OTTAWA – Finance Minister Bill Morneau batted away criticism Wednesday that his second budget has no plan to return to balance, and questions about why the Liberals ditched their promise to reduce the debt-to-GDP ratio.
The document, titled “Building a Strong Middle Class,” includes $4.8 billion in new spending, but only $1.3 billion this year. The big ticket spending —a $7-billion child care plan and a $5-billion National Housing Fund, for example — is all spread out over a 10-year period that comes into effect in 2018-2019, only a year before the next election.
While it wasn’t a big-spending budget, as in 2016, Morneau still projects the Liberals will add $140.9 billion over six years to the national debt. The 2017-2018 deficit is expected to be $28.5 billion, with a $3-billion contingency. By 2020-2021, the deficit grows to $30.4 billion with no plan to get back in the black.
“We have shown in this budget a very responsible approach. We are making every dollar count,” he told reporters, sidestepping their questions.
“What you see is that we are focused on making investments but doing it in a way that is responsible.”
The new budget is a far cry from the Liberals’ election promise of running only two “modest short-term deficits of less than $10 billion each” and a return to balance by 2019-2020.
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Back in 2015, Liberal Leader Justin Trudeau promised his budgets would be half of Conservative prime minister Stephen Harper’s $20 billion deficits. “We will end the Harper legacy of chronic deficits and reduce Canada’s federal debt-to-GDP ratio each year,” the Liberals’ electoral fiscal plan states.
Morneau said the investments the Liberals are planning on skills and innovation are intended to help strengthen the economy.
The Grits’ innovation plan focuses on expanding growth and jobs in six key areas: advanced manufacturing, agri-food, clean technology, digital industries, health/bio-sciences and clean resources.
The 2017 budget includes a strong focus on skills and access to post-secondary education for not only young people but also disadvantaged communities such as indigenous peoples, those studying part-time or on employment insurance, or parents with children. The budget also includes several measures to spur innovation, although not as much as many expected.
Ministers will look at finding savings
Instead of providing details on the government’s plan to invest $950 million to create superclusters in the economy, for example, the budget notes that cabinet ministers will review the $22.7 billion Ottawa already spends on innovation across all departments and study the programs’ effectiveness.
Ministers will also be busy reviewing government spending and public assets with an eye at finding savings.
But there is still no plan to return to balance. “Our plan is to continue to be responsible every step along the way. That is what you are seeing here,” Morneau said.
He noted that the government still projects the debt-to-GDP ratio to drop, although different private-sector forecasters cited in the budget suggest that the number may rise. Perhaps, that explains why Morneau declined to repeat the Grits’ campaign pledge.
While the federal government plans more spending, Canadians who mind their own pocketbooks might be upset to discover that Morneau will eliminate the public transit tax credit, increase taxes on booze, and tax ride-share programs such as Uber.
There are no large tax hikes in this budget, although EI premiums are expected to increase five cents in 2018-2019. A government review of tax planning strategies also suggests changes are coming that will affect top income earners who use private corporations to shield some of their income.
Former parliamentary budget officer Kevin Page told The Huffington Post Canada the 2017 budget actually looks like an “austerity budget.”
There is a lot of spending identified, but it’s mostly small numbers, he said.
The Liberals have a sound strategy focused on skills and innovation, he said, but there aren’t a lot of programs to meet their ambition.
Kevin Page: 'The clock is ticking'
“There is a lot of strategy but not much money behind it.”
Page, who now serves as president of the Institute of Fiscal Studies and Democracy at the University of Ottawa, also wondered why the Liberals are still reviewing innovation programs.
“Why didn’t they already do that? We’ve known since budget 2016 that this was going to be a skills and innovation budget. …
“The clock is ticking. We are now in the second year of this mandate,” he added. “There is still no sense of a plan.”
“We are still adding significant amount of debt, and I think Canadians will still be asking: ‘What do we get for this?’”