A budget for most Canadians

Hey there, time traveller!
This article was published 30/03/2012 (5097 days ago), so information in it may no longer be current.

For Canadians older than 30 years, the federal budget Thursday probably felt like déj vu all over again. And for Canadians younger than 30, slashing spending by more than $5 billion over two years likely seems draconian. In any case, neither characterization fits this budget.

For the older crowd, the budget, at least in its pre-presentation hype, was to be a mirror image of the 1994 budget, when the Chrétien Liberal government staved off a Greece-style humiliation by slashing $10 billion of program and transfer spending over two years while cutting the civil service by 55,000 positions.

Now that was draconian. It also was necessary. Federal profligacy and deficit spending had driven debt to a crippling 68 per cent of GDP. Only by taking an axe to spending could balance — and fiscal sanity — be restored.

In comparison, debt to GDP is just over 30 per cent today and the annual deficit is coming down, not going up.

But what 1994 taught politicians, or should have taught politicians, is they cannot responsibly wait until the country is tipping over a cliff to take steps to pull it back to balance.

Which appears to be what Finance Minister Jim Flaherty did on Thursday. He did not make the deepest cuts imaginable — the $10-billion upper limit floated in the pre-budget period — but neither did he allow for business as usual.

Cuts amount to about seven per cent of the $75 billion of spending under review, but transfer payments were not touched. Most departments will feel the pinch, but compare a one per cent cut to Veterans Affairs Thursday to 11 per cent 18 years ago, or small trims to Environment compared to a 32 per cent cut in 1994, when the Transportation Department was cut by 51 per cent.

In 1994, 55,000 civil servants had to be let go. This budget calls for a reduction in the civil service of about 19,200, many of whom will disappear through attrition. There’s about $1 billion set aside for buyouts and, while civil servants will be required to contribute more toward their gold-plated pensions, they will remain gold-plated — and indexed.

Some cuts are not in spending. The federal environmental review process will be streamlined to get speedier approvals, a measure that will outrage environmentalists who use the process not so much to decide the merits of projects but rather to delay them to death. Even former premier Gary Doer, dear to environmentalists who applauded his decision to waste $1.1 billion to move Bipole III, condemned the review process for its tardiness.

Likely the most controversial measure is the plan to gradually and eventually increase to 67 from 65 the age at which Canadians are eligible for OAS pension support. It seems a sensible response to changing demographics. Given that implementation doesn’t begin for 11 years, however, the measure seems more a wake-up call than a done deal — there is plenty of time to tinker and adjust.

This is a budget that will satisfy no one on the extremes. But Canadians generally know their houses must be kept in order, that value for dollar still matters, even if it means we will no longer be able to pinch pennies, except figuratively. The decision to scrap the penny likely best illustrates what the budget seeks to do. It costs 1.5 cents to produce one cent. All Canadians know if you want to get out of that kind of hole, the first thing to do is to stop digging it.