Trudeau’s Liberals pledge billions in federal budget for ‘transformative’ change

Finance Minister Bill Morneau stressed the Liberals’ priority was to grow Canada’s middle class and included plans for heavy investment in aboriginal communities and social housing. The deficit will grow to $29.4 billion in 2016-17 in what he called a ‘reasonable’ plan.

Thestar.com
March 22, 2016
By Bruce Campion-Smith and Tonda MacCharles

Justin Trudeau’s Liberals are opting to spend heavily in their first budget to deliver the “bold, transformative” change they say is needed to put Canadians on firm footing for the future.

The Liberal budget unveiled Tuesday calls for billions of dollars in new spending for aboriginal communities, middle-class families, transit upgrades and social housing in cities and towns across Canada.

It provides more cash for children and their parents, poor seniors, unemployed Canadians and injured veterans.

The Liberals say their first budget is a tonic that will revive a slowing, uncertain economy, a salve for Canadians worried about their financial futures, and for aboriginal people a step toward righting past wrongs.

For all that, Canada’s finances will go deep into the red for at least the next five years as Liberals set aside election pledges to contain deficit spending to $10 billion.

Instead, the government said it will take advantage of low interest rates to borrow money and spend nearly $30 billion more this year than it takes in.

The hope? That all that spending on roads, bridges and cities, and that extra money in families’ pockets, will kickstart a sluggish economy.

“This budget puts people first and delivers the help Canadians need right now,” Morneau said in his maiden budget speech.

Morneau said the Trudeau government is intent on making “good investments” to ensure the country’s future growth and prosperity - but it staved off some of those investments for a second mandate, with measures that won’t kick in for five or six years down the road.

The plan unveiled by Morneau doesn’t set out how or when the books will be balanced - a surprise that drew swift condemnation from the Conservative official Opposition. Morneau said if the more optimistic private sector economists are right and economic growth is better than the feds forecast, Ottawa could be back in the black in five years.

For now, Morneau said the Liberal projections of a $29.4-billion deficit in 2016-17 is “reasonable and affordable” and said that despite the deficit spending, the size of the debt will shrink as a percentage of the overall economy over the coming years.

The Liberals’ fiscal plan drew praise from many quarters while others sounded a note of caution over the extended deficit spending.

“This budget is a nightmare scenario for taxpayers who will be forced to pick up the tab for today’s Liberal spending spree,” Conservative interim leader Rona Ambrose said in a statement. She called the Liberal decision to borrow $30 billion in the coming fiscal year alone “shocking.”

“Canadians gave them an inch, and they’re taking miles. After breaking such a simple promise, we can’t trust them to control spending, manage our economy or create the jobs we need.”

In contrast, NDP Leader Thomas Mulcair said the Liberals didn’t go far enough to tackle income inequality. “Families across Canada are worried about their jobs and struggling to make ends meet - but today’s budget told them they would have to wait longer for help,” he said in a statement.

The Canadian Taxpayers Federation blasted the budget as a reckless dive into unnecessary deficits and increased public debt and what it called the government’s unwillingness to even present a medium-range plan to return to balance.

That was echoed by Kevin Page, the former parliamentary budget officer: “I don’t mean to sound sarcastic about this, but it is a budget, really, without a fiscal plan.”

Jean-Francois Perrault, chief economist at Scotiabank who served as an assistant deputy minister at Finance Canada, said the Liberals are over-confident in their projections of the budget’s impact on Canada’s economic growth. But he praised its many specifics.

“There’s a lot of interesting stuff in there,” Perrault told The Canadian Press. “It’s a smartly designed piece of policy, no question about that.”

At the core of the Liberal strategy is the Canada Child Benefit, some $5 billion in new spending a year that Morneau boasted is a social program to rival universal health care.

“It will lift hundreds of thousands of kids up from poverty.”

To pay for it, the Liberals have redrawn other government transfers for children, and pared back - with an eye to eventually eliminate - several of the boutique tax credits Conservatives brought in for arts, fitness and textbooks. Families with a combined income of over $200,000 will not gain from the increased child benefits. And individual high-income earners will pay more in taxes.

Residents of Toronto and other Canadian cities will benefit as the Liberals open the taps on infrastructure cash, starting with an $11.9-billion infusion over five years to upgrade transit, water and wastewater facilities and affordable housing.

To get the projects underway, the federal government is offering to pay up to half of the costs - more than its usual one-third share. Even so, the infrastructure spending falls short of the $5 billion a year promised in the Liberal platform.

Morneau acknowledged the money is “a first step” but a critical one to upgrade the country’s transit networks. The repairs, billed as “unsexy” by Prime Minister Justin Trudeau, will come first, with new infrastructure projects to come later.

The budget splurge meets many of the Liberal platform promises. However, Morneau did not deliver a promised small-business tax reduction from 10.5 per cent to nine per cent. He shrugged it off, saying the most important thing is to get the economy growing so small business can reap the benefits of consumers who have more to spend.

Morneau declared he was “most proud” of the new investment in aboriginal communities, saying the more than $8 billion pledged over five years for education, nursing stations, housing, and sewer and water treatment is more than the $5 billion promised by a previous Liberal government’s Kelowna Accord in 2005. The Conservative government cancelled that agreement.

For workers in hard-hit regions, the Liberals will extend unemployment benefits, and give an extra boost to laid-off long-term workers. It will be easier for new workers - immigrants and young Canadians - to claim benefits in the first place. That’s expected to cost $1 billion a year.

The budget provides more financial support to injured veterans and reverses the Conservative decision to close regional veterans’ offices across the country, adding an extra one.

More:Budget winner and losers

The defence department will see its capital spending deferred as the budget delays $3.7 billion for big-ticket capital projects, confirmation that new military hardware such as new fighters to replace aging CF-18s remain years away. Morneau refused to call it a cut, saying the move simply ensures the money is booked for later when it will be needed.

The Liberals had vowed during the election campaign to balance the books in the fourth year of their mandate. That deadline has disappeared in a budget plan that forecasts $25-a-barrel oil and takes a gloomier view of growth than many economic forecasts.

“We believe we can get to balanced budget over time,” Morneau told reporters. “It will take a few years but we will get there through strong investment.”