Budget 2011: Take Two

On June 6, Finance Minister Jim Flaherty introduced a new 2011 Budget. (The March Budget was not adopted before the government was defeated in the House of Commons). The June Budget only contained two new provisions: the elimination of the subsidies for political parties and a $2.2 billion transfer to Quebec in support of tax harmonization. Because the June Budget is essentially the same as the March Budget, we re-offer here our commentary on the March Budget.

We ended our March Budget commentary noting that we would be watching and commenting on the impending election campaign in order to promote public justice. The scenario has now changed as we look ahead to four years of majority government, but CPJ’s role has not. We will continue to call for public justice values in public policy and political debate, to monitor and analyze government decisions from a public justice perspective, and to work with the government and opposition parties in finding public justice policy alternatives. We hope that the government and the opposition parties will also commit to pursuing public justice on behalf of all Canadians and not merely those who voted for them.

Federal budget imbalance 

“Leadership is about finding a balance between needs,” said Finance Minister Jim Flaherty in presenting Budget 2011. Unfortunately the budget he delivered does not show real leadership. While it was rich in lofty rhetoric about reflecting the values and responding to the priorities of Canadians, it was poor in actions that delivered on these goals. Budget 2011 offers tinkering rather than real change in the face of significant challenges confronted by Canadians. Rather than balancing needs, it ignores them.

Canada has a social deficit and an environmental deficit, in addition to our fiscal deficit. Poverty is rampant and inequality is too high. Key components of social security are missing, such as an affordable housing strategy and a national childcare plan. We are failing to take action on climate change, despite our many commitments and the ever-increasing urgency of environmental devastation. Yet the budget does not address any of these issues, except to offer a few platitudes. The government’s real priorities are demonstrated to be vastly different than the priorities of Canadians: a jobs-based approach to economic recovery that relies more heavily on rhetoric than reality, a few social policy crumbs, and more “boutique taxes” that appeal to some voters while failing to achieve their policy goals.

A jobs-based approach to economic recovery

Three weeks ago, the government released its response to a major parliamentary report on poverty, stressing labour-market attachment and ignoring the many thoughtful and substantive recommendations of the committee. When faith communities gathered in Ottawa immediately following this response, faith leaders pointed out its inadequacy, calling for the government to move beyond the rhetoric of jobs and growth to address the immediate needs of our neighbours.

Their closing declaration stated that “Faith communities in Canada recognize, across our many different traditions, the unified impulse of all religious practice to nurture and share in community with those who are poor, and stand in solidarity with them. We call upon the government to champion public policies that defend everyone’s rights to dignity and abundant life.” The faith leaders specifically called for a federal poverty reduction plan and a national housing strategy.

Budget 2011 is built on this idea that jobs are the answer to fighting poverty and inequality, securing economic recovery, and supporting Canadians confronting economic insecurity. A key focus in the next phase of the government’s Economic Action Plan centers on continued job growth. However, the government’s plan to create jobs seems to be nothing more than keeping taxes low and providing a few “boutique tax” credits to businesses. Tax cuts create far fewer jobs than government spending on infrastructure, but that element of the Economic Action Plan is being ended.

The government is also ignoring the reality that jobs alone don’t provide economic recovery or security. In his budget speech, Flaherty stated that since July 2009, more than 480,000 jobs have been created by the Canadian economy – more jobs than were lost during the recession. However, what Flaherty failed to mention was that many of these newly created jobs were part-time or temporary. Similarly when the budget document notes that “more Canadians are working today than before the recession,” it fails to add that more Canadians are working part-time than before the recession too, with nearly one million of them working part-time involuntarily.

Unfortunately, this trend toward a labour force made up increasingly of part-time or temporary workers means that more Canadians will be faced with employment insecurity and economic hardship. Many will be forced to work multiple jobs just to pay the bills. Workers will also not qualify for the benefits made available to their full-time counterparts. Simply getting people jobs is not a sufficient response to economic insecurity, let alone poverty.

