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Alternative to 'do-nothing' Federal Budget would alleviate poverty and add jobs

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Image: policyalternatives.ca

The following remarks are excerpted from the 2014 Alternative Federal Budget press conference, featuring Armine Yalnizyan, David Macdonald and Bruce Campbell (February 5th, Parliament Hill).

This year is our 19th Alternative Federal Budget (AFB).

From the beginning, we've developed a rigorous economic and fiscal framework for our Budget; and we have acquired an enviable reputation for more accurately forecasting fiscal balances than the  Department of Finance. Organizers of a recent international conference in Berlin recently called our alternative budget the leading example of its kind in the world. Former parliamentary budget officer Kevin Page has praised it, as have many academic economists.

Budgets are about choices -- choices that reflect the values and priorities of the governments that produce them. Our AFB reflects the social, economic and environmental justice values that guide our work.

This year's alternative budget has 25 chapters and over 90 contributors from civil society, labour and progressive groups (to whom goes my many thanks as without their input, this project would not be possible).

I would like to draw your attention to an important innovation in this year's alternative budget. Using Statistics Canada's sophisticated social policy analysis software, we have calculated the distributional impact of our tax measures, as well as the number of people that would be lifted out of poverty by these measures. This is a first for our alternative budget, but more importantly this is a first for any budget in Canada. This presented a challenge for our team of (ninja) economists, but we did it.  If we can do it, surely any provincial or federal finance department can, too. We think the incorporation of distributional impacts of budget measures is an idea whose time has come.

I think you'll agree: our plan shows impressive progress can be made against poverty, all that's lacking is political will.  In total, the Alternative Federal Budget lifts 855,000 Canadians out of poverty, raising one in five low-income people above the poverty line.

Canada is in the appalling position of having proportionally more children living in poverty than adults.  The alternative budget would rectify this situation by lifting a quarter million children out of poverty.

We also focus on low income seniors, who are often women whose partners have passed away.  Our alternative budget lifts 1 out of every 2 low-income seniors above the poverty line, providing a more dignified retirement for over 300,000 of them.

However, the Alternative Federal Budget is not purely about poverty reduction. We also examine the implications across the entire income spectrum.  On average, the bottom 60 per cent of families would see an increase in their incomes.  The upper middle class would pay slightly more; equal to about 2 per cent of their incomes. Canadian families making over $150,000, who are in the top 5 per cent of families, would contribute the most, seeing an average tax increase of 6 per cent. This is largely because we close a number of costly tax loopholes that effectively benefit only the most affluent Canadians in the first place.

The distributional impact of our plan could not be more different than the impact of the federal government's plan to introduce income splitting for families with children. 86 per cent of families would receive nothing under the government's proposal. Income splitting would provide the richest 5 per cent of families with an average $1000 and the bottom 60 per cent with an average $50 bucks, further exacerbating income inequality.

The government has real policy choices to make at budget time.  For the same amount of money they could continue to send cheques to Canada's wealthiest seniors through pension income splitting, or we could eliminate seniors' poverty. For the same amount, they could implement income splitting for families with children sending the richest families support they don't need, or we could provide universal $10 a day childcare. How we choose is critical to whether we have a more or less equal Canada going forward.

Today we offer you an Alternative Federal Budget, so you can compare it to what's coming up.

Next week our government is expected to offer you a do-nothing budget for 2014, deliberately showcased for a couple of hours of attention between the luge and snowboarding events at the Olympics (I kid you not) so you can forget about the importance of what's going on.

Canadians are being shoved down a hurried path to surplus, by cutting services even as revenues rise as a share of the economy. The Finance Department's Fall Update shows our government expects federal revenues to rise as a share of the economy, even as expenditures fall.

The federal  spending role will be the smallest it has been since the end of the 1940s.  That “small government” moment was accidental. The ratio of federal spending to GDP shrank because the economy grew unexpectedly quickly.  Today a small government is by design.

The Economic Action Plan requires us to cut services to veterans and students; reduce inspections for food safety' conduct less scientific research and offer fewer impartial statistics; crack down more on charitable organizations and less on tax frauds.

Why is this necessary? To offer more tax cuts like income splitting, cuts that do nothing for our poorest families, single parents, but enrich those who need help the least. That's what a balanced budget means for our government.

The Alternative Federal Budget has a balanced budget approach too. It's a different kind of balance that more than doubles projected growth in employment, with measures that would add 811,000 jobs over the next 3 years. With more people working, there will be more revenues.  We take a balanced approach – more revenues allows us spend more, not less, and tackle the challenges individuals, families and communities face across this land, too many of them long overdue for attention.

Not only does our plan target resources ($4.5B) to lift people out of poverty and reduce inequality [tax $30B-$50B] of opportunity, it improves everyone's quality of life by:

- stepping up spending for core infrastructure ($1.25B), public transit ($1.35B) and housing ($2B);

- making sure we have all hands on deck when they're needed, by supporting provincial initiatives to expand access to early childhood education ($1 to $3B) and post-secondary education ($4B);

- ensuring First Nations peoples are ready and able to take advantage of economic opportunities as they see fit ($3B), as the North becomes the New West;

- setting up a Youth Initiative so we put talent to work, instead of letting it lie fallow ($100M);

- putting our money where our mouth is and assuring clean water for everyone ($4.8B) and a healthy smile for all children ($200M);

- working with the provinces to broaden access to an affordable Pharmacare plan ($3.4 B to $4.6B); reduce long-term care user charges (by 50 per cent, $3.2 to $3.4B) and bring care to our communities ($2.6 to $2.6B).

Our balanced budget approach -- higher revenues supporting higher spending -- gets us to surplus only 1 fiscal year after the federal plan, maybe earlier if we use the $3 billion contingency fund the way the feds might.

If the AFB was implemented, it would boost the economy, from the bottom up. Check the Federal Budget Plan from 2009, page 240:  the government boosts the economy most when it boosts from the bottom up.

Instead, the Balanced Budget Band is fiddling while the economy drifts into troubled waters.  Cutting services for everyone while promising tax cuts for the rich not only shows poor political leadership; it is fiscally irresponsible.  Our slowing economy is trying to absorb an estimated fiscal drag of almost a full percentage point on this year's growth, as estimated by the Parliamentary Budget office, caused by ghosts of federal budget cuts past and present.

The Alternative Federal Budget reduces income inequality and strengthens the economy. The feds pledge to widen inequality and ignore the economy.  It's time for a more balanced approach to a balanced budget.  

For the full Alternative Federal Budget 2014, the Budget in Brief and more, visit www.policyalternatives.ca/afb2014.

Image: policyalternatives.ca

 

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