heeled get big new tax breaks. The sacrifice will be borne by the rest of us, as jobs and services are cut.

That’s the status quo thinking that is being rejected the world over. The Alternative Federal Budget says “We can we do better, together” and shows us how.

Any government that is serious about addressing the issues that the majority of Canadians struggle with every day would implement a budget that looks like this.

Enjoy and share:

Comments

Comment from Sara-Anne Peterson
Time: March 14, 2013, 6:23 am

Armine, I so admire you. Rock on.

Comment from Purple Library Guy
Time: March 16, 2013, 1:22 pm

This is a vastly better budget than anything we’ve seen from a federal government in many a long year. I’d love to see still more Romanow Report on the health side–move into pharmacare, for instance, maybe even public dental insurance–and push industrial policy even harder. But there’s a lot of very good stuff in here.
I only read the short version. In the long version, under environmental or water, does it buy back the Experimental Lakes?

Comment from Larry Kazdan
Time: March 17, 2013, 5:30 pm

Alas, despite many excellent ideas, this budget has a tragic flaw. Perhaps the CCPA (which I support) feels constrained by accepted wisdom or political realities, but why should progressives give unqualified support to a budget whose target for 2015-16 is 1.2 million unemployed?

For what is missing, see Job Guarantee at the website of the Centre of Full Employment and Equity:
http://e1.newcastle.edu.au/coffee/job_guarantee/JobGuarantee.cfm

Letter sent to Sun news:

Think-tank unveils alternative tax-and-spend budget, March 12th, 2013
http://www.sunnewsnetwork.ca/sunnews/politics/archives/2013/03/20130312-172206.html

For all its commendable proposals, the CCPA alternative budget is a conservative document, strangulated by right wing economic ideology.

During WWII, our budget deficit rose rapidly from 12% of GNP in 1939 to over 42% in 1945. The need for soldiers and armaments required everyone to work and the unemployment rate was reduced to less than 1% in 1944. But though the government debt ratio rose to over 120%, more than three times what it is today, there was an enormous increase in productivity and the post-war period was one of unparalleled prosperity.

The CCPA budget, however, timidly plots a balanced budget for 2015-16, and projects an unemployment rate of 6%, which translates to 1.2 million Canadians seeking work and unable to find it. Despite criticism of “growth-killing austerity”, the alternative budget takes about as much money out of the economy as it puts in, and fails to seriously deal with major joblessness that costs our economy billions in lost production, and causes untold personal suffering to individuals and their families.

Larry Kazdan

Footnote:

1939–1945: World War II Transformed the Canadian Economy
http://web.archive.org/web/20050507140447/http://canadianeconomy.gc.ca/english/economy/1939ww2.html
> The government budget deficit also increased rapidly: in 1939, the budget deficit was less than 12% of GNP; in 1945, that rate rose above 42%. Nevertheless, by 1944, the Great Depression had faded into memory, and the unemployment rate was less than 1%.
Of course, my views are subject to severe criticism. See Winnipeg Sun comment that follows this letter:
>
> Austerity hurts
>
> Re: ‘Deficit drama’s fiscal cliffhanger,’ (Editorial, March 9).
>
> The fiscal crisis in the U.S. arises because of their dysfunctional political system which has mandated sharp and immediate spending cuts that will derail the economy. After the Second World War, Canada and the U.S. had debt to GDP ratios three times higher than what they are today, and the post-war period was a golden age of prosperity. So why insist “austerity must be accepted?” The experience of Europe where unemployment rates are already double digit demonstrates the government must put more money into the economy, not take more out.
>
> Larry Kazdan
Winnipeg Sun comment:
http://www.winnipegsun.com/2013/03/14/letters-march-15-2013
>
> Governments cannot spend their way into prosperity, clearly you’ve never taken an economics class to understand that basic principle.

______

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