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Canada Economy 2014
Written by Diana Thebaud Nicholson // December 16, 2014 // Canada, Economy // 1 Comment
The arrogance of officialdom should be tempered and controlled, and assistance to foreign hands should be curtailed, lest Rome fall.
– Cicero, 55 BC
Oil price drop means lost billions for Canada, CIBC says
Recent dive in oil prices ‘an unprecedented development for the Canadian economy,’ bank says
(CBC) There’s a broad consensus that the declining price of oil is bad economic news for Canada, since the country has made major moves in the last decade or so to increase oil output and become a major global player in energy.
Last week, the Bank of Canada estimated that on the whole, suddenly cheaper oil will knock about a third of a percentage point off of Canada’s GDP next year. But the CIBC report points out that gauging the impact of that decline is far more complex than simply measuring the impact on GDP.
“The energy sector directly accounts for nearly 10 per cent of Canada’s GDP, but in the oily corners of the country — Alberta, Saskatchewan, and Newfoundland and Labrador — that sector’s weighting is closer to 25 to 30 per cent,” the bank says. A world where the price of oil is under $60 and dropping is an unquestioned negative for those places. But contrast those provinces with the rest of the country and cheap oil is not nearly as dire. Outside of those three, no other province relies on energy for more than four per cent of its GDP.
Jean Charest & Chris Ragan: ‘Ecofiscal’ policies adjust market forces for the sake of the environment
(Montreal Gazette Opinion) On Nov. 4, a group of 12 prominent economists from across Canada — supported by leaders from business and across the Canadian political spectrum — launched Canada’s Ecofiscal Commission, a new effort to examine the role pollution pricing (including and beyond carbon) can play in Canada’s future prosperity.
These unfamiliar voices in the “environment space” signal growing recognition of a fundamental fact: Our environment and our economies are inextricably linked. In Quebec, where we adopted this premise many years ago, the question remains: Can we continue to lead by adopting policies that give us an environmental and economic advantage? We believe the answer is yes. …
While reducing greenhouse-gas emissions is one of the critical challenges ecofiscal policies can help address, it is far from the only one. Internationally, such market-based policies are effectively addressing water quality, air pollution, traffic congestion and landfill waste.
Income splitting not a wise investment for Canadians
Income splitting is not a wise investment for Canadians. It will eat through virtually the entire federal surplus without providing any benefit to most Canadians, without creating a single job, and without helping one young person get some opportunity to get ahead.
Granted, the policy Prime Minister Stephen Harper announced last week will benefit some Canadians. However, it is not a policy designed to help all or even most Canadians. In fact, despite changes the Conservatives made to this scheme, it will still benefit the wealthiest Canadians most of all. Nearly half the benefits would flow to those making over $100,000 a year.
In short, Mr. Harper appears to believe the Canadians who need the least should be given the most. That’s not fair.
Not only does Mr. Harper’s plan not benefit most middle class Canadians, it relies on them to fund it. Think about a single mother earning one income who has to work hard to ensure her child goes to school, that the fridge is always stocked, and there is gas in the tank. She’s also worried about putting money away for the future. Meanwhile, thanks to the Conservative government raising tariffs on thousands of household goods, anything from a new bike to a new TV will soon be even more expensive.
This is the person Mr. Harper thinks should pay for those who make double or triple her income to get a $2,000 tax break.
Straight-talking Poloz sounds a wake-up call
Bank of Canada Governor Stephen Poloz has just sat Canadians down and given us a national the-dog-has-died talk. The country lost some things in the Great Recession that ain’t never coming back.
Mr. Poloz gently but bluntly laid out the facts in his opening remarks prepared for the quarterly Monetary Policy Report press conference on Wednesday. (The press conference was actually cancelled due to the shootings that took place on Parliament Hill, literally a stone’s throw from where the event was to take place, but the central bank released the prepared statement anyway.) He said the bank has been sifting through the fine details of Canada’s non-energy exports, all 2,000-plus product categories of them, to better understand why these exports have failed to bounce back in line with growth in foreign demand. What it uncovered was ugly for a large number of industries.
David Dodge: Austerity Not A Wise Policy Choice Right Now
(HuffPost) Former Bank of Canada governor David Dodge is taking issue with the notion that balancing government budgets as quickly as possible is the key to a strong economy, or that it is a wise policy at the moment.
