With this budget, the Liberal government maintains the illusion of control. He reacts as much as he plans. And when you add up his reactions, it’s expensive.
On the campaign trail, parties file platforms and financial frameworks with a suspect level of detail. Then once in power, they realize their plans aren’t quite working out.
Like his predecessors, Justin Trudeau had to adapt to an unpredictable world. When Donald Trump had lowered corporate taxes, he imitated it to avoid moving and selling businesses. When the pandemic hit, he spent quickly sending buoys to citizens. This responsiveness was a quality.
This year again, his silversmith Chrystia Freeland rewrote part of the plan. This time, it is in response to two unforeseen events: what is happening in the United States and elsewhere abroad, and the contest in Parliament.
In response to theInflation Reduction Act of Washington, Ottawa will massively subsidize green investments. Last November, the federal government feared that this American program was acting as a black hole. To encourage companies to develop their projects here, new tax credits are being created – they will cost around 80 billion by 2034, it is estimated. So much the better, because an unprecedented amount of capital will be required to decarbonize the economy.
The other reaction is a political game. In Ottawa, the minority Liberal government made concessions to the NDP in exchange for its support. The pact contains 27 measures.
These are the three layers that overlap in the new budget: electoral commitments, reactions to a changing world and concessions to an ad hoc ally.
If the context was unpredictable, the reaction of the liberals did not surprise. They followed their instinct: take out the checkbook.
An example: faced with attempts at interference from China, the federal government is creating a National Office – another – which will monitor these maneuvers. And which despite himself will serve above all to make people forget that the public inquiry has not yet been launched…
There are two ways to analyze a budget: with a magnifying glass or a panoramic angle.
Taken individually, these measures seem sensible.
For example, unlike in Quebec, the federal government targets its aid to people who really need it. Wages are rising faster than inflation, and inflation itself is falling. The cost of living crisis hits low-income people first, who are struggling to find housing and food. Mme Freeland is doubling the GST rebate, for this year only. The NDP is happy, the money is going to people who really need it and the measure is temporary, and therefore fiscally responsible.
But whether justified or not, these measures add up. When looking at the overall portrait, the lines point downwards and shimmer red.
Over the next five years, this budget will add nearly $42 billion in expenditures. As of the last economic update in November, $51 billion had been posted. And in March 2022, there were 36 billion.
Mme Freeland argues that these expenditures are necessary.
In fact, they stem in particular from the enhancement of the health transfer, dental costs and the daycare program, which are not a luxury.
The minister believes that Canada has the means. The country has the lowest debt and lowest deficit in the G7. After a short-term rise, the debt burden will begin to fall again. However, it is falling faster than expected. It will also be complicated for the future because of weak economic growth, rising interest rates and new spending announced each year to prove that the government “is there for us”.
A word appears in the Liberal discourse: the “refocusing” of spending to finance the new measures. It’s a timid term. We dare not speak of discipline, rigor or control.
To finance the generosity, Mr.me Freeland relies on both more efficient management and better tax justice.
For efficiency, details are lacking. The promise to recover 7.8 billion still looks like a wish.
We know more about taxation. The minimum tax for individuals will increase from 15% to 20% and minimum taxation will also be required of large companies, according to the OECD mechanism.
On paper, it’s fine. But if the trend continues, the government will recover less than expected from the pockets of the wealthy, and it will spend more than expected.
Moreover, the budget does not contain a word about the project to create an ambitious pan-Canadian public drug insurance plan. Against all expectations, he is thinking of bringing forward the entry into force of assistance for dental care for adults earning a low income.
Interfering in provincial jurisdictions with a tight deadline to please the NDP is not synonymous with prudent management.
Seen from Quebec, the budget contains both good and bad. As a surprise, Ottawa would reimburse up to 15% of the costs of clean electricity production. And this, until 2034, thanks to a standardized program, therefore without having to negotiate individually. A gift that could become poisoned if the United States sees it as a subsidy and sue Hydro-Québec under our free trade agreement.
Few things are planned to solve the inhuman delays that prevent asylum seekers from obtaining a work permit to get out of precariousness.
This will not please the NDP. Its leader Jagmeet Singh will nevertheless be satisfied with certain small victories, enough not to plunge the country back into an electoral campaign.
The fact remains that in the next budget, the spiral will continue. There will be less room for maneuver to finance new measures. And above all, to react to the new crisis.