Reactions to the 2021 federal budget have been all over the map. Is it too much, too little? Is it the shock the country needs or a missed opportunity to set a new course?
As expected, a number of headlines are preoccupied with the numbers — spending, deficits, debt — and compared to the constrained budgets we got used to seeing over the last three decades, this one does feel different.
But fiscal politics are clearly changing. Decades of austerity did not yield the promised benefits. Instead we have seen growing inequality and insecurity, persistent poverty, deteriorating infrastructure, accelerated nature loss and, as a result, declining social and political trust. And even as we acknowledge the existential threat climate change poses, successive governments have failed to rise to the challenge.
No doubt this past year of pandemic has changed us. COVID has made painfully visible the human and economic costs of austerity politics. We have seen how ill-prepared we were for a crisis that we knew was coming. Dan Gardner rightly asks why we typically wait for people to die before we muster the will to manage known risks.
Well, there are signs that some governments are ready to eschew the austerity politics that brought us here, get past deficit phobia, and recognize that sometimes the risk of doing too little outweighs the risk of spending too much. This is such a time. Both the EU and the U.S. are talking transformation, have huge spending plans on the table and are showing some real ambition on climate change. Even austerity-promoting agencies like the IMF are changing their tune.
So how does our federal budget stack up? There’s plenty to like, especially the important commitments to child care for which so many have fought long and hard only to be repeatedly disappointed. This time there’s enough money on the table to get this done and do it right. There are a number of other good things and hopeful signs. But, notwithstanding what seem to be “big numbers” this budget is, at this critical juncture, a missed opportunity, a choice for incremental fixes over real transformation.
In the face of headlines highlighting deficits and debt, calls for even more will no doubt raise eyebrows among much of the punditry. But more is needed. A call for transformation, however, is not just about more. It’s about ensuring that we don’t lock in the policies and systems that got us here. It’s about setting us on a new course and rebuilding our collective toolkit to meet the multiple and layered crises we face.
So, what would a truly transformative budget look like?
1. Accelerated transition to a net-zero carbon economy
The budget and some pre-budget announcements did up our game on climate change and promise significant investments in crucial areas such as green transportation, energy-efficient homes, and agricultural practices. The introduction of green bonds is promising. But experts remind us that the clock is ticking, our past failures to move the yardsticks have upped the urgency and most conclude that the measures in the budget fall far short of the investment required.
Teika Newton of the Climate Action Network worries about the budget’s contradictory messages and inadequate investment. She put it this way:
“We are in an exceptional moment where smart investment could fundamentally redirect the whole of our economy and society toward a healthier, more resilient and climate-safe future. … Yet the big take-away is this: we are in a time of changing norms, and Budget 2021 does not present a vision for climate-safe transformational change.”
Cathy Orlando of Citizens’ Climate Lobby adds: “The clock is ticking and the youth are watching.“
We talk emergency but our actions don’t match. Given the urgency of the threat of climate change and nature loss and the possibilities created by the ambitious proposals of the Biden administration, we will come to regret — or hopefully revisit — the budget’s relative modesty on climate action.
Change is coming. That’s not the question. We have to decide whether we are leader or laggard, whether we will be dragged into a greener future or seize the considerable opportunities and collectively manage a just transition.
2. A blueprint for the care economy
There’s no contradiction in celebrating the victories of child-care and minimum wage activists while still recognizing that the budget falls far short of providing anything like the investments we need in the care economy.
Money for traditional and “shovel-ready” infrastructure is welcome but nothing is more important than investing in the infrastructure of the care economy, from child care to long-term care, from education to health care, from ending homelessness to fighting racism and the legacy of colonialism.
For years we have starved social programs and put off essential reforms, preoccupied with so-called financial health and resiliency at the expense of human health and resiliency. Surely if nothing else, COVID has shown us the enormous cost of treating care as an afterthought, something we will get to if and when we can afford it. Investing in the care economy should not wait any longer.