In a new paper for the Bennett Jones legal firm, where he is now a senior adviser, Dodge analyses the two-speed Canadian economy and has some advice for governments to improve competitiveness and growth.
Without naming any specific governments or politicians, Dodge makes clear that he believes now is not the time to slash and burn to get to a balanced budget.
Instead, the emphasis should be on taking advantage of low interest rates to invest in infrastructure to help improve Canada’s lagging productivity, which he says is holding back the economy.
The aim should not be to get deficits to zero as quickly as possible, but to reduce deficits to below nominal growth in the economy so that deficits become an ever-decreasing share of gross domestic product, he says. (see also:
Jonathan Sas: Who wins with income-splitting? Rich Albertans.
(iPolitics) If Stephen Harper’s goal was to design a tax policy to make income inequality in this country even worse, he can pat himself on the back. That’s exactly what the Conservatives’ family income-splitting tax scheme will do.
Research from various organizations across the political spectrum has demonstrated already that this tax policy, projected to cost the federal treasury $3 billion in 2015, would be an expensive and inequitable tax giveaway.
Pushed by social conservative groups like the Institute of Marriage and the Family Canada and REAL Women of Canada, income-splitting would benefit very few Canadian households — while lining the pockets of wealthy, traditional families with one breadwinner and a stay-at-home spouse looking after the kids.
Today, the Broadbent Institute released a new study further detailing just how unfair this policy would be in practice.
The study found that nine out of 10 Canadian households would receive no benefit at all from income-splitting — and less than one per cent of all households would be eligible for benefits in excess of $5,000.
Michel Kelly-Gagnon: Canada, Let’s Tear Down These Trade Walls
(HuffPost) … we Canadians put a lot of effort in crafting trade deals with countries around the world — which is a very good thing. But we fail to do the same within our borders. We are a trading nation. But on our own land, we created a multitude of balkanized markets that give unnecessary headaches to our entrepreneurs.
At least this could change. James Moore, the federal Industry Minister said the Conservative government is planning to significantly overhaul the existing Agreement on Internal Trade, signed by all provinces 20 years ago. This agreement left in place a number of cumbersome barriers that are estimated to cost the country $50-billion a year.
… economic relationships between provinces are vastly underestimated. Take Quebec and Ontario for example. Canada’s two most populous provinces represent a market of 18-million people. Their joint GDP make them the fourth-largest economic area in North America, behind California, Texas and New York State.
And guess who’s their largest trading partner? Each other.
Canadian finance needs to get more responsible – Brett House and Salomé Mirigay
(Globe & Mail /subscriber only )Responsible investing offers Canada an opportunity to do things differently. It’s both an approach to allocating capital and an asset class in its own right. Responsible investing runs the gamut from efforts to avoid underwriting activities that damage society – tobacco, weapons, pollution – to the active search for investments that produce positive social and environmental effects – reducing poverty, crime, and empowering women – that produce a financial return.
… Returns on responsible investments vary as much as in any other market segment. But what’s clear is that fears of a zero-sum tradeoff between financial returns and doing good are misplaced: the Jantzi Social Index of 60 Canadian equities has equalled the performance of the S&P/TSX 60 for over a decade.
Additionally, responsible investments are broadly uncorrelated with other assets. In a post-crisis world where nearly every market moves in lockstep with the actions of central bankers, responsible investment offers a natural hedge.
Responsible capital tends to be patient capital: dominated by pension funds and endowments, it’s invested for long-term returns, not speculative gains. It’s the capital Canada wants. An enhanced focus on responsible investing could complement the macroprudential measures being implemented in many countries, including Canada, to trim the distortions created by exceptional short-term monetary stimulus.
Brett House: Building a Responsible Financial Sector
Instead of rewarding Canada for a good crisis, foreign capital is making us more vulnerable to future financial turmoil.
(Open Canada) As pretty much everyone has heard, Canada’s performance through the 2008 global financial crisis has burnished our reputation for financial probity. The World Economic Forum has named Canada’s banks the world’s soundest for six consecutive years. In relative terms, we have had a very good crisis.
