The (Very) Political Economy of the Budget

Here is the CLC Budget Analysis

At this point the economics of the budget are so overwhelmed by the uncertain political calculations that one hesitates to add to the discussion.

There are a few modest half good things here in response to demands from labour and the left. $300 Million earmarked for the poorest of poor seniors is not to be sneered at, nor some very modest measures to support unemployed workers and to promote green jobs.

 But the major if somewhat concealed focus of the Budget is clearly spending cuts to pay for future tax cuts, since they are not needed to shrink  an already low and falling deficit. The $4 Billion of annual spending cuts to be undertaken over the next year and moving forward greatly outweigh the mostly temporary new spending measures, yet we have details of the latter – like bulbs shining on an electoral Christmas tree – but not of the former.

Departments that have already given up 5% of their direct federal program spending Budgets will now have to give up another 5% in just one year, and we have no idea where the axe will fall. The victims are largely ignorant of their future fate, and will remain so through any immediate election.

I’d say this is a politically astute Budget. It concedes momentary ground to the left, while clearly sticking to the underlying agenda of a shrunken public sector and tax cuts.

Whether the opposition parties have responded in as astute a fashion is open to question, one likely to be answered in a vote in early May.

4 comments

  • Andrew: I’m not sure I agree with you that it was a very politically astute budget, but I guess we’ll see. I was expecting something more astute, at least something that would make the NDP have to struggle over whether to support it or not.

    As it turned out, the budget didn’t even go half way to meeting the NDP’s really quite modest demands, while also signalling steep federal program spending cuts for future years. And even in some of the key areas, what they included was insufficient and/or half-baked.

    For example, the full GIS top-up with its princely amount of $600 year is only available to seniors with an individual income (outside of OAS and GIS) of less than $2,000. For every dollar of income above this, the combined clawback rate of the GIS and this GIS top-up is 75% (50% for GIS plus 25% for this top-up). This 75% effective tax rate for low income seniors is a heck of a lot higher than the 15% tax rate they are giving large corporations.

    The ecoENERGY retorfit proposal appeared half-baked: no details and it would have been very difficult to get all the community infrastructure and local auditors trained and ready for just a one year program.

    And on waht was by far the largest loophole they close (deferral of corproate tax through partnerships), my understanding is that it has developed and grown largely because of ongoing cuts to corporate tax rates. So to count it as a revenue gain (after it probably wasn’t counted as a loss when they announced the CIT cuts) is somewhat misleading. In any case, the value of it is expected to decline.

    What they delivered for these programs were considerably less than what the NDP had called for and paled beside the value of other spending or tax cuts. There was no way they could support this.

    The budget was also a fairly incoherent grab-bag of different measures and promises without any compelling vision, as many further to the right have critiqued it for.

    Yes, they’ll use all these promises relentlessly during the election, but I hope an increasing number of people will see through them.

  • I hope people see the real agenda also. That $4 Billion translates into some pretty serious cuts to programs as opposed to administration, and it will be difficult to expose the impacts.

  • After reading quite a few reviews of the budget, I will give everybody a thumbs up on analysis. Especially given the timing, I was amazed at the quality of the reports given the timing. (potentially I am just a slow analyst- stop right there Toby! lol.)

    Anyway the one point that I think needs to be underlined is what is not in the budget and I believe one can pick up on it in Armine’s analysis. That is, what we are witnessing here is the decline in revenues, not just from the down turn, but all those massive tax cuts are now creating havoc with the ability of the government to deliver.

    So it is the declines and what is now missing in the budget that I find the most problematic. From the massive corporate tax cuts, the personal income tax cuts, the GST cuts, we are now playing with a lot less marbles. And I believe as Jim pointed out quit a few times yesterday on national TV, what happens when the some of the big ticket items like health transfers have to be renegotiated.

    We are on the pathway of what Harper has planned all along. Reduce public spending by taking away the cash- starve the institutions of health, education, municipalities and other major areas, and you destroy the ability of the public sector to deliver. Smaller government, more private sector space for profits. Goods and services become publicly ossified and then commodified by the market and allocation becomes based upon income and profits.

    I would say we are currently making our way fairly close to the edge of this neo con plan, where we finally start seeing some real change. For example, municipalities have been squeezed but with the great recession, the slow rot was delayed as Harper had no choice but to stimulate or lose power. Now, with a partial recovery and the rest of the world seemingly moving towards austerity, the neo con plan can now be accelerated. And as Armine points out we are at the dawn of this new beginning and this budget is a sign of that.

    I also think Iggy got it pretty bang on yesterday, the question now is a matter of priorities. What were the priorities advanced in this budget.

    Continue on with the tax reduction plan, offer some quite shallow nickel and dime programs that cover off ever about as many sub groups of voters as possible, to say during the campaign something was in for them.

    But overall the trajectory of Harper is bang on keep giving away the tax revenue base to starve the public sector- where there is spending it will be on prison building, increased security measures and the military. All part of the neo con ideology that there is no such thing as society- just individuals.

    On that happy thought- it is time to throw the bums out. Everyday is a good day when one has the opportunity to affect change and chart the political and economic direction of the country without a neo con at the helm.

    Bring it on.

    pt

    Paul

  • Well, I wouldn’t say I think it’s a very politically astute budget. But it’s probably politically astute *enough*, given the media climate. A halfway serious news media, and I’m not even talking about the kind I’d like to see, only the kind of already-deeply-flawed media we had back in say the seventies, would have announced all the little programs as what they are–crumbs. That media would have at least put opposition parties in a position to thoroughly wreck the frame a government put on a budget like this one.
    But, since the news media nowadays shows no inclination to question the frame the government puts on the budget, and indeed resists attempts by others, even Liberals, to do so, this budget is astute enough. The media seem happy to present the Cons’ window dressing as reality, to ride through their Potemkin villages while ignoring calls to look behind the facade.

    So it’s politically astute in the sense that the Conservatives knew all they had to do was go through the motions–that they didn’t so much need to fool the reporters as just give the reporters an excuse to pretend they were fooled.

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