News and views from SA Canada Five most outrageous things about the federal budget

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1) Timing. With great economic uncertainty in Can­ ada (arising from the sharp decrease in oil prices and growing evidence of serious economic trouble), the gov­ ernment chose to heighten the uncertainty by delaying its budget for several weeks. Not because of uncertainty about oil prices. The delay was actually to wait until the fiscal year started, so they could sell the government’s shares in General Motors, and use the net proceeds to help achieve the politically all-important “balanced bud­ get.” A shameful and reckless exercise.

2) Selling the Silverware. Speaking of the GM shares, the $2.1 billion net proceeds from the sale were indeed essential to the government’s declared small surplus ($1.4 billion). The shares fetched $3.3 billion, but the government had to deduct their “book value” (which was artificially low anyway due to the government’s ul­ tra-cautious accounting in 2009 that they might not get much at all back from the GM rescue).

The fire-sale (instead of retaining public ownership and implementing democratic control of the company, to reorganize production to meet human needs - Editor) was widely interpreted in the automotive media as a sign that Canada was “giving up” on the industry (and was accompanied by another spate of stories about the mi­ gration of auto investment to Mexico). More fundamen­ tally, selling an asset to balance a current budget is ut­ terly phony: the state is poorer, not richer, because it no longer has that asset.

3) Phony Balance. Speaking of the “balanced budget,” it is entirely dependent on a fiscal sleight-of-hand. There is a $1.4 billion reported surplus. But that’s only because the government diverted $2 billion out of its normal $3 billion contingency reserve (apparently things are so stable in the world economy these days there’s no need anymore for so much symbolic “protection”).

They siphoned $2.1 billion from the GM shares. And then perhaps most offensively of all, they raided $3.4 billion from the annual operating surplus of the Employ­ ment Insurance system. (That surplus is created by the denial of benefits to over 60% of unemployed Canadi­ ans; the appropriate response, especially with growing layoffs around the country, would be to fix that problem — not raid the EI cookie jar.) That makes a total of $7.5 billion in shell game transactions.

Without those three fiscal tricks, the reported balance would be a $6.1 billion deficit—not a $1.4 billion sur­ plus. The emphasis placed on achieving balance is mis­ placed anyway, as many economists of all stripes have pointed out. But to attain this inappropriate “victory” in such an underhanded and misleading way sets a new low for the politicization of fiscal policy.

4) Public Transit. The opposition parties have argued that this is the moment for government to invest heavily in overdue infrastructure; this view is fully and loudly endorsed by economists around the world, who cor­ rectly identify secular stagnation (not public debt) as the greatest threat to prosperity and stability.

The argument must be having some effect on public opinion (a recent poll indicated Canadians preferred in­ frastructure spending over tax cuts by more than 2-to-1 as the top priority for budget policy), so the government has responded with some mostly token infrastructure initiatives. The most token of all is its ballyhooed “Public Transit Fund.” This “innovative” measure merits several pages of text in the budget plan. But you have to wade through many tables until you realize it doesn’t get any money at until 2017-18, at which point it gets all of $250 million. Given the cost of transit investments, and the desperate need for them (for economic, social, and en­ vironmental reasons), this is offensive, and I am amazed that Conservative Finance Minister Joe Oliver could an­ nounce it with a straight face.

5) More Stealth Austerity. Even critics of the govern­ ment are describing the budget as a “tax cut budget” full of “election goodies.” I think this is a mis-characteriza­ tion. The tax cuts are what is “new,” and hence will be reported. And costing $5 billion in just this year, they are too expensive. (Many others have written about their perverse impact on equality, labour force participation, and other variables.)

But the real thrust of the budget won’t make the head­ lines: because it’s “more of the same,” not news. The budget confirms the path of grinding, disguised aus­ terity that dominated fiscal policy under this majority Conservative government. The government has reduced federal public administration employment by over 50,000 positions since mid-2011. It has imposed incre­ mental, badly understood spending cuts that cumulate to $14 billion per year.

It has underfunded veterans’ offices, Coast Guard fa­ cilities, meat and railway inspectors, EI processing, and many other services that are essential to the quality and safety of Canadians’ lives. It will unilaterally reduce health transfers to the provinces beginning in 2017, by $36 billion over a decade. It will force Canadians to work until age 67 to collect Old Age Security.

For these reasons I hope Canadians will forcefully re­ ject the Harper Conservatives in the coming election. n