The ONW Salon: What Should Be In The Upcoming Federal Budget?
Finance Minister Morneau has announced he will bring down the Liberal government's second budget on March 22nd. What should be in it, especially with an eye to benefitting Ontario? We asked our political analysts, Richard Mahoney, John Capobianco and Tom Parkin.
The budget is quickly approaching.
Too many Canadian moms (especially) and dads are walking away from jobs because the cost of childcare is far too high and there is not enough of it. It’s a massive waste of skills and unacceptably keeps women workers in a second-place economic tier. Several economic analyses have concluded that affordable childcare is effective at reducing the number of moms and dads who drop out of the paid economy. Research shows the Quebec plan spurred enough extra economic participation that the additional income tax revenues more than paid for the program.
The cost of medicines is far too high and too many Canadians aren’t getting the prescriptions their doctors recommend. We can do something. A recent study published in the Canadian Medical Association Journal says it would cost $1.2 billion a year to run a national pharmacare program. And that the program would save consumers over $4 billion a year.
Canadians need to use our historically low interest rates to maximize our investment in infrastructure. There’s no shortage of needs. Prime Minister Justin Trudeau repeatedly assured Canadians there would be a $10 billion deficit a year to pay for massive infrastructure construction. That later grew to $30 billion. But last budget the Liberals only earmarked $2.7 billion in infrastructure spending for 2016/17. That budget projected just $3.9 billion for 2017/18.
And now it seems the infrastructure program is more about providing solid gold returns to investors than building infrastructure. Public interest rates are near an all-time low. But the Trudeau Liberals will set up a private infrastructure bank that pays private investors three or four times the public financing rate. More money being skimmed off by institutional investors means less capital investment in infrastructure.
We need a research, development and innovation strategy that isn’t corporate welfare. Jobs in technology and advanced manufacturing are fueled by ideas. Our major innovation program – the Scientific Research and Experimental Development Tax Credit Program – costs more than $5 billion. It’s spawned a cottage industry of grant application writers, but it’s an unfocused program that isn’t hitting the mark. The budget should establish a panel to focus and repurpose our research and innovation public investment.
Federal budgets are always a big deal and the timing of budgets is important, whether at the beginning of a government's term, in the middle or at election time. PM Trudeau and Finance Minister Bill Morneau are about to deliver their second budget. Yes, this one is important. as was their first when they delivered it shortly after being elected. The big difference in timing is that the government’s popularity tends to fall as the years in power tends to rise.
Therefore, when the PM delivered the government's first budget and increased the deficit more than they had promised during the election to $30 billion from $10 billion, he largely got a pass on that since the Liberals were still very much in honeymoon territory with the electorate and many were just happy to have a change in government. Not so this time or from here on in. Our economy and jobs remain key to any government's success and Canadians will be taking note.
That said, for us here in Ontario and with the Ontario Liberals in serious trouble, it will be interesting to see if their federal cousins throw them any bones, by way of money, so that when the time comes for the Ontario budget, the province will have its books balanced.
Tom's analysis above covers many of the key areas where this budget will need to focus. However, I don't think it will be in the order Tom has laid out. I would expect this coming budget will be big on infrastructure and that will be an area key to Ontario and other provinces. The other significant area will be healthcare and drug costs and it will be interesting to see if the feds do anything with this file.
As both my friends' posts indicate, there are many priorities out there, and when we talk budgets, our resources are limited. So the challenge is to fund the huge scope of federal government activity - much of which goes out in “transfers”, aka payments to individual Canadians and to provincial and also municipal governments - and to mark with new spending the new initiatives you think are most important.
The changes made in Bill Morneau’s first budget gave tax relief to middle income Canadians and made a dramatic impact in poverty reduction with the Canada Child Benefit. These were of huge benefit to Ontario citizens.
So what does Ontario need now? Continued funding of those initiatives, of course. And all the other things the federal government does. But the Ontario government has done a number of things that stand out and should get specific attention.
First of all: infrastructure spending. Premier Wynne has embarked upon the most significant investment in public infrastructure in our lifetime. She is making up for years of underfunding in public transit. The transit projects already funded and beginning construction could use more federal help. And new projects already under consideration by Ontario, such as the next phase of light rail in Ottawa and the Pearson Hub initiative in the GTA are all worthy projects, which create jobs now and improve people's quality of life in the long term. So an increased commitment to investment and partnership there would help greatly.
