Ottawa throws oil on the fire with the CELIAPP, but once again rejects the question of health transfers.
Posted at 9:00 a.m.
Only a few years ago, many people were surprised that the federal government managed to run a $20 billion deficit in the midst of economic growth. But those were the good old days. This year alone, the deficit will approach 53 billion. The debt is expected to add almost $100 billion over the next three years.
This is less than in the last two financial years (respectively 328 and 114 billion), but the conditions have changed, too. The economy, employment and household spending are broadly back to pre-pandemic levels.
Why is Finance Minister Chrystia Freeland still spending so much?
First Nations and military expenditures: necessary
Ottawa will increase $11 billion over six years for services to First Nations, including those for children. It will always remain to be seen how these sums will achieve their objectives, but let’s just say that we still have some catching up to do so that these fellow citizens have the same opportunities as other Canadians. In short, it is difficult to be against.
The underfunding of military spending, which was embarrassing to our allies, became a geopolitical problem with the war in Ukraine. Ottawa will therefore increase them by $8.1 billion over the next five years.
It will not be enough to reach the target set by NATO (it would have been necessary to put 15 billion more), but it is a start.
Some will object that it will not feed or heal any Canadian. They are right, but it is more than that. If Canada wants to fully assume its role in the liberal order (in the philosophical sense!), it must give itself the means to do so.
Brutal regimes flex their muscles, democracies have no choice but to follow. As Theodore Roosevelt said, we can continue to speak softly, but with a bigger stick.
Real estate slippage
The central measures of the Freeland budget relate to the real estate market. In addition to a one-time payment of $500 for those struggling to find housing, the Liberal government is providing $2.7 billion for affordable housing and $4 billion to build 100,000 homes in cities.
It seems like a lot, but it’s not much, given the demand for housing in the country (moreover, acting on supply constraints is also more effective and less costly). In any case, the effects of these measures will be largely canceled out by the next one.
Where the federal government is completely skidding is in setting up a new tax-free savings account, the CELIAPP, which will be used to finance the purchase of a first home. But in addition to exempting withdrawals from taxes, contributions to this “TFSA-house” will also be tax deductible, like an RRSP.
So, no need to choose between the TFSA and the RRSP, the CELIAPP offers you butter and butter’s money!
It will be possible to invest up to $8,000 per year, up to a maximum of $40,000. In total, with two buyers, it’s potentially $80,000, plus added returns, that will be added to the price of a house in already overheated markets.
From the point of view of public expenditure, the CELIAPP will not bankrupt the government (the cost of the measure is estimated at 675 million), but it is economically doubtful, because we have a supply problem, and the government will overstimulate demand. The effect obtained is very likely to be contrary to that sought. In the end, access to property will be a little easier for the wealthiest and much more expensive for the others. Simply, it’s throwing gasoline on a fire.
Lack of environmental audacity
Speaking of gasoline. The most important thing is what’s not in the budget. At $50 a tonne, federal carbon pricing is still insufficient to curb our consumption of fossil fuels (just like the price on the stock market in Quebec).
One can debate the advisability of devoting 2.6 billion to support carbon capture and storage. But we could also have increased the cost of pollution. Ottawa, like Quebec, lacks audacity, whereas the IPCC has just reminded us that it is not five minutes to midnight, but quarter past midnight… This is all the more unfortunate since most of the product of the federal tax comes back into the pockets of taxpayers (but not in Quebec!).
The health minefield
The establishment of universal public dental care coverage fills an anachronistic hole in health care coverage in the country. The problem is that the initiative still comes from the federal government – who has the money – while health is a provincial responsibility.
In Quebec, dental care is free for up to 10 years. The federal plan begins with children up to age 12 this year, to cover all adults by 2025, in families earning less than $90,000 a year.
It will be interesting to see if Quebec will want to follow Ottawa or if it will prefer to withdraw, with compensation (as for the drug insurance plan, which Mme Freeland plans for next year).
The maple leaf in the room still remains the issue of federal transfers.
The federal government does not subtly point out that it has expectations of the provinces and that it does not seem to find that the amounts currently spent on health are producing the expected results. It promises for the future.
A recent poll showed that a majority of Canadians from all provinces and all political stripes want an increase in federal health transfers1, preferably unconditionally. One day, the Liberals and the NDP will have to listen to them.