Sunday, March 18, 2007

The Conservative Election-Ready Budget

The time is not for slash and burn right now. The new Common Sense is to lavish goodies on the middle class or at least pretend to. Some social programmes are to be axed and the divide between rich and poor is growing. But the budget does offer the illusion at least of relief for the hard pressed middle class. It may very well be enough to get a majority for the Conservatives. Goodye Wheat Board, hello more military spending and buy shares in the jail-industrial complex. Keep George Bush smiling!

Election-ready budget


Prime Minister Stephen Harper says he's not planning an election, but Finance Minister Jim Flaherty's new budget coming Monday is expected to have enough goodies for voters, just in case. With winning a majority government foremost in Prime Minister Stephen Harper's mind, Finance Minister Jim Flaherty's budget Monday will have goodies for voters

Mar 17, 2007 04:30 AM
Les Whittington
Ottawa Bureau

OTTAWA–The ghost of Mike Harris will be nowhere to be seen when Finance Minister Jim Flaherty rises in the Commons to deliver his second budget on Monday.

With a federal election looming, Flaherty is shelving the tight-fisted, tax-slashing ways of the Harris government he was once part of in Ontario in favour of a grab bag of economic policies meant to appeal to the widest possible array of voters.

But once the fireworks are over on March 19, Canadians will have to dig through the scores of tax and spending proposals to see what the Conservatives are actually trying to accomplish.

The budget is being rolled out at a time when, although economic growth numbers remain buoyant, most families are caught up in a long-term trend that finds them struggling harder than ever just to keep their standard of living from eroding.

And at a time when, despite years of prosperity and federal budget surpluses, Canada is still enduring high levels of poverty, widespread homelessness, decaying cities and an affordability crisis in post-secondary education.

Flaherty is not likely to dwell on these concerns in his budget message. Instead, he will focus on how well Canada's economy is performing, how quickly the national debt is being paid down and what the Conservatives see as the way ahead for the country.

And there will be much to catch the eye of the average voter on Monday.

To begin with, new spending. Lots of it. With winning a majority at the polls now outweighing all other considerations for Prime Minister Stephen Harper's government, the Tories have swallowed their traditional objection to federal spending sprees and dipped into an unexpectedly huge budget surplus – perhaps in the $7 billion to $10 billion range – to dazzle Canadians with goodies.

There's fresh financial commitments for anti-global warming programs, farmers, public transit, medical wait-times, AIDS research, border safety, crime prevention, land conservation, alternative energy and victims' rights, among other things. In all, some $13 billion in spending commitments have been announced in just the past few months.

Added to that will be a huge outlay of extra cash from Ottawa to the provinces –probably about $3 billion – to quiet a long-standing dispute over revenue-sharing at the federal-provincial level. Much of the cash will be aimed at Quebec, but other provinces such as Ontario will wind up with more money for post-secondary education and similar priorities.

"In our upcoming budget, we will finally take action to restore fiscal imbalance in Canada, so the provinces and territories have the resources they need to meet their obligations to Canadians," Harper said in a Feb. 6 speech that previewed his government's plans.

Speaking of the provinces and territories, he said, "we'll respect their jurisdictions, focus on core federal responsibilities and ensure federal programs treat Canadians fairly regardless of where they live."

And, despite the billions in newly announced spending, there will still be room for tax cuts on Monday. All in all, it will be an attractive, politically attuned package.

But beyond the numbers and the high-minded rhetoric, what will it all amount to for Canadians?

At heart, Flaherty is a Harris-style Conservative who favours lower taxes, less government intrusion in the economy, and letting business get on with the job of creating wealth. But as federal finance minister, he has positioned himself as a more moderate champion of middle-class families.

His first budget contained an array of tax breaks – including a cut in the goods and services tax, and tax credits for textbooks, kids sports and public transit – that struck a chord with some Canadians.

He also introduced a $100-a-month baby bonus to replace the Liberals' $5-billion plan to work with the provinces on a national child-care system. Never mind that the baby bonus was taxable, thereby reducing its value, and that Flaherty surreptitiously raised personal income taxes to help pay for the other measures.

