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And the medal goes to... Ranking Budget 2016

March 22, 2016

3-minute read

Lockup over, what does the Liberal government's first budget tell us about its priorities, and how does it stack up to the 2016 Alternative Federal Budget? There are some high-performing measures in there, which I've handed medals based on their likely impact on poverty, inequality and responsible economic growth.

Gold medal measuresGold-Medal-Measures

Reducing poverty Two measures will have a big impact on poverty rates this year: the new Child Canada Benefit and the improvement to the Guaranteed Income Supplement for seniors. The new child benefit actually exceeded our Alternative Federal Budget recommendation (one of the few items to do so) and will have a big impact on child poverty. The improvement in the supplement for seniors will have a similar impact in that group, although unfortunately it will only apply for single seniors: couples would need to split up to see an increase.

First Nations There was a promise in the election platform for on-reserve education. What is definitely new in the budget is dedicated funding for on-reserve water systems to end boil water advisories in those communities. That funding is new and almost as large as what we have in our alternative budget. There is also substantial new money for housing on reserves, another pressing need for First Nations. The one downside, and it’s a doozy, is that this money is carved out of infrastructure funds that might otherwise have gone to cities--an either/or funding situation where there should be money for both.

Silver medal measuresSilver-Medal-Measures

Making the tax system fairer  The new top tax bracket is an important step toward using the tax system to offset growing income inequality. But a leaky tax system makes gains harder. There is going to be increased enforcement of the existing rules, which will likely raise revenues and will almost certainly fall on the richest (who have the right accountants). However, closing tax loopholes like the stock option deduction or the abuse of the small-business category by professionals (both in the Liberal election platform) now appears to be off the table. Also, the so-called middle class tax cut is not at all progressive, with the biggest gains going to high-end earners.

Bronze medal measuresBronze-Medal

Infrastructure The Liberal election platform front-end loaded municipal infrastructure spending so it was larger up front. However, in the budget, the spending is back-end loaded, so more (much more) is far off into the future. It's also smaller than it was in the platform, even including the carved out First Nations spending. Given the lags in infrastructure spending, the longer you delay, the longer it takes to get the employment and GDP boost.

Growth and employment This isn’t a specific budget item, more like an elephant in the room. GDP growth and unemployment rates for 2016 are well off where they should be. However, this budget seems to have a deficit limit of $30 billion: abandon hope all ye who think it should be higher. This completely artificial number creates a deficit that is too small to address the major challenges of our time--high unemployment and weak growth. In fact, our alternative budget shows how you could run a $40-billion deficit and still keep a stable debt-to-GDP ratio while also having a huge impact on employment and GDP. By being more open to a higher deficit to boost growth, this bronze medal puts the government on the podium at least.

Participation ribbonsNice-Try

Home care & health care Home care spending was promised in the platform but doesn’t make it to the budget, or rather it's extraordinarily limited compared to the scale of the problem the provinces are facing. In fairness, any new health care spending would have to be negotiated with the provinces. But then again, so will infrastructure money. At present, home care and new health care spending is generally missing in action. Hopefully, it will show up in future budgets as negotiations with the provinces proceed, but for the time being, it gets “a thanks for coming out” ribbon.

Child care Child care was a major focus of the election campaign. The underlying issue for young parents is that child care in Canada is expensive, I mean really expensive, I mean more expensive than university tuition. The other problem is that there aren’t enough spaces, so waiting lists are the norm. There is money for child care in the budget, but it's pretty limited compared to these big problems. There is a promise for more money in the future, once a framework is in place. But this money is definitely not hitting the ground with the speed that was laid out in the Liberal platform. So child care funding is definitely participating but it doesn’t make the podium.

What items did I miss? What should have medaled but didn’t? Leave a comment below.

David Macdonald is a senior economist with the Canadian Centre for Policy Alternatives, and the coordinator of the centre’s Alternative Federal Budget project. Follow him on Twitter @DavidMacCdn.

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