It also makes good economic sense. The care sector is a huge and growing component of the overall economy and comprises the biggest share of jobs (many unpaid) of any sector by far. Further, countless studies have shown that investments in universal child care and pharmacare would more than pay for themselves, that reducing inequality and poverty is good economics, that few investments would yield greater returns than realizing the right to housing and ending homelessness.
It’s high time to view child development, education and training as public goods. Caring is good for us, good for the economy, and good for the planet. Never has it been clearer that care workers are essential workers and that ensuring decent work in this sector is in everybody’s interest.
Investment in the care economy is what’s needed to repair our broken economy and fractured society and, most important, deliver on the ultimate test of any budget, enhanced well-being. As Pat Armstrong, Marjorie Cohen, Laurell Ritchie, Leah Vosko and Armine Yalnizyan put it: “the care economy is the driver of our present and our future.”
The budget commitments on child care and standards for long-term care are a good place to start. But much more is needed. Certainly we cannot do everything at once but at a minimum we should expect a blueprint and timetable for the care economy that could serve as the equivalent, say, of what the Marsh Papers did for the post-war welfare state.
3. A commitment to redistributing wealth and power
Central to transformation is addressing the corrosive inequality in wealth and power that has undermined social and political trust, hurt our economy and frayed the social fabric. Transformation must include a commitment to reducing inequality and rebalancing power.
Numerous studies have documented a worrying decline in commitment to democratic institutions and in the belief that democracy can deliver what’s needed. For example, Roberto Foa and Yascha Mounk, who have long been tracking public support for democracy conclude:
“What we find is deeply concerning. Citizens in a number of … democracies in North America and Western Europe have not only grown more critical of their political leaders. Rather, they have also become more cynical about the value of democracy as a political system, less hopeful that anything they do might influence public policy….“
Wolfgang Streeck and Armin Schäfer make a compelling case that this is the not-too surprising result of the politics of austerity. It’s what happens, they say, when people believe that vast market forces or the interests of the rich and powerful have captured the government, when people come to view the democratic process as more or less irrelevant to their needs: they increasingly opt out or act out and can become more vulnerable to the appeal of non-democratic solutions.
For Schäfer and Streeck democratic renewal is very much a budget matter. It starts with a commitment to reducing inequality, combatting poverty and rebalancing power through investments in the care economy and strengthened income supports paid for by sharply progressive taxes.
Proposals for a basic income guarantee are fundamentally about empowering citizens and workers. Democratic renewal also demands that our policies and programs be embedded in a commitment to gender equality, anti-colonialism, and anti-racism. And it will require revitalizing our democratic institutions, starting with often-promised but never-delivered electoral reform.
All these policies would help people, especially those who have felt excluded, to connect to one another and their governments and would restore more power to a greater number.
Also essential is democratization of the workplace, that is to say, redressing the inherent imbalance in power between workers and employers. The $15 federal minimum wage is a welcome step even if largely symbolic. The federal government could do much more to set the standard of decent work and fair pay for all jurisdictions by developing a model labour code for the federally regulated sector and workers in companies that do business with the federal government.
Protecting workers’ rights will also require changes in the rules of the game, trade agreements that protect worker rights, bankruptcy laws that give priority to pensions and disability benefits, corporate governance rules that enhance workers’ voice, and policies that help expand union membership and encourage and facilitate worker ownership.
Democratic renewal is not a side issue. We will not rise to our collective challenges if we don’t rebuild social and political trust. No change will hold without a power shift.
4. A renewed social union framework
Almost everything that matters for our future involves both orders of government, Indigenous governments and communities and, for that matter, cities and towns. Successive federal governments have avoided big social and environmental reforms in part at least to minimize the inevitably tense and sometimes raucous intergovernmental conflict that is almost automatic in a federation such as ours. We cannot afford such timidity now.
