Keeping our eye on the ball: Budget 2010

Everyone concerned about the future of Canada's social programs, transfers to individuals (like pensions) and government programs in general should be keeping a keen eye on Ottawa for the next month as we get closer to budget day on March 3rd. The Harper conservatives have been thinking about this day for a long time but their plans, usually firm long before implementation, and designed personally by Harper, are in disarray this time.

Harper is juggling various strategic balls at the moment and each of them has risk associated with it. First, Harper did not expect to be heading for this first big deficit budget tied with the Liberals in the polls. His gross miscalculation about the impact of shutting down Parliament has thrown a serious wrench into the works. While it is impossible to be certain, there is good reason to believe that he might have forced an election on the budget -- placing in it some calculated outrage that the opposition parties would have to vote against. Polls in the fall -- when planning began in earnest -- suggested a possible majority. That is now dead in the water.

According to the Globe and Mail there is real dissent within the ranks of the government over the relative political benefits of going after the deficit versus continuing stimulus spending -- or at least, not cutting normal expenditures. This question takes on much greater significance given that Harper now does not control the political agenda. Even in early January Finance Minister Flaherty was warning about "restraint." No more. The message now is more nuanced and exposes real confusion in the bunker.

Both Harper's options have risks. If he starts hacking away at the things he hates -- almost everything but defence spending -- Harper risks angering even more Canadians whose economic insecurity is still front of mind. Unemployment is not coming down and many Canadians are maintaining their life style in spite of hardship by borrowing on the increased value of their homes. The rapid increase in home values has postponed the moment of truth for many people. But the real estate bubble that I warned about last fall is now beginning to worry even the executive of the Big Six Banks -- the short term beneficiaries of easy mortgage money. If that bubble -- not in danger of bursting just yet -- should grow and stimulus funding cause inflation and higher interest rates, the risk of a mortgage default crisis becomes real. Harper does not want to be planning for an election during such a crisis as it would mean certain defeat.

It is fascinating to watch how the framing of an issue can change almost overnight in the right circumstances. I, along with a lot of others, would have thought that the sustained and relentless 1990s campaign against deficits would have placed a permanent taboo on public acceptance of them. But the financial crisis changed that. When those who were most vociferous about no more deficits (the hit-the-debt-wall crowd) suddenly reversed course, the taboo simply melted away.

That is what a recent poll [2] suggests. When asked which should be the government's priority -- spending to create jobs or controlling spending to eliminate the deficit, 51 per cent of Canadians said keep spending versus 44 per cent who said control spending. Even amongst self-identified Conservative voters the numbers were very close: 50 per cent were for controlling spending, 46 per cent for continuing the stimulus. Women, who are now moving to the Liberals away from the Conservatives, were in favour of continued spending by a margin of 55 to 40 per cent. In every important contested province except Quebec the numbers supported spending -- in B.C. 53 to 38 per cent.

There is good reason to believe that any serious cuts will be postponed -- perhaps only till the fall and an economic update. But that time will be valuable for progressive forces because it will give us time to organize a campaign to tax the rich -- and corporations -- as the only sane and rational way to get back to fiscal health.

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