The Trudeau government came out with its Fall Fiscal Update on Tuesday afternoon, and it was a bland document, with neither surprises nor ambitious new plans.
The finance minister’s fall fiscal exercise used to be nothing more than a statement of the government’s fiscal position, four or five months before the annual budget. Governments would reserve their important taxation and spending announcements for the main, big budget. These days, most governments don’t want to wait for the budget. They use the Update to roll out new goodies at a time when it might be politically advantageous for them. The 2017 Update is no exception.
If you believe the media and the opposition, this Update comes at a time when Finance Minister Bill Morneau is in trouble on two fronts.
First, Morneau handled awkwardly the government’s plans to change the tax regime for private corporations. Those changes, in fact, have merit; but Morneau did not do a good job of explaining them. Worse, in their first try, he and his department did not take pains to craft the changes in such a way as to avoid unintended consequences, such as making it difficult for farmers to pass their farms on to their children. The finance minister has had to do some backtracking on all that.
Worse still for Morneau, however, are his personal challenges on the ethics and conflict-of-interest front.
Canadians only recently learned that Morneau did not put his assets into a blind trust, or sell them outright, before becoming finance minister. He used what is clearly a loophole in the regulations to keep a measure of control, if only at arm’s length, of his very considerable business interests. A number of Morneau’s cabinet colleagues, with far slimmer financial resources and less likelihood of getting into conflicts of interest, decided to sell their assets, holus-bolus, or place them in blind trusts.
Morneau chose to erect a thin “screen” between himself and his stake in Morneau Shepell, a major corporate service provider that has historically done business with the Government of Canada. He used the device of a holding company, and says that is what Mary Dawson, the ethics commissioner, advised him to do. Dawson says otherwise. In the commissioner’s version, she told Morneau he was not required to set up a blind trust, but did not otherwise advise him.
A good news story for the finance minister
The 2017 Fiscal Update gives Morneau a chance to turn the page and he is doing so with gusto. Not only can he give a glowing report on growth in both the overall economy and employment, he can also tout a significant decrease in projected deficits over the near term. The minister attributes these good results to the government’s policies, in particular, the expanded child benefit.
The government claims that the child benefit, which it introduced in its first year in power, has helped lift 300,000 children out of poverty. From an economic standpoint, the child benefit put money into the hands of lower- and middle-income Canadian, who have spent it. That spending fuelled demand for goods and services, which has caused businesses to expand and hire more workers. Or, so goes the theory.
This sort of economic stimulus has worked so well, Morneau now says, the government is going to do more of it. The government will, indirectly, increase the (targeted and means-tested) child benefit by accelerating the previously announced plan to index it to inflation. Originally, indexation was to start in 2020. Now it will start next year, in 2018.
It is relatively small tweak, but the government can credibly say, based on the expectation that inflation will run at 1.5 per cent next year and 2 per cent the year after, that it will be putting real money into the hands of Canadian families. Or, as the Trudeau Liberals prefer to say, they are putting dollars into the wallets of the “middle class and those striving to join it”.
The government will also, modestly, increase payments under a smaller program, the working income tax credit. This social payment is designed to bring the lowest paid workers to somewhere near the low income cut off line. And this one is not limited to families; workers without children also receive it.
That sums up the good news in the Update.
It is all in the category of adjustments to existing measures. But it was a great opportunity for rhetoric. In the House of Commons on Tuesday, Morneau cited all the good numbers on increased economic growth, as opposed to the stagnation of the previous Conservative decade, and then turned to the government’s signal accomplishment.
“When we invested in Canadian families through the Canada child benefit, we saw, right away, in turn, they invested in their families,” the Minister told the House, “They paid off debt, sent the kids to summer camp, bought healthier food, and maybe even a few more children's books. Right away, we saw a rise in household spending ... Now, with a little more wind in our sails, we are doubling down on the plan that has worked.”
Opposition focuses on what Morneau does not do
Neither Conservatives nor New Democrats wanted to argue against giving more many to families and low-paid workers. They chose to focus rather on Morneau’s failures of omission.
For the Conservatives, it is the failure to live up to Liberal promises on the federal deficit.
Conservative finance critic, Pierre Poilievre, does not buy the argument that future deficits will be lower than previously projected, or that the deficit continues to drop as a proportion of gross domestic product. He reminds the Liberals that they once said deficits would only be temporary. They now seem to have forgotten that pledge.
“The prime minister promised a small $10 billion deficit,” Poilievre said in his reply to Morneau, “Today we learn that the deficit is double that. He promised the budget would be balanced by 2019. Now we learn the deficit will be almost $17 billion in that year and there are no balanced budgets projected by the government ever.”
As for the New Democrats, they may have promised a balanced budget during the last election campaign, but they don’t talk about that anymore. Instead, they excoriate the Liberals for their lack of ambition, spreading some money here and there, but doing precious little to significantly improve the lives of Canadians families.
When he spoke, the NDP’s finance critic, Alexandre Boulerice, provided a long list of concrete actions the Liberals could take that would make a real difference, starting with a national daycare plan. He put it this way:
“Liberals said that they would do a real national child care program. [But the government’s new] measures will not create a single place in public childcare … Also, we still have 250,000 seniors living in poverty in this country. What was in the update? There is nothing new. For the unemployed people… six out of 10 are still refused by the current system… Plus, there is nothing about the minimum wage or creating a condition for better wages and good jobs in this country….”
At this point, Boulerice had his own statistic, one which paints a far less rosy picture than Morneau’s portrait of an expanding economy and growing middle class.
“2016-17,” Boulerice said, “saw the lowest average increase in wages in this country in the last decade. The government is creating jobs, yes, but a lot of Walmart jobs.”
In this analysis, Boulerice and his fellow New Democrats have some interesting company.
In a posting on Facebook, earlier this week, Alex Himelfarb, a onetime Clerk of the Privy Council (the most senior, federal public servant), states: “Most poor people are actually working — in precarious jobs with low pay, no benefits and fewer prospects.”
He then posts a link to an article in the Catholic Register about the Dignity for All Campaign, which is a joint venture of Citizens for Public Justice (CPJ) and Canada Without Poverty.
CPJ puts out an annual October report on poverty trends. In this year’s report, it points out that 70 per cent of those living in poverty are the working poor, not the unemployed or the homeless.
“Youth 15-24 and women are over-represented in precarious work,” the CPJ report says, “along with racialized people, Indigenous people, immigrants, people with disabilities, and older, working-age adults.”
The current government’s discourse is so middle-class obsessed that the people described in CPJ’s report, for whom the Dignity for All Campaign advocates, can legitimately fear that the sunny-ways Liberals have almost forgotten them.
Photo: IMF Photo by Joshua Roberts
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