Our “good” crisis has not done much, however, to boost Canada’s standing in financial markets. … Instead, our stability has made us into a haven for emerging-market plutocrats looking to stash their cash in Canadian real estate. Sotheby’s found that foreigners accounted for about 40 percent of Vancouver’s luxury-home purchases last year. Similarly, the Conference Board noted that Vancouver’s real estate market is tightly tied to Chinese economic fluctuations. When all of this gets detailed in The New Yorker, as it was last week, we’re vying with Manhattan for honours in the wrong game.
These foreign inflows are combining with domestic capital, pushed by generationally-low interest rates, to create one heck of an asset bubble in urban Canadian real estate. Rather than making Bay Street look like the new Wall Street, foreign capital is making Liberty Village look like pre-crash Phoenix or Las Vegas.
Time to retire claims that Canada’s middle class is ‘struggling’
The American middle class, long the most affluent in the world, has lost that distinction,” the New York Times reported Tuesday, citing groundbreaking new research tracking incomes in the developed economies. And who do you suppose might have stolen its crown?
The Times story never quite comes out and says it, but leaves readers in little doubt: “After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States.” A writer for The Atlantic magazine’s website was less hesitant. “Canada is officially home to the richest middle class on the planet,” he announced.
Not quite. The study on which the story is based is sound enough. Drawing on data compiled by the Luxembourg Income Study, an international research project, it is the first to compare living standards across different countries at various points on the income scale and at different points in time. Notably, it compares incomes for individuals at the median — halfway between the richest and the poorest — offering a truer indication of how the middle class has been faring in each country than average-based measures like per capita GDP, which can be pulled out of whack by very high incomes at the top. Canada’s middle class richest in world: report ; Canada leading ranks of shrinking middle class
William Watson Column: Fuddle-duddle the middle-muddle
What obscenity was to the judge middle class is to Justin Trudeau: He knows it when he sees it. He just can’t give a satisfactory definition of it. First it was people who live off their labour income, not their wealth — which these days actually excludes only the very topmost, thinnest sliver of the income distribution. Then it was people who live from paycheque to paycheque — which in fact is almost a definition of what it means to be NOT middle class. This terminological inexactitude wouldn’t be such a problem if Trudeau hadn’t self-righteously dedicated himself and his party to helping the very middle class he seems unable to locate on the socio-economic scale.
Andrew Coyne: Flaherty’s mixed record reflects Tories’ wandering ways
It is hard to assess Jim Flaherty’s record as finance minister apart from that of the prime minister he served. Nothing gets done, in this government more than any other, without the prime minister’s approval.
What can be said is that during Flaherty’s term at finance the distinction became even harder to draw: In a government that politicizes everything, finance has led the way. Under Flaherty, not only did budgets cease to be budgets — now they are Economic Action Plans — but they ceased to mean much of anything.
The budget and the estimates are not only expressed on different accounting systems, but parliamentarians are provided with no means of reconciling the two. Actual departmental spending, as recorded in the public accounts, routinely bears no resemblance to either.
More and more spending is now disguised as tax credits, materially understating both expenditures and revenues. Even the official spending figures have proved harder and harder to trust. Requests for details on spending cuts from the Parliamentary Budget Officer, which departments are statutorily obliged to provide, have been rebuffed. Sometimes, as in the case of the F-35 program, they’ve simply been false.
If I dwell on this part of the Flaherty record, it is because it explains so much of the rest. There is no principle running through it other than expediency, no broad legacy other than what was politically advantageous at the time. Which, after all, is the real Jim Flaherty: the one who merrily ran up spending by 40% in his first four budgets, or the one who flatlined it in the four that followed?
Should we remember the Flaherty who, against every axiom of economics, cut the GST rather than cutting income taxes, then larded up the tax code with all manner of special tax breaks for favoured political interests? Or should we remember him as the tax cutter who made deep reductions in corporate tax rates, the policy innovator who brought in the Tax-Free Savings Account and the Working Income Tax Benefit, the free trader who eliminated all tariffs on intermediate goods?
