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ROCHON on 2015 budget: Conservatives making a mockery of working Canadians


Louis-Philippe Rochon

Associate Professor of Economics, Laurentian University

Co-Editor, Review of Keynesian Economics


Today, with great fanfare, Minister of Finance, Joe Oliver, tabled his much-delayed budget in the House of Commons. Despite the government’s best effort to confuse Canadians with tales of terrorism, the economy and job creation remains by far the single most important issue facing hard-working Canadians. Unfortunately, this budget, full of accounting tricks, will do very little to revive Canada’s moribund economy, and it contains far less in terms of good news for working Canadians.

In fact, Mr. Oliver, with Mr. Harper by his side, has managed to accomplish quite the feat with this budget: they showed how the government is devoid of any real vision for Canada’s economy, while simultaneously mocking hard-working Canadians by giving away a panoply of boutique tax breaks … to rich friends and very targeted groups that they hope will vote Conservative in October.

This is less a fiscal budget than it is a shopping list.

Overall, two things stand out most from this budget.

First, the government seems to be oblivious to the fact the economy is essentially dead in the water, despite the government’s rhetoric to the contrary. Bank of Canada Governor, Steven Poloz, admitted as much last week when telling Canadians there was zero growth in the first three months of the year. This will no doubt be followed by another quarter of poor or even negative growth. Mr. Poloz believes the economy will come back to life in the second part of the year, but so far this has been greeted with much skepticism by the private sector and many economists.

But Mr. Poloz deserves some credit at least for taking this threat seriously. For instance, to counter the effects of the oil crisis and other elements ailing the Canadian economy, Mr. Poloz lowered the bank rate in January to 0.75 per cent. Mr. Poloz is keenly aware of the poor and “atrocious” nature of the Canadian economy.

Mr. Oliver and Mr. Harper in contrast appear not to be.

This brings me to the second element that stands out the most from this budget: nothing in it will contribute to resuscitate the economy. Sure, there are some tax breaks, but 1) these do not amount to a consistent and logical approach to fiscal policy; 2) these tax breaks (some announced before the budget – 160 since taking office) will largely go to rich Canadians who really don’t need any additional fiscal assistance.

And tax breaks are never as effective as large-scale fiscal expenditures. There is of course a $1 billion a year in transit spending, but it is so grossly inadequate that is sad. Mr. Harper is simply ignorant of the real needs of Canadians, and of the kind of spending that is really required to get the economy moving again.

When you think about it, Harper’s government has been mired in the great economic and financial crisis almost from the day it has taken office in 2006. Of course, the crisis was a truly worldwide phenomenon and Harper is certainly not to blame for creating it (but certainly his kind of policies certainly are). But we can certainly hold the government to account for how it is dealing with the aftermath of the crisis. What Conservative policies aided it putting an end to the crisis? What Conservative policies contributed to ensure a strong economic recovery? Sadly, not many.

Harper seems to be more interested in letting markets and consumers lead the way at a time when markets themselves are demanding governments take the reign. This cat-and-mouse dance is harmful to our economy: more than ever, the government must take the lead now and propose bold steps to ensure our shared prosperity.

Eight years after the crisis, and the economy is still stalled. This budget would have been the perfect opportunity to inject some life into it with some infrastructure spending. Yet, rather than give Canadians a bold and much-needed vision, the strategy is rather a piece-by-piece approach the aims of which are difficult to understand apart from offering tax breaks to the select few.

There is an important disconnect between Mr. Harper’s rhetoric on wanting to help the middle and working classes, and his actions. In the end, this budget is a gross mockery of working Canadians.

We are left with a set of very inconsistent policies, with the two most powerful policy branches of government working against each other. Whatever good Mr. Poloz is trying to achieve with his expansionary monetary policy is being completely obliterated by Mr. Harper’s restrictive and austere fiscal policy. This is not productive.

This budget has added nothing and will contribute even less to the economy.





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Comment from Purple Library Guy
Time: April 22, 2015, 6:24 pm

“There is of course a $1 billion a year in transit spending”–There isn’t, actually. I believe Mr. Jackson on this very blog points out that there is no transit spending whatever until 2017, which will see $250 million in theory, and $1 billion not until 2019 or 2020 or something. Which might as well be never for how much it means.

Comment from Larry Kazdan
Time: April 24, 2015, 5:08 am

Letter in Toronto Star

Balanced budget will choke economy

The issue is not whether balanced-budget laws ever work but whether targeting a balanced budget at the national level makes any sense.

The federal budget is a tool to manage the economy, and good management requires counter-cyclical fiscal policy to keep the economy on an even keel. When inflation threatens, the government must tax more and spend less. And when the economy is depressed, the opposite.

Those critics who argue that the government should tax more and then spend the amount collected miss the essential point. Increased taxation may indeed be justified as a means of reducing inequality, but these government revenues are unlikely to provide the quantum of aggregate demand necessary to drive the economy to full employment.

Note that after the financial crisis of 2008, even the Conservatives felt it necessary to increase spending by billions of dollars without new taxation, and then bragged about how thousands of jobs were created as a result.

Yet Canada currently still has 1.3 million unemployed. We know that long-term unemployment leads to increased rates of family breakdown, increased crime rates, increased alcohol and substance abuse, increased suicide rates, increased incidence of mental and physical problems, and lost opportunities for skill development and work experience among the young.

In the 1970s, the Local Initiatives Program created jobs and community benefits that were funded by the federal government and delivered through local non-profit organizations and citizen groups. Projects covered such areas as arts and culture, recreation, tourism, research, help to the aged, education for the young, and protection of the environment.

If a similar but enlarged program were offered today, the benefits would far outweigh the costs. Those currently without work or income could become engaged in productive activities providing services to other Canadians.

In comparison, a balanced budget will choke purchasing power and sabotage economic recovery.

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