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.

3 comments

  • Good points Andrew, seems Tories will be pushing harderbthat the oil industry ia a jobs creator. Flaherty in hail fax today was trying to really push how the rise in oil prices is actually great news for Canada as itvwill spur morevtar sands investment.

    I don’t see how high oil prices are a real ele toon sell to the rest of Canada. The political of gas prices, notbto mention how high oil costs will further push the dollar up, as well increase energy costs, two of the major impediments to manufacturing economies of central Canada. I was a bit shocked ton hear such things from flaherty who finds his own riding in the midst of manufacturing heartland.

    Jobs just is not on the radar and when it isbthe tories are pinging at the oil sector, which as we kind of debated on the blog recentlybis notbthevjobs juggernaut Tories make it out
    to be.

    The opposition need to sit-down together, at least I think they do, and coordinate an election campaign against the
    Tories that focus on these issues,

    Jobs, jobs, jobs and more good jobs
    Corporate tax cuts
    Environment and the abysmal track record
    The poorbleadership of Harper, proroguing, the oda crisis, census dismantling etc, international mismanagemant
    Misguided spending, fighters prison building.

  • Sorry my iPad is terrible for typing. Great for everything else. Keeps replacing words and it is pain.

  • Great post. However, you lost me at:

    “I don’t hear anyone… proposing significant tax increases or revenue-raising tax fairness reforms with the exception of the corporate tax rate issue.”

    Surely you jest! While it makes economic sense, it makes poor, if not deadly, political sense. It would be signing a death warrant for any opposition party to make such a claim, especially the LPC. Which, should the NDP or Bloc support a “significant” tax increase – levied against any constituency, be it consumers in general with the GST or upper-middle/high income Canadidans – the LPC would also take vicious aim them along with the CPC. If the Liberals dared propose something that bold – it would surely spell the beginning of a CPC majority government as the “tax and spend” narrative would be hammered day and night.

    Bottom line, what’s good for the goose isn’t always viewed as being good by the gander. That’s why you won’t see any proposals to “significantly raise” taxes of ANY sort until AFTER the election when the next government is formed.

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