Of course he was both, but the confusion underscores how far afield the Tories have wandered in the last eight years. Even after the recent cuts, Flaherty leaves with spending higher than it was at the start of his tenure — after inflation, after population growth. It wasn’t the GST cuts that drove us into deficit: had Flaherty only left spending where he found it, revenues would have exceeded spending in every year but 2009-10, when with the help of the recession it might have hit $10-billion — versus the $56-billion actual figure.
That year’s extraordinary splurge — a $37-billion increase in spending in one year, ultimately adding $160-billion to the debt. … That ill-judged document, with its gratuitous swipe at party subsidies, set the pattern for what was to come: budgets became the pretexts for massive omnibus bills, hundreds of pages long, touching on every subject under the sun.
I don’t want to suggest Flaherty was a failure. Though he created the deficit, he should also be credited with bringing it back under control. He showed a cool head during the global financial crisis, intervening just enough to reassure the markets without doing so much as to suggest we had a problem ourselves.
Not only is the government’s fiscal position strong, with a debt-toGDP ratio that is the envy of the developed world, but so is the economy: by all of the usual indicators — unemployment, inflation, real incomes — it has rarely been in as good shape. If you are the kind who blames Finance ministers for recessions, you are obliged also to credit them for recoveries.
In fact, like most finance ministers he had little to do with either. …
By the end, the minister seemed increasingly out of touch, if not out of control: the hectoring of the banks to stop cutting mortgage rates, the talking down of the dollar, until the last budget, and Flaherty’s fateful extracurricular musings on the wisdom of income-splitting. The suggestion that a major election promise was about to be broken, on a par with his earlier move to tax income trusts, may well have been his undoing. In a government that prizes message discipline above all, some things are truly unforgivable.
Michael Den Tandt: Harper goes all-in on the economy
In promoting Joe Oliver and Greg Rickford simultaneously to this government’s two most important portfolios, Finance and Natural Resources respectively, Prime Minister Stephen Harper has made a no-nonsense, unsurprising move that cements the Conservatives’ overwhelming strategic focus on resource extraction. It remains to be seen whether Oliver can display anything approaching outgoing finance minister Jim Flaherty’s common touch, especially in the critically important Greater Toronto hinterland and more broadly across Ontario.
… The big unknown is how much Oliver, at Finance, shifts this government rightward, and what effect that will have on its electoral prospects, particularly in middle-of-the-road Ontario. Flaherty has long been among the Conservatives’ most moderate voices and Oliver, though much less outgoing than his predecessor, has gained a reputation as an ideologue, mainly because of his famous 2012 open letter, in which he castigated “environmental and other radical groups” for blocking resource development. What is not in question is his professional suitability for the job; as a former executive director of the Ontario Securities Commission, former CEO of the Investment Dealers Association of Canada, a McGill-trained lawyer and Harvard MBA, he is on paper better qualified than any recent finance minister has been, including Flaherty.
UPDATE: Finance Minister Jim Flaherty resigns from cabinet
One of Mr. Flaherty’s most controversial decisions came early on in his tenure as Finance Minister, when he broke a campaign promise and announced a new tax on income trusts. Mr. Flaherty – who later apologized for the hurt caused by the decision but stood by it as the right thing to do – recently said he still runs into citizens at airports who are angry with his decision.
Both during and after the economic crisis of late 2008 and early 2009, Mr. Flaherty played a leadership role in the G20 on financial matters. Along with India, Canada has co-chaired a committee that helps set the G20 agenda on economic policy.
Since the release of the 2014 budget, Mr. Flaherty has been particularly candid in his comments about public policy. He recently questioned the merits of a central Conservative Party campaign pledge, which is to allow income splitting for families with dependent children under the age of 18.
John McKay: The Tories’ real economic record
(National Post) The last 10 years of the Liberal Chretien-Martin government delivered 10 surplus budgets in a row. The Conservative Harper-Flaherty combination has delivered eight deficits in a row. The Liberal government paid down debt. The Conservatives have raised it. Minister Bernier is a member of that government.
The Harper government has been one of the most profligate spenders in Canadian history, ramping up spending by 30% since 2006, adding upwards of $160-billion to the national debt, and beggaring Canadians by an additional $5,000 each.
And all of these wounds are self-inflicted. The Harper government destabilized the fiscal framework that the previous Liberal government needed a decade to build by destroying the federal government’s revenue base with HST cuts and other ill-advised tax cuts.
