A Few Thoughts On The Federal Budget

Finance Minister Chrystia Freeland’s budget on Tuesday was greeted with the proforma standing ovation by smiling government MPs. The documents require about 20 MB. For context, the Bible needs 4.1 MB.

Much of the budget had been announced earlier, or telegraphed in the days leading up to the release. Some of the rest has funding for yet to be developed plans.

For example, the amounts being given to the provinces for health care had been revealed in considerable detail at the federal-provincial meeting in early February. It was much less than the provinces sought but still a useful boost.

Likewise, the announcement of a dental plan was a known requirement by the NDP for continuing to support the Liberals. Perhaps Jagmeet Singh should have been allowed to read that part of the speech.

The plan will provide dental coverage for uninsured Canadians with annual family income of less than $90,000, with no co-pays for those with family incomes under $70,000. The cost will build to $4.4 billion a year with no provincial contribution. Presumably the available funds will determine the benefit details.

This will make four groups happy: dentists, the recipients, the provinces, who will be relieved of pressure for such a plan, and the many employers who will save on the cost of the benefit plans for some of their employees, including teachers and civil servants.

There is $359 million to combat the opioid crisis, for community supports, prevention programs, supervised consumption sites, and action to tackle drug trafficking. Details to be determined.

The list under making life affordable replays previous announcements about improved benefits for children, child care, pensioners, low-income workers, and students. Unlike Nova Scotia, Canada indexes tax brackets which is particularly important after the inflation spike in 2022.

Canada already receives 82% of its electricity from non-carbon sources. The demand will accelerate as transport becomes increasingly electrified. The budget proposes investments to accelerate the supply and transmission of clean electricity and connect the grid from coast to coast to coast. That is a nice vision, but the never-ending talks about implementing the Atlantic Loop do not point to a path for success.

Even more vague are promises that name an issue, usually one that belongs to the provinces, while saying nothing substantive about when or how they might happen.

“Too many Canadians have experienced excessive renovictions, above-guideline rent increases, and other actions that have made rent more expensive. More needs to be done … policy changes applicable to all large corporate landlords could be considered to ensure best outcomes on affordability and fair treatment of tenants.”

“… a Home Buyers’ Bill of Rights, which … could include legal right to a home inspection, requiring that real estate agents disclose whether they are representing both sides of a potential sale, … transparency on the history of sale prices.”

“…commitments from Visa and Mastercard to lower fees for small businesses, while also protecting reward points for Canadian consumers offered by Canada’s large banks.” Of course what those points will buy can be and is often devalued.

“…reduce junk fees for Canadians. This could include higher telecom roaming charges, event and concert fees, excessive baggage fees, and unjustified shipping and freight fees.”

Canada led the G-7 in its economic recovery last year, now slowed down by the Russian invasion of Ukraine. It has by far the highest growth rate in population. Unemployment has been at record lows. In such circumstances one might hope for a positive fiscal balance. But the continuous intrusion into areas of provincial jurisdiction means continuing though shrinking deficits. The interest on debt in 2027-2028 is projected be double what it was in 2020-2021.

Unfulfilled projections of shrinking deficits have been a regular feature of Liberal budgets since they were elected in 2015. They are never short of new spending ideas that postpone a return to balance.

That is tolerable if the economy is strong and interest rates are low, but there could be serious difficulty if the economy falters and interest rates spike. Meanwhile Quebec and Ontario will have surpluses in the next year or two. Saskatchewan is already there.

Someday there might be a federal government less interested in doing tasks that are better managed by the provinces. That will require a transfer of tax points and a recalibration of the equalization formula. It might reduce the amount of squabbling between levels of government.

Perhaps there is a simpler way. The two levels of government provide a vast array of programs for low-income people: dental care, rent supplements, child benefits, home heating subsidies, help with pharmaceutical costs, student grants and interest-free loans.

Why extract taxes from people who will be eligible for some or all of the proceeds? Might it be easier to reduce income taxes up to the levels that these programs will provide? A similar process could serve people with little or no income. It would save a lot of administration and make for much shorter budget documents. Just a thought.


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