In the run-up to the 2022 federal budget, the sound from Bay Street was positively biblical ... wailing and gnashing of teeth, rending of garments, and cries of despair.
Corporate Liberalism was apparently dead and the socialist hordes were at the gates, imposing “big government” and onerous taxes on the “wealth creators.”
In the end, we got a very Liberal budget with a scattering of progressive concessions to secure the support of the NDP.
As with all budgets, a great deal is made of small items, like baubles on a Christmas tree.
Take over-blown claims of investing in affordable housing.
While Canada desperately needs more supply, we get a promise to build just 6,000 new co-op units, and a Tax-Free Home Savings Account which is more likely to further inflate prices than to help those who cannot afford to buy.
The same is true of clean energy and green jobs. There is, to be sure, a serious investment in zero-emissions vehicles. But support for building retrofits to increase efficiency and use of cleaner energy like heat pumps is minimal, and certainly far short of the massive changes that are needed to meet our ambitious but necessary emissions targets.
The Liberal plan to deal with the climate crisis relies heavily on carbon taxes and public subsidies to corporate investment via the new Canada Growth Fund and the Canada Infrastructure Bank, plus the new tax credit to promote carbon capture and storage in the tar sands.
Their plan is weak on regulation (still no cap on oil and gas industry emissions) and on the major public investments needed to decarbonize the economy. Indeed, the Liberals cannot even bring themselves to halt new pollution enabling mega projects like the expansion of offshore oil production.
As the United Nations Secretary-General said on the eve of the budget, “investing in new fossil fuels infrastructure is moral and economic madness.”
The budget did respond to NDP demands to decisively expand public health care over time, but much more work is needed to create a national system including dental care, pharmacare, mental health and care for the elderly.
There is weak Liberal ambition when it comes to social spending and public services flows from their commitment to low taxes, especially on corporations and the rich. In line with NDP demands, the budget does impose higher taxes on the huge profits of the financial sector which resulted from government action to deal with the pandemic.
But there will be no wealth tax on large fortunes, and no end to the special tax treatment of capital gains income and other fair tax measures that could raise billions of dollars of new revenues.
While much of the mainstream media deem the Liberals to be “big spenders” the fact of the matter is the Liberals have only very limited progressive ambitions and only move under political pressure.
Federal program spending will be just above 15% of GDP after the special pandemic programs have expired and recovery takes hold. That compares to about 14% in the last year of the Harper government. Federal revenues have increased by just 0.5% of GDP over the same period.
Finance Minister Freeland has promised to further reduce the federal deficit and debt as a share of the economy. This implies no major increases in public investments unless they are financed by tax increases, and spending cuts in the event of a new recession.
This budget certainly has some progressive elements. But it falls well short of the major policy shift that many had sought in response to the compelling lessons of the pandemic.
Andrew Jackson is senior policy adviser at the Broadbent Institute.