OPINION: Trudeau’s first budget is taking baby steps in the right direction

by | Apr 8, 2016 | Canadian News, City News, Opinion

Jeremy Appel

Prime Minister Justin Trudeau’s inaugural budget, unveiled by rookie Finance Minister Bill Morneau is a step in the right direction, with billions of dollars pledged for infrastructure, child care, First Nations and the arts.

But the Trudeau government is constrained by its commitment to “fiscal responsibility,” code for austerity, and no one in Parliament is credibly taking them to task for it.

Much of the discussion over the budget is determined by the size of the deficit. The government is now going $29.4 billion into the red, instead of the $10 billion promised on the campaign trail.

The Liberals have also all but abandoned their pledge to balance the budget in time for the next election.

Yet Pierre Trudeau never balanced a budget in his 16 years as prime minister, nor did Conservative Ontario Premier Bill Davis in his 14 years in power.

Suffice it to say, the sky is still intact.

The real problem with Trudeau’s budget is that it doesn’t go far enough in restoring the damage wrought to the Canadian welfare state by both the Stephen Harper and Jean Chretien years.

This sentiment is echoed by the Canadian Centre for Policy Alternatives (CCPA), a left-leaning think tank. (Full disclosure: this writer has done paid work for the CCPA’s Monitor magazine.)

“The Liberals are spending in the right places, but the amounts aren’t up to the task,” said chief CCPA economist David Macdonald. “The deficit is too small to really tackle Canada’s biggest economic challenges: unemployment and slow growth.”

The Canadian Chamber of Commerce, hardly a left-wing organization, says that the budget’s $11.9-billion in infrastructure investments are “spread too thin” to be effective. Since the money is borrowed, they suggest the government spend more on infrastructure before interest rates increase.

Interest rates are currently so low that the Bank of Canada is contemplating experimenting with a negative interest rate, which would place the interest rate below one per cent.

Wouldn’t now be an appropriate time to make massive investments?

In a $2-trillion economy, what’s the difference between $10 billion, $30 billion and $80 billion? Not a whole lot.

As Macdonald pointed out, the $29.4-billion federal deficit amounts to no more than 1.5 per cent of GDP. Canada’s debt-to-GDP ratio of 32 per cent, which Trudeau has said will serve as his fiscal anchor, remains on the lower end of G8 nations.

Increased funding for First Nations is a welcome change from the Harper government’s bellicosity, but the $8.4 billion pledged conveniently goes into effect fully after the next election.

Ditto for the $1.9 billion earmarked for arts and culture organizations – Canada Council, Telefilm Canada and the National Arts Centre that fund and promote Canadian content. Another $675 million is going “to modernize and revitalize” the CBC for “the digital era,” again doled out over five years.

It’s no wonder that Tom Mulcair, who’s in danger of losing his job as NDP leader as a result of the party’s disastrous 2015 campaign, has suddenly discovered the virtues of deficit financing. It was ultimately an easy, albeit politically risky, vote getter for the Liberals.

If you recall, Mulcair ran in the election as a fiscal conservative, pledging to balance the books in every year of an NDP government. This allowed the Liberals, Canada’s natural governing party, to position themselves as outsiders with their pledge to adopt minor deficits that are easily affordable.

Mulcair’s criticism that Trudeau’s budget doesn’t do enough to tackle economic inequality reeks of insincerity. He knows that if he has any chance of staying on as leader, he must embrace the NDP’s social democratic roots.

One of the few issues where Mulcair did outflank Trudeau on the left during the election was his promise to establish a federally subsidized childcare program.

Paul Martin had made a similar pledge in his failed 2006 campaign for re-election. He dismissed the argument that parents should be given money to spend as they see fit on their children. This sort of stipend amounted to “beer and popcorn money,” the former prime minister said.

Now Trudeau is offering beer and popcorn money to low- and middle-income parents with his Canada Child Benefit. It’s not as dependable as federally-funded daycare, as its success depends on how the parents spend their money. That it’s being targeted toward those with less money is no doubt a step in the right direction.

The childcare aspect is a microcosm of the budget – ambitious, but not ambitious enough.

The NDP and Conservatives have yet to offer a coherent or preferable alternative.

That may change if Mulcair is shown the door and the NDP chooses a leader with stronger progressive credentials who can put pressure on the Liberals’ left flank to move further away from years of cuts.