Tax cuts are fine if a government has the fiscal discipline to impose spending constraint. The Harper government, clearly, does not, as the 30% jump in spending since 2006 attests. Adding $160-billion to the national debt is not disciplined. Enacting tax cuts contrary to the advice of the most senior economic advisors in the country is not disciplined. Tax cuts that produce little or no economic stimulus are not disciplined.
Big city mayors talk Canada Post, infrastructure and housing funding
Vancouver mayor Gregor Robertson, as chair of the big city mayors’ caucus, spoke to reporters in Ottawa. He was accompanied by Ottawa mayor Jim Watson and Claude Dauphin, president of the FCM.
Montreal mayor Denis Coderre and Quebec mayor Régis Labeaume also addressed the media immediately afterwards.
Calgary Mayor Naheed Nenshi told CBC News the mayors are expected to spend a “fair bit of time” discussing the growing housing crisis with the federal minister [of state for social development].
The federal government’s key infrastructure plan will also be a main topic of discussion as numerous questions remain on how the federal funds will be used to meet local needs.
Middle-class dreams a ‘myth’ in troubled economy: internal government report
(Globe & Mail) Canada’s middle-class is mortgaging its future to stay afloat, making the Canadian dream “a myth more than a reality.”
That’s the blunt assessment of an internal Conservative government report, an unvarnished account of the plight of middle-income families that’s in contrast to the rosier economic picture in this month’s budget.
The document was prepared last October by experts in Employment and Social Development Canada, the department that runs the employment insurance fund and other income-support programs. The Canadian Press obtained the report under the Access to Information Act.
Cities running out of cash for snow removal as icy Canadian winter hits hard
Toronto depleted its entire winter maintenance reserve fund dealing with the massive ice storm that plunged large parts of the city into darkness just days before Christmas.
At Issue: Jim Flaherty and Income Splitting
What was that all about with Jim Flaherty, income splitting and campaign promises?
Rift over income splitting emerges
Andrew Coyne: If Flaherty refuses to implement, he should step aside
We have a clear split between the prime minister and his lieutenant
Mr. Flaherty is not, as he protests, “just one voice.” He is the minister of finance, the second most powerful person in the government. He is the only Minister of Finance this government has ever had, at nearly eight years in office one of the longest-serving ever. So when he repudiates one of the party’s most important policies, it’s — well, what is the precedent for this?
Is income splitting still party policy? On the evidence of Wednesday’s extraordinary Question Period, there is room for doubt. Asked to clear up the confusion, neither the Prime Minister nor, in one of only two questions he was permitted to take, Mr. Flaherty would give a straight answer. But the apparent humiliation of the finance minister, forced to watch as other ministers answered questions on the budget he had just delivered, surely signals the prime minister’s displeasure.
Brett House comments on the budget – CBC Montreal (at the 8-minute mark)
Shame the feds took a pass on doing anything meaningful on what should be the cornerstone of a year of policy work.
Andrew Coyne– Federal budget: Forget principles, for the Conservatives it’s all politics, all the time
It’s not a bad budget, overall, neither reckless in the whole nor overly harmful (with one or two exceptions) in the particular: But whether it does the right thing or the wrong thing it is always and everywhere because it serves the government’s political interests. As it always has been.
13 must-know budget items, including new justice programs
(Globe & Mail) Ottawa is delaying $3-billion in defence spending; saving more than $1-billion annually by clawing back its share of health benefits for public-sector retirees; accruing $14-billion in EI surpluses between 2013 and 2017; and hiking tobacco taxes to bring in more than $600-million a year. Several spending projects are also stretched over several years.
Included in the budget is notice that Ottawa is pushing ahead with the Canada Jobs Grant program, regardless of a host of provincial complaints. The program, a centrepiece of last year’s budget, will see roughly $300-million of $500-million in current federal job-training transfers redirected by the time it’s fully implemented. According to the budget, Ottawa will now take on the provincial share of the program and launch it April 1 in provinces where a deal isn’t reached soon. No province has yet signed on.
The budget rolls out cash for infrastructure projects, some new and some already announced. Montreal is getting roughly $500-million for both bridge refurbishment and the construction of a new bridge across the St. Lawrence, which had already been announced and is due to open in 2018. The budget also allocates $470-million in new money towards the bridge project between Windsor, Ont., and Detroit, Michigan, a $631-million effort already announced.