Policy crumbs, but no poverty elimination 

Budget 2011 contains welcome references to “helping Canadian families and communities,” “improving the financial security of Canadians,” and “taking action to help families make ends meet.” It even mentions poverty – twice. Yet when it came time to announcing a national strategy, what did they say? “Through a consultative process ... we will ... develop a federal policy framework to maximize the competitiveness of Canada’s aerospace and space industry.” Not to eliminate – or even reduce – poverty. Not to address the affordable housing crisis. Not to develop a national system of early childhood education and care. The aerospace industry. How does this square with the commitment “to act in the best interests of our country?”

Truth be told, there were a few social policy crumbs here and there, but like everything in this budget they were minimal:

  • A top-up benefit to the Guaranteed Income Supplement of up to $600 extra per year for single seniors, and up to $840 per year for senior couples – an extra $50-70 per month.
  • Steps, as yet undefined, to complement community efforts to address the challenges of the homeless, persistently unemployed, and at-risk youth through government/community partnerships.
  • $52 million over the next two years to support programs for Aboriginal communities.

Although a small nod was given to issues such as water safety on reserves and the need for clean energy technologies in Aboriginal communities, the question of Aboriginal poverty (and that of other marginalized groups) was largely ignored. $30 million has been committed to the First Nations Policing Program, but no mention was made about the need to address the housing crisis amongst Aboriginal Canadians, the education shortfall, and the ever-widening gap in general well-being between Aboriginal Canadians and the rest of Canada.

A critical piece that is consistently missing from the government’s interpretation of what Canadians need, want, and have a right to, is that a “low-tax plan for jobs and growth” doesn’t put food on the table, a roof overhead, or address mental health issues or stigma. In short, it does not provide marginalized Canadians with a life of dignity. If this approach were sufficient, poverty and economic disparity would cease their upward climb, homelessness would be a non-issue, and the thousands of Canadians across the country calling for substantive action on these critical issues would fall silent.

What is needed is an effective and enduring approach to reducing – and eventually eliminating – poverty. A comprehensive federal poverty elimination plan that addresses key areas, including income security, housing, and child care. A federal Act that ensures an ongoing commitment to results. And sufficient and sustained investment in the social security and well-being of all Canadians.

More boutique taxes means less government revenue

While the budget doesn’t offer any big, new spending programs, it does continue a trend toward use of “boutique taxes” that appeal to targeted segments of voters without delivering effective and accountable results to Canadians. Budget 2011 creates 4 new credits while extending or expanding a number of others. These include the new Hiring Credit for Small Business, the Children’s Art Tax Credit, the Volunteer Firefighters Tax Credit, and the Family Caregiver Tax Credit.

Tax credits have been criticized for reducing government revenues without any kind of follow-up to ensure that they are meeting their stated goals. In fact, analysis shows that some of them have not achieved what they were supposed to or have been less effective than spending a comparable amount on an actual government program.

Budget 2011’s “boutique taxes” look set to follow this precedent. The Children’s Art Tax Credit will provide a maximum of $75 a year to families who can afford to pay the 85% of the cost for arts programs that the tax credit will not cover. Similarly, the Family Caregiver Tax Credit offers a maximum of $300 a year, which will hardly make up for lost income while caring for a sick or disabled family member. The Hiring Credit for Small Businesses will give up to $1000 one time to small businesses as an off-set against rising EI premiums – a move which is unlikely to spur major hiring drives.

But while these tax measures amount to peanuts in the pockets of individuals who qualify, overall they represent a significant chunk of change for the government. Over 5 years, the cost of the personal income tax measures alone are projected to cost $1.4 billion. The Hiring Credit for Small Businesses and the Mineral Exploration Tax Credit together will cost the government $255 million over two years. Imagine what this money could do if invested in affordable housing or a real boost to the Guaranteed Income Supplement.

Finding a balance between needs

Budget 2011 fails to find a balance between needs because it fails to acknowledge that some needs even exist. It pays lip service to other needs, while refusing to deliver decisive action that would rise to the challenge. It now looks like this budget will not pass and Canada will be in a federal election campaign soon. The real needs, values and priorities of Canadians have an opportunity to triumph in an election campaign – but will the political parties pay attention? CPJ will be on hand to promote public justice values and serve as a resource to help citizens wade through the rhetoric. Stay tuned!