No one doubts that tax cuts get the public's attention. But Flaherty's critics question whether this kind of piecemeal approach is really what the country needs to ensure a vibrant economy and a strong social fabric over the long term.

"We think they're highly politically motivated, designed for some sort of electoral tactic as opposed for being designed for some kind of ultimate economic purposes," says Ellen Russell, senior economist at the Canadian Centre for Policy Alternatives (CCPA), a left-leaning think-tank.

"We also think they don't make a meaningful difference, even to the people who receive them."

This year, as part of Harper's pre-election theme – building a "stronger, safer and better Canada" – the budget has been designed as a something-for-everyone package.

It's expected to bring some savings in taxes for most Canadians – both through a modest across-the-board tax cut and the Conservatives' so-called "tax-back guarantee." The latter, a commitment to return to taxpayers in the form of tax reductions any savings on interest payments achieved by reducing the $480 billion national debt, is a catchy idea. But it will only provide $30 or $40 in tax savings per person this year.

Beyond that, Flaherty will introduce a refundable tax credit designed to keep Canadians at the lowest end of the income scale from being penalized by the tax rules when they move off social assistance to take a job.

And for the rich, Flaherty is expected to fulfill the Conservative election promise to ease taxes on stock market profits and other capital gains.

But it's not clear the budget will really do much to tackle the deeply entrenched economic and social problems that lie behind the facade of today's good times.

A recent report by a national anti-poverty action group, for example, found that few of the benefits from Ontario's economic performance are trickling down to the province's most vulnerable families.

Since 1995, the percentage of children living in working poor families in Ontario has more than doubled, from 17 per cent to 38 per cent, according to Campaign 2000.

And it's not only low-income families who are struggling to stay afloat in a sea of prosperity.

A new analysis of income data shows that nearly 80 per cent of Canadian families are working more and earning a smaller chunk of national wealth than in years past. At the same time, the incomes of Canada's richest families are skyrocketing.

The widening of this so-called income gap between rich and poor families is attributable to minimum wages that haven't kept up with inflation, the disappearance of many well-paying manufacturing jobs and the trend toward temporary employment, say economists at the Canadian Centre for Policy Alternatives.

On a wider scale, there are growing fears about income security if Canada's economy falls behind low-wage economic giants such as India, China and Brazil.

Tackling these problems, according to many analysts, requires concrete action led by the federal government to stimulate significant long-term investments and goals. The focus would be on such areas as post-secondary education and training, affordable housing, early learning and child care, technology-based industries, improved health care, a less restrictive federal employment program and higher minimum wages.

"It's high time for governments, led by the federal government, to get with the program and take this thing seriously, the way we have other serious challenges such as the federal deficit and, it seems now, climate change," says Laurel Rothman, national co-ordinator for Campaign 2000.

"We certainly have significant resources. We have provinces like Quebec, Newfoundland and, just recently, Nova Scotia, which are all committed to a poverty-reduction strategy, and we think it's time for the government of Canada, with the provinces, to do the same."

Opposition parties will be watching carefully to see if the budget goes beyond short-term politics.

"Canada's future success calls for a comprehensive strategy, not a sudden, last-minute attempt to get ready for an election," Liberal Leader St├ęphane Dion says.

"We can be a country where opportunity is shared equally. A Canada where the federal government will be there when Canadians need help."

Oddly, the spending spree that Harper and Flaherty have begun recently has actually spurred concerns about a possible round of deep cuts to federal social programs next year.

Like the Liberals before them, the Conservatives find themselves awash in money as personal and corporate tax revenues have surpassed all expectations. The budget surplus for this fiscal year, which ends March 31, once forecast by Flaherty at $3.6 billion, is likely to come in at more than $7 billion.

But it hasn't gone unnoticed that last year, despite a federal surplus that hit $13 billion, the Harper government nonetheless laid plans to axe $1 billion in spending, including social and cultural programs and a legal project that helped minorities.

The question is: Even with such a huge surplus, can Ottawa afford the current avalanche of spending without going back into a budget deficit?

NDP finance critic Judy Wasylcis-Leis says she's wary of the Tories' strategy.

"Their whole approach," she says, "has been to minimize the role of government and to bring an attack solution to bear on every problem."

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