Atomic Energy of Canada Ltd.’s Chalk River reactor will receive $117-million over two years – nearly all of it on the books next year – to ensure ongoing production of medical isotopes while government prepares to hand off operation of the facility to a contractor.
Flaherty’s lean budget aims to fix Tory weak points
The public’s concern about jobs was met with internships for unemployed and loans for apprentices in trades, and money for the lagging Canadian auto sector; there was money for an overlooked Montreal bridge, and even a measure to cut back the pensions of suspended senators. But it was budgeting on a budget, and designed to look that way.
Mr. Flaherty’s spare budget speech, less than 2,400 words, was an ode to conservatism, both small-c and big. He filled it with words like “careful,” “sound,” and “common-sense,” and literally promised to “stay the course.” Look back at how we came out of recession with a job market that was better than most, and carefully pared spending to get out of deficit, he suggested. In his press conference, he made a virtue of its modesty: “Boring is good,” he said.
The measures he highlighted were mostly small-money job-training initiatives aimed at providing a little boost into the job market, modest funds for research and specific infrastructure, and consumer-choice initiatives.
None of it could be allowed to affect the central message that the government is carefully skimping its way out of deficit.
CCPA’s ‘Alternative Budget’ for Canada – it’s all about choices we make
(RCI) An Ottawa think tank has come out with an alternative federal budget it says would not only deal with Canadians’ largest social, economic and environmental concerns, but also take 855,000 of them out of poverty. The Canadian Centre for Policy Alternatives (CCPA) proposals are contained in a 168-page document titled “Alternative Federal Budget 2014: Striking a Better Balance”, the Centre’s 19th alternative budget, and was release February 5.
The proposals include restructuring existing federal agricultural programs, expanding affordable day care, establishing neighbourhood revitalization programs, cancelling the universal child tax benefit, and improving the Canada Pension Plan.
Canada Budget 2014: Harper Must Drop Austerity Obsession,Grits Say
(HuffPost) Deputy Liberal leader Ralph Goodale is urging the federal Conservatives to abandon what he calls their obsession with austerity in Tuesday’s budget.
The former finance minister says it’s the wrong policy when households are carrying record levels of debt, the country is running a chronic trade deficit and businesses aren’t boosting their investments.
Goodale says the government should allot more money for infrastructure and access to post-secondary education, while eliminating tariffs on consumer goods and reducing the burden of higher employment insurance payroll taxes.
He says the Tories should also stop spending millions of taxpayer dollars on advertising unless there’s some accountability on how that money is spent.
Goodale says he doesn’t know whether the Tories should delay their self-imposed deadline of 2015 to balance the books because he doesn’t have access to all the financial information they do.
But he says he’s skeptical of the Conservative math because they’re planning to balance the books, in part, by simply not spending the money they’ve promised in the budget.
Op-Ed: Harper’s economic index: an 8-year report card
Eight years after the January, 2006 election that brought the Conservatives to power under Prime Minister Stephen Harper, Alex Roberts looks at the state of the Canadian economy. Not to be confused with the Harper’s Magazine’s monthly index of “ironic statistics arranged for thoughtful effect.”
Estimated amount spent on taxpayer-funded advertisements since 2009 touting the “Economic Action Plan” and the government’s economic record : $113,000,000
National unemployment rate in January, 2006: 6.6
National unemployment rate in December, 2013: 7.2
Increase in the number of unemployed in Canada since January 2006: 236,200
Youth unemployment rate, January 2006: 12.2
Youth unemployment rate, December 2013: 14.0
Rank of Canada’s unemployment rate in 2013 compared to other G7 countries: 3rd
Rank of Canada among the 34 OECD nations in employment creation 2007-2012: 20th … and the list of dismal facts continues
William Watson: Higher interest rates needn’t kill economy
If rates do go up, and at the same time anxiety comes down, we might have the best of both worlds: more capital, infrastructure and income but without necessarily killing off all the world’s rentiers.
Canadian bank bosses plot new course as ‘leveraged up’ consumers borrow less and save more
Canada’s biggest banks say consumers are reaching the limit on how much they can afford to borrow, and that’s likely to slow loan growth this year.
