Tuesday’s federal budget was widely perceived as an attempt to boost the government’s standing before this fall’s general election. Key voting blocs the Liberals rely on — seniors, low-income families, young people looking for a job — were all beneficiaries of carefully targeted funding.
A sum of $1.8 billion has been set aside over four years to raise the Guaranteed Income Supplement for retirees, although the start is delayed until 2021. To help workers upgrade their skills, a Canada Training Benefit will be established that includes a $250-a-year tax credit.
First-time home buyers will be allowed to withdraw $35,000 from their RRSPs, up from the present $25,000. And the interest rate on student loans is being reduced from prime plus 2.5 percentage points to prime.
But there was another backdrop to the budget, and in this respect, it’s not so clear the government’s strategy meets the need.
Middle-class incomes have stagnated under the Liberals. After adjusting for inflation, median annual earnings rose by just 0.6 per cent over the past two years. It’s not clear how this budget will improve that situation.
A recent Angus Reid survey found Canadians pessimistic about the coming year. Nearly four out of five expect the economy will at best stay the same, and more than likely worsen. Only 24 per cent think it will improve.
And those concerns are personal in nature. Almost half worry that someone in their household could lose a job because of the economy. And a stunning 71 per cent fear they won’t live as well as their parents’ generation did. This is a reversal of the decades-long experience that each new generation is wealthier than the previous one.
Nationwide, household borrowing is at near-record levels. In B.C., residents of Metro Vancouver have the highest debt levels in the country. Will allowing first-time home buyers to take more out of their pension funds help?
The prime minister might say he has tried to counter these fears with deficit financing aimed at freeing up additional cash. The budget forecasts a deficit of nearly $20 billion.
But here, too, there is a risk. Opinion polls suggest increasing concern that the country’s burgeoning debt is itself a threat to economic security. They know from their own experience that you cannot borrow your way out of trouble indefinitely.
Yet this budget contained no schedule for returning to a surplus, indeed it projects deficits out to 2024.
There is also the matter of health care. According to the Reid survey, this is the No. 1 concern among Canadians.
And the government did make a small move in this direction. A promise was given to work toward a national pharmacare program, although only initial steps were taken.
That was unavoidable, because the federal government cannot proceed alone. The costs are too great (at least $20 billion), and more important, the provinces must agree to go along. Yet the likelihood of that happening any time soon, if ever, is in question.
More important, health care is an issue because of the general perception this essential service is underfunded. That concern, in large part, went unmet in Tuesday’s budget.
The broader context, then, is that significant numbers of Canadians fear the economy is headed in the wrong direction, and they translate that fear into direct, personal consequences for themselves.
The budget provides only the most limited help in this regard, with much of the new spending either spread out over five years or delayed well into the future.
And the reason is apparent. Normally, governments do all the heavy lifting in their first year or two, clearing the decks for good news when election time arrives.
But the current administration went heavily into debt from the outset, leaving itself only limited room when it mattered. As a result, this is at best a modest budget that seems unlikely to achieve its principal aim — improving the Liberals’ re-election chances.
Too many of the promises are either drops in the ocean or time-delayed. The door is open for the opposition parties to propose bolder steps. We’ll see if they do.
