March budget redux

With just a few changes, the budget that brought down the minority Conservative government in March is back. This time, with the Harper government holding a majority there is no question that it will pass.

The only significant changes to the almost $250-billion budget are that a couple of election campaign promises have been added to the package. A $2.2-billion transfer to Quebec for tax harmonization for one, and for another, the $27-million a year that would go to political parties, representing $2 for every vote cast for each party during an election, will be fazed out over four years. Coincidentally, just in time for the next federal election.

Weakening the funding platform for other parties means the Conservatives, who have a strong fundraising base without the taxpayer endorsement of $2 per vote, are already laying the groundwork for what they anticipate would be a long run in power.

The other special feature of the retread budget is Finance Minister Jim Flaherty’s projection that the books will be back to balance one year earlier than previously estimated, that is by 2014/15. A billion dollars in cuts is expected next year, $2-billion the year after and $4-billion each year after that. But details on how that is going to happen were not very specific. The finance minister, however, pointed to dismantling some federal programs and reducing the staffing of the bureaucracy.

The first cuts would come through shrinking federal services, but there is concern that, similar to the Paul Martian era in the 1990s, which took us out of deficit by cutting transfer payments affecting healthcare, education and social welfare spending in the provinces, the effect may reach closer to home.

Prime Minister Stephen Harper has already promised not to cut transfer payments to the provinces but the cuts would have to come from somewhere. We know the government is not going to cut military spending. On the contrary, it will be increased with the purchase of those F-35 fighter aircraft. And healthcare is sacrosanct among Canadians. Maybe that $27-million to be taken away from political party coffers could go toward paying down the deficit.

What is certain is that the Conservatives are taking a gamble that they will have accomplished what they promised so they can present a rosy picture in time for the next federal elections. It will be no small task. The current deficit projection for this year is $36.2-billion. This follows last year’s record high $55.6-billion. Moreover, there will be no paying down the deficit this year.

In any case, whenever finance ministers start to make a point of deficit cutting they are in effect talking to financial institutions and bankers. The interests of ordinary citizens are much more about what money government will spend to take care of their needs. Toward that end, the March pre-election budget with its small appeasements and lack of a strong nation-building program was repeated. Volunteer firefighters will get a tax credit, although a tax deduction would have been more appreciated. There will be a tax credit of up to $5000 for retrofitting eco-friendly fixtures in homes and small tax credits for children’s arts activities and family caregivers. There will also be more money for the poorest retirees through the Guaranteed Income Supplement – $600 more per year if they are single and $840 more for couples, as had been previously promised.

The Conservatives are however moving in the right direction when it comes to small and medium size businesses, which account for the majority of businesses in Canada. The budget includes a break on Employment Insurance with a tax credit for new hires, which will help to reduce payroll costs. A program to provide training for older workers and to help them find work will continue to receive funding.

We are now two years past the global banking crisis, but economic recovery is still fragile. Canada has weathered the storm better than other jurisdictions, but the government needs to make sure that while they are trying to conquer the deficit they are not doing so on the backs of the most vulnerable among us.

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