November 14, 2019

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Opinion

Harper government's vaunted economic prowess fails

Prime Minister Stephen Harper walks with Finance Minister Joe Oliver into the Commons on budget day.

JUSTIN TANG / THE CANADIAN PRESS

Prime Minister Stephen Harper walks with Finance Minister Joe Oliver into the Commons on budget day.

Hey there, time traveller!
This article was published 22/4/2015 (1667 days ago), so information in it may no longer be current.

Hey there, time traveller!
This article was published 22/4/2015 (1667 days ago), so information in it may no longer be current.

Finance Minister Joe Oliver had a chance Tuesday to prove the Harper government's economic prowess. The budget he delivered, however, failed miserably to do that.

Increased stimulus spending would have allowed provinces and municipalities to deal with Canada's $172-billion infrastructure deficit ($11 billion in Manitoba and $3.8 billion in Winnipeg alone) and create new jobs. A federal living wage would have made many of those jobs decent ones.

This budget's infrastructure spending, among the details Oliver highlighted, disappoints in two ways. First, money is not available right away. The finance minister appealed to our sense of fiscal responsibility given the unpredictability of the economy, but the longer we wait to fix our infrastructure, the more it will cost to repair it.

Secondly, $5.35 billion will be available through a New Building Canada Plan which means only spending that includes public private partnerships (P3s) will be considered. There are too many red flags around P3s, many of which have left tax payers on the hook for millions of dollars, to be forcing them on other levels of government.

Despite federal government claims that Canada came out of the recent recession in a strong position, our economy is just sputtering along. Ottawa is not doing enough to stimulate the economy for the benefit of all Canadians.

Economic growth bottomed out in 2009, with GDP shrinking by 1.25 per cent, but by 2011, growth improved to around 3.5 per cent. This correction occurred largely because of government stimulus spending. Today, growth sits at an anemic 2.64 per cent and the Bank of Canada forecasts have Canadian economic growth flickering around two per cent until 2017.

Other economic observers believe there are signs of a serious structural problem that began long before oil prices tumbled and the global financial sector imploded. Those signals have been coming from the labour market, where job quality indicators are pointing to strong growth in precarious low-wage, part-time work. CIBC senior economist Benjamin Tal notes that last year the number of low-paying full-time jobs rose twice as much as the number of high-paying jobs.

These concerns are augmented by Tuesday's Statistics Canada job vacancies report. For every job vacancy in Canada, there are 5.8 people who need a job — a job with decent pay and benefits so they can provide a degree of economic security to their families and have disposable income to stimulate the economy.

But infrastructure is not just physical. Social infrastructure is also required for a healthy economy. Despite the proven advantages to a child's lifelong development and its role in gender equality, childcare is woefully supported in Canada. Manitoba has demonstrated leadership in the childcare area, but it cannot provide the support required on its own.

It is unfortunate this federal budget did not invest more in child care: every new child-care job creates or sustains another 2.14 jobs, and every dollar spent generates $1.58 of economic activity in Manitoba's rural and northern regions and $1.38 in Winnipeg.

Instead of increased spending on child care to help many low and mid-income families, we got income splitting which will help far fewer families, and many of them wealthy — families whose children already have access to the best education and who do not have to have both parents working. Only families (with children under 18) in the top 50 per cent income brackets will benefit from income splitting and a mere 18 per cent of them will see a little over $300. Just 11 per cent of families with children will receive the full benefit of around $2,000, and these will be Canada's wealthiest.

This generous tax break will be lost on 89 per cent of households, but will cost around $2 billion in lost revenue that could have gone towards a national child-care program.

Another questionable tax break comes with the doubling of the tax free savings account to $11,000, despite the fact average annual contributions have been decreasing every year since it began in 2009. Mostly high-income, older Canadians take advantage of these accounts. Because interest accrues without being subject to tax, its budgetary impact grows with time. The Parliamentary Budget Officer estimates TFSAs will take $14.8 billion from federal coffers and $7.6 from provincial revenues by 2060. That could pay for a lot of child care, or eliminate child poverty (Manitoba has the second-highest child poverty rate in Canada), or revitalize our starving health-care system or ensure safe drinking water on First Nations, or (fill in the blank).

The TFSA increase and income splitting have been largely criticized as bad public policy, but future leaders will be hesitant to reverse them lest they get labelled as tax and spend politicians.

So rather than showing fiscal responsibility by creating good jobs and investing in Canada's working and middle class, this budget secures the position of Canada's richest and further confounds our ability to deal with our greatest challenges.

 

Lynne Fernandez is an economist with the Canadian Centre for Policy Alternatives, Manitoba. She holds the Errol Black Chair in Labour Issues.

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