Hefty price tag raises concern over ballooning deficit

OTTAWA (CCN)



The new Liberal government’s first federal budget gets many positive reviews for new spending targeting the middle class but the hefty price tag raises concerns.

“The almost $30 billion 2016 federal deficit does not scare most independent economic analysts – interest rates are at historic lows today, Canada’s debt-to-GDP ratio is smaller than any other G7 country, and Canadians voted for a Liberal Party that ran on a platform of deficit spending in order to address many outstanding societal needs,” said budget analysis by the social justice think tank Citizens for Public Justice (CPJ).

“However, the government also announced that $120 billion will be spent in infrastructure over the next decade, while cutting taxes 1.5% for middle class tax filers and promising that the country’s debt-to-GDP ratio by the end of their mandate will be lower than it is today. Can all this be done?” CPJ asked.

Though CPJ said deficit spending “can be useful” in aid of the common good, and in creating more societal equality, it must “not jeopardize life possibilities of future generations.”

“Unless future budgets find the revenue to pay for social benefits, the only other option is for governments to revert to often painful spending cuts,” CPJ warned.

“Overall, the federal government expects to spend $113.2 billion more than it raises during the next five years,” said Cardus co-founder and executive vice president Ray Pennings.. “The payoff for the first two years, according to the budget documents, will be 1.5 per cent growth in GDP translating into 100,000 jobs “created or maintained” by 2017-18.”

Pennings said it is “fair game” to be concerned over the deficit-spending, but added “prudence also requires analysis of how such an approach affects the institutions that Cardus argues are critical to a healthy and vital Canadian society.”


The Canada Child Benefit

The Liberals’ Canada Child Benefit (CCB) won praise from most groups, including CPJ, Cardus, and even the conservative Canadian Taxpayers’ Federation.

“The CCB will offer a progressively distributed, non-taxable benefit, with a maximum benefit of $6,400 a year for each child six and under, $5,400 for each child six to 17,” said CPJ in its budget analysis.

Cardus Family director Andrea Mrozek points out the CCB simplifies existing benefits by combining them into one, that targets those with lower incomes. “The family benefits include more money given directly to most parents, and these benefits extend to those earning $200,000,” she said.

“The greater flexibility afforded by extending parental leave time to 12 months within an 18 month period is another positive improvement in the government’s family package,” she said.

Mrozek praised the plan for giving parents a direct cash benefit. “However, it’s not all sunny days,” she said. “On a note of caution it remains unclear whether or not the Liberals will attempt both cash benefits to families and national daycare.”

The new budget ended income-splitting for families, a measure brought in by the previous Conservative government to ensure tax fairness for single-earner families earning the same as dual-income families. Mrozek described the change as “negative.”

“A consequence of the government’s actions on child benefits combined with the removal of family taxation is that the emphasis shifts toward poverty reduction and away from a recognition of children or the family as important societal institutions,” she said.

CPJ put the CCB among measures addressing poverty in Canada, along with $2.3 billion to be invested over two years in affordable housing; changes to employment insurance benefits; a modest increase in the Guaranteed Income Supplement for seniors; and $8.3 billion over five years to help Canada’s indigenous communities. But CPJ noted the federal budget lacks a commitment to a national anti-poverty plan.


Infrastructure spending and green economy

CPJ praised the budget for “taking an integrated approach to both the economy and the environment” that addresses “the realities of climate change in the context of economic well-being offers hope for a better future.”

But the budget does nothing now about eliminating fossil fuel subsidies or putting a price on carbon, CPJ said.

“Depending on how the pluses and minuses are calculated for programs spread over several budgetary envelopes, total new spending for greening Canada tops $3 billion,” said Cardus’ Pennings.

The budget also commits $120 billion over ten years in infrastructure spending that include investments in public transit; wastewater and green infrastructure; and social infrastructure such as “affordable housing, child care centres, and cultural/recreational facilities,” Pennings said.

“In order to maximize the public benefit, physical infrastructure development must consider how it relates to social infrastructure-the relational patterns that give rise to the social fabric of our neighbourhoods and communities,” he said. “Improved physical infrastructure can enhance our quality of life the most when its relationship to social capital and community institutions are clearly understood.”

“At its worst, poorly envisioned physical infrastructure can perpetuate or increase social isolation and push community institutions to the margins,” he said.

The investments in water and wastewater improvements for First Nations were described as a “step forward,” by the Council of Canadians water campaigner Emma Lui. “But we were calling for enough to fully address their water and sanitation needs, as well as much stronger funding commitments for Great Lakes protection and municipal water and wastewater infrastructure. “


Climate justice and overseas aid

The Canadian Catholic Organization for Development and Peace noted the federal budget has increased foreign aid spending, but not enough to bring Canada in line with the United Nations’ recommendation of 0.7 per cent GNI for overseas development aid (ODA).

“It is not clear how the $256 million that has been earmarked for aid over the next two years will be used, but our hope is that it will not be used for commitments made at the Paris Climate Conference to support countries in the Global South adapt to climate change and mitigate its impacts,” said Development and Peace executive director David Leduc in an email. “While equally important, this is a new commitment that goes above and beyond our ODA responsibilities, and a separate budgetary envelope ought to be created for this purpose.”

Nor is it clear how these funds will help Canada attain the UN’s sustainable development goals set last September, he said. “This should represent a greater priority than the provision of additional support to security and development projects that are tied in to defense strategies.

“Investing in long-term development, strengthening democracy and human rights and alleviating poverty are, without question, greater guarantees of peace and security,” Leduc said.


Refugees

CPJ welcomed the $245 million in funding over five years to resettle 10,000 additional Syrian refugees this year. It noted more refugee families will be united through the government’s plan to welcome 300,000 new permanent residents in 2016.

It called for the loan relief to be provided Syrian refugees for transportation and processing costs to be extended for all refugees.

“The government’s focus has moved to family reunification and refugee resettlement,” CPJ said. “It is welcome news that the Budget 2016 has proposed an additional $25 million in 2016-17 to target backlog and to reduce application processing times.”

“Private sponsorship groups rely on the government to process their applications and those of their sponsored families,” CPJ said. “Hopefully, these additional funds will reduce wait times so that families can quickly be brought together in Canada.”

CPJ also praised the $56 million over three years to help permanent residents, including refugees, acquire language training and other skills to integrate into Canadian society.