March 22, 2016
OTTAWA—Today’s federal budget delivers on poverty reduction, makes important steps towards reducing inequality, and addresses decades of underfunding and neglect on reserves. However, delaying infrastructure and social program investments will not solve the problems of slow growth and high unemployment.
“This budget provides something that’s been missing for a long time: a real response to poverty and inequality,” says CCPA Senior Economist David Macdonald. “Today’s changes to the Canada Child Benefit and Guaranteed Income Supplement will have a big impact on reducing poverty for children and seniors.”
There are many welcome investments in today’s budget but CCPA economists say more spending is needed to boost Canada’s faltering economy. The projected deficit of just over $29 billion for both of the next two years—amounting to at most 1.5% of GDP—is relatively smaller than any federal deficit run between 1974 and 1996 and federal government spending as a share of the economy remains at near-historic lows.
“The Liberals are spending in the right places, but the amounts aren’t up to the task. The deficit is too small to really tackle Canada’s biggest economic challenges: unemployment and slow growth,” says Macdonald. “It’s important to remember that every deficit creates a surplus elsewhere in the economy. Every billion dollars in federal deficit means an extra billion in the pockets of Canadians through new transfers or higher wages, extra money for the provinces, and extra opportunities for businesses.”
Today’s budget implemented a large portion of the Liberal’s election platform but several promises were not addressed, including: closing the stock option deduction loophole, closing loopholes for small businesses, reducing subsidies for the fossil fuel industry, and implementing home care (although this may come in the future). The largest surprise is the carving out of major on-reserve commitments, which are positive, from money that would otherwise have gone to municipalities, which is negative.
“The Liberals’ first budget says it can, and does, move the needle on slowing growth in the first two years of this fiscal plan, creating tens of thousands of jobs in the process,” says CCPA Senior Economist Armine Yalnizyan. “Why do they then take their foot off the gas pedal and watch growth fall in the next two years of the fiscal plan?”
Economic growth forecasts continue to be downgraded, in Canada as around the world. One of the key ways a government can counteract that trend is by investing in infrastructure. “The biggest surprise in today’s budget was the decision to back-end load infrastructure spending plans, which rise to their highest level in the Liberals’ second mandate, five years from now,” says Yalnizyan. “This five-year fiscal plan sees the federal contribution to the economy fall to the lowest level in over 60 years, as cities struggle to meet accelerating demands for affordable housing and public transit. We need the federal government to play a bigger role for more than a couple of years.”
The new federal government made a big splash last fall when Prime Minister Trudeau appointed equal numbers of women and men to Cabinet. The budget includes money to increase spaces in shelters for victims of domestic violence and support for the Inquiry into Missing and Murdered Aboriginal Woman and Girls. It lacks any significant investment in prevention measures.
“This government has made important symbolic commitments to improving women’s lives,” says Senior Researcher Kate McInturff. “What we don’t see in the budget is the money to back that up. With the addition of $3 million in 2016-2017 and $5 million in 2017-18, the budget for Status of Women accounts for a paltry 0.016% of total federal program spending in both years. That’s not going to buy real change for women in Canada.”