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A Very Liberal Budget

Thanks to the announcement of significant funding for a new national child care and early learning program, the 2021 federal Budget can be fairly described as the most progressive since the 1970s when the NDP pressed a Liberal minority government to build the modern welfare state. That said, it falls well short of what many on the left hoped for, and fails to set the stage for social and economic transformation after the pandemic has passed.

If one turns to the small print in Annex 5 of the Budget, one finds that, by 2025-26, federal program spending will be only marginally higher as a percentage of GDP than it was before the pandemic (14.9% vs 14.6%.) There is a matching small increase in federal revenues as a percentage of GDP. Assuming economic recovery, the federal deficit and debt will soon begin to fall as a share of the economy after spiking when the pandemic took hold.

There is no “return to big government” as alleged by the deficit and debt hawks on the right. Nor is there a looming debt crisis. Rather, there has been a modest shift in the balance between social Liberals and business Liberals.

The promise of sustained federal funding for the provinces for child care and early learning is more than welcome, especially since the focus is on expanding affordable high quality care in not-for-profit centres. The government has recognized that good social policy is also good economic policy.

But the same model is not promised for public health care. There is virtually no mention of pharmacare in the budget, and only a small ($3 Billion over five years) increase in federal support for elder care is promised, despite the shocking conditions (most seriously in the for profit sector) revealed by the pandemic.

When it comes to income security, the gaping holes in Employment Insurance were temporarily filled by the government, but the flexible and temporary new EI rules which give access to more workers and increase benefits will remain temporary. The Canada Recovery Benefit for the gig workers who do not qualify for EI, and wage subsidies to employers are all to be reduced and phased out by this Fall.

Serious consultations are promised on Employment Insurance reform but the intention seems to be to return to a flawed system as soon as possible. There is no mention of anything even remotely resembling a basic income guarantee despite the popularity of the idea at last week's Liberal convention. That said, the government does propose to increase tax credits for the working poor.

The budget fails to address the flaws in the Canada Recovery Sickness Benefit, which only pays benefits to longer term workers with a significant time lag. Nor does it challenge the provinces to provide desperately needed paid sick leave so frontline essential workers can take some time off work as needed to deal with the virus.

Turning to transition to the green economy, there are welcome promises of additional federal spending, for example on home retrofits for higher energy efficiency, public transit and passenger rail, and support for clean technology, but a long list of tax breaks and subsidies does not really amount to anything resembling a major, transformational green jobs plan. The government's focus is much more on carbon pricing than on needed regulations, public investment in clean energy, and a green industrial and trade policy.

Major subsidies and tax breaks to large companies in the industrial and resource sector are proposed to reduce greenhouse gas emissions, but some should be considered to be subsidies to continued fossil fuel extraction.

The Liberal government's lack of real ambition in many areas is reflected in their tax agenda. They continue to oppose wealth taxes and the special treatment of investment income in the personal tax system, big measures that would raise a lot of revenue for progressive spending measures and reduce growing economic inequality.

In fairness, they do propose to limit corporate tax avoidance and to devote more resources to audits. But a lack of real commitment to fair taxation constrains the ability of the government to finance a major increase in program spending over the medium and long term.

The budget reflects the impact of the pandemic on the public mood. Citizens have seen the deep flaws in our economic and social model and called for a change, and the Liberals have responded to a degree. But there remains far more to be done.