The Supreme Court has paved the way for federal leadership on climate change. Now the federal government needs to find its approach to social policy too. Renewing our social union calls on tools we have allowed to rust out and muscles we haven’t used for decades. It also calls for new approaches to ensure that municipalities have the resources they need given the increasingly central role they play.
Federalism should not and need not be an impediment to transformative change. Rather it ought to be a resource to help us or perhaps force us to reconcile universality of rights and diversity of needs and experience, to balance the imperatives of solidarity and flexibility. We know that’s no easy enterprise. It means finding accommodation among governments of different stripes, workarounds where necessary, and asymmetry where appropriate.
We will have to get better at holding all governments to account for the commitments they make in intergovernmental agreements. It will take leadership. It will also take money. For example, it’s hard to imagine how the federal government will win agreement on conditional child-care transfers without addressing the provinces’ real concerns about health funding.
We need a new social union framework that sets out how governments will work together, that creates federal-provincial mechanisms that foster collaboration, transparency and accountability and this must be built on a renewed fiscal federalism. We cannot fail again to deliver on child care and we cannot stop at child care.
5. A tax system that provides the foundation for a green and just Canada
The budget does signal a welcome shift away from austerity and our deficit and debt phobia. The cost of public borrowing is so low that it would be frankly irresponsible not to borrow what’s needed and it would be foolish to adopt some inevitably arbitrary fiscal anchor especially now as we face multiple and layered crises.
Inflation poses no imminent threat and we have the tools to deal with it in any case. The central bank is playing a hugely important role in reducing fiscal risks. And, to reiterate, fiscal politics are changing not least because it is finally dawning on many governments that the risks of doing too little far outweigh the risks of doing too much.
The budget also opens the long-closed door on taxes even if only a crack. It promises some significant steps to crack down on tax evasion, a welcome and timely digital tax, closes some loopholes and introduces some minor tax increases, for example, on luxury cars and planes. But again all this falls far short of the changes we need in our tax regime. No wealth taxes, no excess profits tax, no corporate tax increases, no major steps on making our tax system more progressive.
To ensure that our public investments are sustainable and that the costs and benefits of these investments are fairly distributed we need fundamental tax reform: to catch up to social, environmental and demographic change, to plug the leaks and fix what’s broken, and to ensure that those who have benefitted most from how things are pay the greatest share for making things better. We seem to have overcome our deficit phobia. We had best find a way to get past our tax phobia. Polling suggests Canadians are ready.
6. A re-imagined public sector
The relentless COVID bug was a test — of our national character, of our trust for one another, science and government, of our institutions. We saw bursts of solidarity and sacrifice. We saw what government can do. But we also saw how the virus preyed on our social and economic inequities, on our failures to make meaningful progress towards Indigenous reconciliation and racial justice, and to ending homelessness and combatting the ravages of poverty.
It also revealed the cracks in our systems. We were unprepared. Our public health system was not up to the challenge. We had once been a leader in producing vaccines. We surrendered that. The weaknesses in our long-term care system proved tragic, fatal. As were the failures to end chronic homelessness and reverse prison overcrowding.
Anand Giridharadas has written powerfully about the enduring costs of four decades of war on government and about the need for an equally vociferous battle to rebuild public capacity and trust in public institutions.
Transformation will require that government make a comeback and this will take an investment in public service — people and tools — and the development of new approaches to public enterprise, such as community ownership and cooperatives and just maybe a public university-based agency for vaccine production.
So, yes, deficits are growing, spending is up from what we have got used to but if government is truly to make a comeback, if we are to usher in a real rebalancing of public and private, individual and collective, this budget is, at best, just a down payment.
Alex Himelfarb is a former Clerk of the Privy Council. He chairs and serves on numerous boards as well as being a fellow of the Broadbent and Parkland Institutes.
This article was first posted on Alex Himelfarb’s blog and is reprinted here with permission.
Image credit: Justin Trudeau/Facebook