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It ekes out a balance, but the government is clearly still hoping for an economic miracle
The federal government tabled its long-awaited budget on Tuesday, April 21. And true to form, it had many of the hallmarks of an election year budget.
The day before, Finance Minister Joe Oliver put on some spiffy New Balance running shoes to whip up some fanfare over the fact it would be a balanced budget.
Enjoy that balance while it lasts, because the Harper government could soon find itself running to catch up with slowing government revenues due to something it can’t control – an oil slump. And something the government could control but isn’t – giving away billions of dollars in tax cuts.
It turns out that budget was balanced by raiding two piggy banks: the Employment Insurance fund and the contingency fund (assuming, I guess, that there are no more rainy days in future), and by selling the family silverware – General Motors shares.
The government itself acknowledges a slow economic growth reality on the horizon but, hey, it’s an election year, so out comes the money tree.
For a government that made everyone wait to table its budget because it wanted to see what shape the oil slump was going to take, there was little in the document that suggested the wait made any difference.
In addition to plunging oil prices, Canada’s job market has been sluggish. The overall employment rate is worse than when Prime Minister Stephen Harper first came to power in 2006. Given so many Canadians are in search of decent work, the election cry could easily be jobs, jobs, jobs, but that’s not what came out of budget 2015.
It was thin on solutions to lackluster employment, a squeezed middle class, and serious ongoing challenges facing Canada’s manufacturing heartland.
Budgets are supposed to redistribute money and resources not ship them up the food chain. But this budget actually contributes to income inequality by targeting boutique tax cuts to a niche voting audience: well-off seniors, well-off families, and business owners.
Young people don’t tend to vote in large enough numbers and you see the results in a budget that, for the most part, pushes them out of the frame.
The budget, for example, didn’t bother to address measures to help the 200,000 Canadian students graduating with student debt. It’s dragging its heels on needed federal leadership for training supports to help young Canadians land, and keep, a good job.
The government is clearly still crossing its fingers and hoping for an economic miracle: the budget was silent about how this federal government could be putting its budget surplus to work on job creation through public investments.
Historically low Bank of Canada interest rates should be encouraging governments to consider borrowing to invest in deteriorating infrastructure and restore public services cut during austerity years. And invest now for future generations and measures that could stimulate the economy. This is a live option.
Instead, the government is barrelling ahead with rich income splitting plans – measures that are a boon to the well-off, but that do nothing for working parents in need of affordable child care, better and cheaper public transit, more affordable housing, and better access to health care.
There may be an election glint in this government’s eye, but cutting taxes while the economy slows is shortsighted at best, negligent at worst.
This government knows full well that seniors are its voting bread and butter. Predictably, Budget 2015 offers seniors several carrots. Among them, an increase in the Tax Free Savings Account (TFSA) contribution limit to $10,000 a year. Once again, these measures are a gift to the well-off: only 13 per cent of seniors max out their TFSA at the pre-doubling rate more than half (57 per cent) of seniors don’t even have a TFSA.
What would have been a better plan for seniors?
For starters, the government should have revoked its decision to make seniors wait two more years – when they turn 67 – to be eligible for Old Age Security.
It should also have heeded the call that provincial premiers have been making that the Canada Pension Plan (CPP) is in serious need of expansion. In the absence of federal leadership, the province of Ontario is creating its own provincial pension plan but everyone agrees CPP expansion is the far better option.
It is an election year and we’re going to hear a lot about relief for working families and middle class economics, but this budget failed to deliver the goods.
For instance, the federal government will spend a combined $7 billion on the Universal Child Care Benefit and income splitting this year. These are untargeted programs that won’t create a single child care space.
That $7 billion could pay for a national $7 a day child care program. Imagine. We could wipe out Toronto’s subsidized child care wait list, which sits in the tens of thousands.
As for $2.4 billion lost to family income splitting, it’s another gift to the well-off. Forty-nine per cent of qualifying families will receive nothing from income splitting, with the greatest benefit going to families who earn more than $200,000 a year.
But enjoy those tax cuts while public services remain chronically underfunded. Its extraordinary shortsightedness will come back to haunt us.
Trish Hennessy is director of the Canadian Centre for Policy Alternatives’ Ontario office.
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