Secondly, the Ontario economy, like all western economies and like many neighbouring U.S. states, has suffered a loss of manufacturing jobs. A focus on innovation in the federal budget now set for March 22 will help Ontario attract the high value-added jobs of the future in advanced manufacturing and services that can be the engine of growth for Ontario's future, just like the Auto Pact of the Sixties was.
In fact, one great project needing some help is autonomous vehicles, with Ontario companies trying to lead the way in that sector. Let's see if we can't attract those jobs and capital here.
I suggested a few pillars for the budget - innovation, infrastructure and affordability. I think there is one more.
We live in a time of incredible income and wealth inequality. It's not healthy for our economy, it's not healthy for our democracy. Our neighbour to the south is a warning sign: we need to take action to maintain social cohesion.
The federal minimum wage should be increased. Fifteen dollars an hour is a common target that can probably be achieved in the federal sector over two years. Just do it.
Canadian Revenue Services needs to address tax havens. When working Canadians are paying their income taxes and people living on capital gains, dividends and interest are avoiding them, it's unacceptable. Our tax transparency needs to be greater. Our enforcement needs to be stronger.
Grotesque incomes need to be addressed. Massive CEO incomes are an indicator of an economic system that is extractive, not competitive. Tax rules need to change to ensure stock option income is used by the small innovators and not as a means for people earning $1 million a year to pay less tax.
The bargaining power of working people needs to be restored to ensure a fair share of benefit from the economy. The federal government should not only promote collective bargaining but help create new, broader-based and more stable industry agreements in the federal sector - structures that are fair to employees and employers and deliver stability.
We can spur the economy as much as we want, we can create efficient social programs. But if the benefits of growth aren't being shared, none of it is economically or socially sustainable.
All lofty and needed projects indeed. But the reality is that the federal government is going to need to prioritize these spends and if what we are hearing about the upcoming March 22nd budget is true - which is a leaner spending budget with fewer "new" spends - then many provinces will be disappointed, including and especially Ontario.
Reports also say that the budget may very well be focused on providing more details on infrastructure spending. Now that the date is confirmed, there will be no shortage of speculation and well-timed leaks as we get to the 22nd. But what will be key for this government will be the overall narrative of whether it will continue to spend and increase the deficit as many economic observers have predicted, or whether it will start to keep costs under control despite their many promises. Challenge indeed.
Reading Tom’s posts makes me weep and be thankful that the NDP didn't win the last election. You would drive any incentives and competition away if what you want to do ever happens.
I think this budget needs to reassure Canadians that this government is laser focused on jobs and creating more opportunities not only in Ontario but across Canada. That means more innovation, protection of U.S./Canada border issues and ensuring any future NAFTA negotiations don't go south - pun intended,
Increasing the deficit further will only make it difficult for this government to balance its budget prior to the next election, which it will want to do because it would be at its peril if it thinks Canadians will continue to give it a pass for out of control spending,
Let me try to return our topic to Ontario and its needs. I mentioned innovation and training to attract investment and create jobs in Ontario. More investment in infrastructure will be key to the province’s ambitious plans. Tom mentioned childcare. I agree with him. When Jack Layton and Stephen Harper combined to bring down the Paul Martin government in 2006, they effectively killed the national childcare and early childhood education program. The number of spaces available had been doubled in Ontario. The Ontario government of the day did the right thing - it continued to fund those new child care spaces even though the Harper government, backed by the NDP effectively, walked away from the Martin plan.
With ever increasing demand for new spaces, I know Ontario would benefit from funding. But there are many demands on public resources. If you look at the needs of the province, and the Trudeau government’s clear priorities, infrastructure and investment in public transit and innovation and training appear to be the places where the need is greatest, and the potential for alignment between the two governments priorities line up best. Here is to hoping that is right!
Richard Mahoney is a lawyer with deep experience in politics and governance. He is a former senior advisor to the Rt. Hon Paul Martin, a former Campaign Chair and President of the Ontario Liberal Party. John Capobianco is a Senior Partner and National Public Affairs Lead at FleishmanHillard. He has been a Conservative strategist with over 30 years of political activism at all three levels, including as a former federal Conservative candidate. Tom Parkin is a veteran NDP strategist and a frequent commentator on national issues.