Call me naïve. Going into the 2015 budget lockup I figured the sale of Canada’s GM shares (that could have been used as leverage to keep GM jobs in Canada, but I digress) would go toward a new infrastructure plan for cities. The proportion of people working today is unchanged from the worst point during the recession and job quality indexes are at all time lows. Building things creates jobs and returns benefits to the economy. Obviously, or so I thought, infrastructure spending would make an important appearance in Joe Oliver’s first budget.
And I suppose it will… in 2019.
This budget is meant to create a surplus, not to create jobs or to drive economic growth. The federal government could easily spend $10 to $20 billion more a year and still see the debt-to-GDP ratio decline. This would have a real impact on job growth. However, the urban infrastructure package in the 2015 federal budget doesn’t even start for two years and doesn’t hit the maximum until 2019-20.
Just like last year, the infrastructure promises are back-end-loaded to hit in the distant future. So there will likely be decent job creation in 2020, but not today.
The surplus itself is amazingly artificial, with money being scooped from everywhere to make it happen. The budget raided $1.8 billion from Employment Insurance, it relied on the $1 billion sale of GM shares and reduced the contingency fund from $3 billion to $1 billion. (As the CCPA has pointed out before, it also relies heavily on $14 billion in cut services going back several years.) The contingency fund or the EI raiding alone were necessary to create surpluses this year and next.
The fetishization of the surplus is more amazing given that $2 billion represents only 0.1% of the Canadian economy. What it means is that assets are sold, necessary investments are foregone and accounting is changed to produce a slightly positive budget. The focus is on how to game the accounting instead of figuring out what Canada needs.
We don’t need an artificial surplus, we need jobs and economic growth.
Jobs are not the only big issue facing households and their children. Certainly climate change must rank as one of the more critical issues of our time. The budget mentions it and “global warming” exactly 0 times in over 500 pages, which is quite a feat! Incredibly, this budget actually increases subsidies for oil and gas through accelerated cost allowance for liquefied natural gas and funding for pipelines.
One of the largest single spending items in the entire budget is actually the ISIL mission, worth $360 million this year alone. But if Afghanistan is any indication, this will almost certainly not be a one-year project.
The final point I’d like to make is related to the measures targeting seniors: the doubling of Tax Free Savings Accounts (TFSAs) and reducing mandatory withdrawals from the Registered Retirement Income Fund (RRIF).
The fact is that only 13% of seniors are maxing out their TFSAs today, prior to the doubling (the budget says 25% of seniors maxed out contributions in 2013, but many of them then withdrew a portion). So there are actually only a limited number of seniors who would use this. In fact, 57% of seniors have nothing in their TFSA. Only 35% of seniors have RRIF/RRSP savings over $50,000.
Both of these measures will have limited impact for seniors. If the government were to cancel the Old Age Security (OAS) age change from 65 to 67, improve the Canada Pension Plan or improve health care, it would have a much broader impact on seniors.
David Macdonald is a Senior Economist with the CCPA. Follow David on Twitter @DavidMacCdn.