Ottawa urged to ease fiscal restraint after dismal job report
(Globe & Mail) Federal Conservatives are facing pressure to act in response to dismal employment numbers that challenge the government’s self-promotion as successful job creators.
Finance Minister Jim Flaherty has indicated the 2014 budget will not include major new spending, but opposition NDP and Liberal MPs say the minister needs to ease up on fiscal restraint, even if it means the deficit won’t be eliminated in time for the 2015 federal election campaign.
As job crisis deepens, a do-nothing budget looms large
The 2014 federal budget promises to be more about politics than about fixing the growing economic problems we face.
Rick Smith, Executive Director of the Broadbent Institute
(Toronto Star) The job numbers for the end of 2013 could not have been much worse than this. But don’t expect the Harper Conservatives to do anything about it in a February federal Budget which will be all about 2015 pre-election politics.
… In short, no progress was made in 2013.
The prospects for 2014 are not rosy. Most forecasters expect little improvement on the jobs front as the housing boom slows and households, now with record-high levels of debt, slow down their spending. The hard-hit manufacturing sector continues to shed jobs as new plant closure announcements multiply.
There is a lot that the federal government could do to help sustain and create jobs, especially for hard-hit young people and recent immigrants.
We could take advantage of still very low interest rates to finance major new investments in public and environmental infrastructure, including public transit, which would both create jobs and reduce carbon emissions.
We could invest in innovation, skills, and research and development to transition from our overreliance on resources to a more sophisticated Canadian economy.
We could lighten up on cuts to public services which kill jobs even as they harm Canadian families.
But the federal budget will do close to nothing along these lines since the Harper Conservatives have only one goal: to set the stage for pre-election tax cuts in the 2015 budget.
They can’t cut taxes till they have balanced the budget. So this year, the order of the day will be no new programs, and even more cuts to jobs and services. Watch for new austerity measures on top of already announced cuts which will see federal direct program spending (program spending minus transfers to persons and minus transfers to provinces) fall by $5.3 billion from 2013-14 to 2014-15.
These deep cuts are being imposed in spite of the fact that the federal debt is already falling as a share of the economy. Even bank economists say that there is no particular hurry to eliminate our remaining modest deficit.
The race to balance the federal budget is motivated not by economics but by the political determination of the Conservatives to deliver a big personal tax cut just before the 2015 election in the form of income-splitting for families with children.
Jim Flaherty’s Olympic budget
“Basically, they’re keeping their powder dry for 2015.” —Doug Porter, chief economist at BMO Capital Markets
(Maclean’s) Jim Flaherty has tried to bury budgets before, and it always works until it doesn’t. When the government won its majority mandate in 2011, the finance minister launched a new tradition: on budget day, reveal to the world a document that includes all kinds of shiny goodies and happy language, and a future that is always brighter, and a few annexes of financial tables. Then, under cover of legislative darkness, sneak an omnibus bill into Parliament. The budget bill is never only about a budget. Among hundreds of pages of proposed legislative change are some budgetary measures, to be sure, but also plenty of other things. People always notice, eventually. About a year ago, a sustained protest, partly aimed at the government’s penchant for the omnibus, caught everyone’s attention.
This morning, The Globe and Mail‘s Bill Curry launched a season of budget speculation by predicting the finance minister’s new approach to fiscal planning: bury it from day one. The theory goes that Flaherty will table his 2014 budget in the House of Commons during the week of Feb. 10. The Sochi Olympics open on Feb. 7. With the nation consumed by dreams of Olympic glory and, if they’re lucky, a renewed claim to global hockey supremacy, the government can safely table what’s apparently going to be a rather boring document.
One Comment on "Canada Economy 2014"
Re: Who wins with income-splitting? Rich Albertans
… the question to answer is whether the appropriate unit on which to levy income taxes is the individual (Canada), or the nuclear family (US). The former, within progressive tax rates, penalizes disparities in the earnings of family members, the latter does not. Moving from individual to family taxation decreases the tax penalty on within-family disparities.The way to make these simple value-neutral verities into something to rouse the masses is to write about “Harper’s goal…to make income inequality….even worse…”