OTTAWA—It’s a budget that is champing at the bit.
Although the federal Liberals say the first race is to defeat the coronavirus and beat back the pandemic, the federal budget unveiled Monday makes clear Prime Minister Justin Trudeau and his finance minister, Chrystia Freeland, have their eyes on a longer track and would be happy to face the electorate with their plan in hand.
Budget 2021, titled “A Recovery Plan for Jobs, Growth and Resilience,” is a monster of a document at 739 pages and all but dares the Liberals’ political opponents to bet Canadians won’t support it.
It proposes $101 billion in new spending — on top of more than $350 billion borrowed and spent to face the COVID-19 emergency — across a broad swath of initiatives to help Canadian families and workers, and to “stimulate” an economic recovery that many economists believe may not be needed.
The centrepiece is a pledge to spend up to $30 billion over five years to create a Canada-wide $10-a-day child-care system by 2026. “This is social infrastructure that will drive jobs and growth. This is feminist economic policy. This is smart economic policy,” Freeland told the House of Commons.
That big-ticket item isn’t the only one. There’s $18 billion to aid Indigenous communities, and $17.6 billion for businesses to make a “greener” recovery and billions to help them become more digitally nimble.
Freeland said while the economy has shown signs it is poised to quickly rebound once lockdowns lift, the additional spending is “essential” to help Canada regain 450,000 jobs that have still not been recovered since the pandemic hit last year, and to position Canada for the future.
Rather than simply trying to goose spending and consumer demand, she cast the spending measures as long-term investments to grow the labour force, improve productivity, and help Canadians young and old, and businesses small and large emerge from the pandemic in better shape.
Meanwhile, Freeland said in the short term the Liberal government will spend an additional $12 billion to extend COVID-19 emergency measures like the wage subsidy, the rent subsidy and other lockdown support until Sept. 25, 2021. It will extend the number of weeks for the Canada Recovery Benefit and the Canada Recovery Caregiving Benefit. And it will enhance Employment Insurance sickness benefits from 15 to 26 weeks. But the budget foresees beginning to wind down supports starting in July, before the national vaccination campaign is completed. Freeland admitted the coronavirus has proven “sneaky” and variants could derail Ottawa’s plan but she vowed the federal Liberals would do “whatever it takes” to address emergency needs as they arise.
The budget does not set out a track to any kind of a balanced budget, but it paints a rosier fiscal picture than the fall fiscal economic statement.
And it shows the federal Liberals hope to grow Canada’s way to recovery and a more balanced budget.
It shows a lower deficit than in Freeland’s economic update in November for the 2020-21 fiscal year, $354 billion instead of $382 billion, in part because Ottawa spent nearly $15 billion less than expected on pandemic supports, and took in $20 billion more than expected in revenue even during the limited reopenings between deadly COVID-19 waves. The federal deficit is now projected to decline to $154.7 billion in the fiscal year that just started, and continue to drop, reaching $30.7 billion in 2025-26, or 1.1 per cent of gross domestic product.
All that borrowing to spend, however, means the federal debt will peak at 51.2 per cent of GDP in 2021-22 before declining to 49.2 per cent of GDP in 2025-26.
“In today’s low-interest rate environment, not only can we afford these investments, it would be short-sighted of us not to make them,” Freeland said.
Budgets are always an exercise in accounting for current spending and in laying out political intentions for the future.
In that respect, the federal Liberals might well want this budget to be seen as a long-term economic and productivity growth agenda. However it relies on a lot of wishful thinking: that the provinces will negotiate national standards or programs for child care, long-term care, mental health and pharmacare; that at least one Opposition party will support it; and that when the minority Liberals do face the electorate possibly later this year their plan will find enough support among small c-conservative voters to elbow the Conservative party and its leader out of a lot of electoral space.
Even before Freeland rose to speak in the Commons, Conservative Leader Erin O’Toole slammed the Liberals, saying Trudeau’s plan is based on “out-of-control debt.”
O’Toole later said the Conservative party would propose amendments and is “prepared to vote against it” if necessary, but he added there is no danger of an election immediately because the NDP has already pledged it won’t vote the budget down.
However, the Liberals’ focus on small- and medium-sized businesses, and vow to take the sting out of the digital and “green” transformations that lie ahead, are clear attempts to mow O’Toole’s lawn, and to undermine his claim that only Conservatives will help recover millions of jobs and take “immediate action on the hardest hit sectors, helping those who have suffered the most, including women and young people.”
What the federal Liberal budget doesn’t do is set out billions for a national drug insurance plan or pharmacare, or dental coverage — long-standing demands of the NDP. The budget says “the case for national universal pharmacare is well-established” but it only devotes three paragraphs to it. Nor does it impose a wealth tax on the ultra-rich, other than a tax on luxury boats, cars and private planes.
New Democrat Leader Jagmeet Singh said Monday he will not trigger an election before the pandemic is over. Still he criticized the budget, doubting the Liberals would follow through on child care.
The budget also does not agree to a $28-billion demand by the provinces to increase the annual federal health transfer. The premiers say Ottawa must increase its share of rising health costs from 22 per cent to 35 per cent. Bloc Québécois Leader Yves-Francois Blanchet vowed to vote against the budget unless it addresses that concern and provides more help for seniors.
Nonetheless, the Liberal government will spend $1.8 billion over five years on health-related research and services. The Liberals want to develop national standards on long-term care and on mental health services; to improve access to sexual and reproductive health services — including protecting access to abortion care — and there was an implicit threat to delinquent provinces. The Liberals vowed to ensure a “full suite of reproductive and sexual health services in any upcoming Canada Health Transfer funding discussions.” Their budget pledges to create a national autism strategy, a National Institute for Women’s Health Research, more research into pediatric cancer and diabetes, better palliative care, “appropriate access and safeguards” for medical assistance in dying, new plasma donation sites, and millions more to address the opioid crisis.
There are a handful of revenue-generating measures, including a digital services tax projected to bring in $3.4 billion over five years, the luxury tax on yachts, private aircraft and fancy cars, excise duties on vaping products in 2022; immediate increases to the tobacco excise duty by $4 per carton of 200 cigarettes, with corresponding increases for other tobacco products, a measure estimated to bring in $2.1 billion over five years starting in 2021-22.
“We promised last year to spend up to $100 billion over three years, to get Canada back to work and to ensure the lives and prospects of Canadians are not permanently stunted by this pandemic recession. This budget keeps that promise,” Freeland’s speech to the Commons said.
“Some will say our sense of urgency is misplaced. Some will say that we are spending too much. To them, I ask this: Did you lose your job during a COVID lockdown?”
Avery Shenfeld, chief economist of CIBC Capital Markets, said in an interview that the promised spending in the first year provides “a life raft to an economy that’s still suffering from a case of COVID. So I think that’s not the year when this is controversial.”
“The issue will be whether next year and the following year we’ll still need as much stimulus,” he said. “But they are allocating less of that money to the next two years. So to some extent they have addressed that concern.”
Jennifer Robson, a professor of political management at Carleton University, said in an interview that as a political document, the emergency measures “that gets us through to the end of September, that stuff was non-negotiable.” Additionally, the budget’s “rebuild” measures may be enough to appeal to NDP voters on the left while the fact it does not levy the “scary tax hikes” Conservatives warned of “has kind of taken the wind out of the sails on the Conservative side.”
Tonda MacCharles is an Ottawa-based reporter covering federal politics for the Star. Follow her on Twitter: @tondamacc