If you're Canada's finance minister, budget days are when the chickens come home to roost.
For as long as he has been in the job, federal Finance Minister Jim Flaherty has subjected Canadians to his carefully woven narrative that the Harper government's approach to managing the economy has all the right bells and whistles. Deregulation, in large dollops, will make the wheels of commerce roll that much faster. Lean – make that increasingly non-existent – government programs will also add a much-needed boost to the national economy. And not to be forgotten, corporate tax cuts will be like the fiscal cherry on top, providing Canada's corporate sector with all the help needed to jump-start economic growth.
Unfortunately for Flaherty, the carefully woven narrative is coming apart at the seams. The latest forecasts for economic growth in Canada make the drying of paint look interesting. Few economists expect Canada's GDP to budge anywhere close to 2.5%, a number that now looks downright optimistic but is far below the minimum rate of growth needed to begin reducing unemployment or ensuring sustainable prosperity across the country.
More troubling still, on the important measures of economic performance, things like rising incomes, better quality employment, less disparity between those who have and those who have not, on those measures, Canada's performance is middling at best, this according to the Conference Board of Canada, a left-leaning think-tank if ever there was one. According to its report, Canada isn't "living up to its potential."
Where are the trouble spots according to the conference board? Poverty, income inequality and income mobility, all the measures where proactive policies at the national level could make a huge difference but under Mr. Harper's watch have been largely ignored.
As Mr. Flaherty likes to tell it, Canada's current fiscal situation requires greater austerity to close a "fiscal gap." In common-speak, Mr. Flaherty's latest budget projects no new program improvements despite the crying need for federal funding in areas like child care, social housing and crumbling municipal infrastructure.
Consider for a moment what the Conservative corporate tax cut strategy has done, or more to the point, not done. Since taking office, the Conservatives have blindly followed the path of corporate tax cuts to the tune of $60 billion; that's how much money the federal treasury has lost because of Harper and Flaherty's dogged determination to cut corporate tax rates. The resulting bloated corporate bank accounts, however, have not translated into a steady rise in business investment. Far from it, the cash hoards that Canada's corporate sector now holds have only earned them the ire of Bank of Canada governor Mark Carney, who has described the piles of cash as "dead money," money that, in theory, should be invested in new plants, equipment, research, product development, all the things that businesses claim are their strong suit, but as far as Carney can determine, are nowhere to be found in this current economic cycle.
Flaherty's latest budget is all about holding the line on corporate tax measures. In fact, his move to increase accelerated depreciation allowances will only serve to further entrench a fiscal strategy that has failed to spark the promised growth that was the rationale for these tax measures in the first place.
Flaherty's budget also claims to support training; however, the Canada Jobs Grant is not new program money, simply a diversion of existing funds. The new program has serious flaws. Flaherty pledges $5,000 per person for job training, but only if it is matched by provinces and employers. These are the same provinces that are being shortchanged by Harper's federal transfer strategy that cuts billions from what individual provinces receive from the federal government. In B.C.'s case, the reduction in federal transfers will amount to almost $2 billion over the next five years. The likelihood that provinces will be able to access – through matching – the federal training money is, at best, a reach.
What that leaves, of course, is more room for the Harper government to use and abuse the Foreign Temporary Worker program to address any labour shortages.
Mr. Flaherty's budget is a reminder of how fiscal conservatism is hurting Canada. The opportunity to set a different course has been missed, a fact that will ultimately hurt millions of workers and their communities across Canada. •
