Economy

The new Canada Child Benefit (CCB) unveiled in the 2016 federal Budget has been widely supported by progressives and anti poverty activists who have long favoured the expansion of income tested child tax credits. By contrast to the so called middle-class tax cut which favours the more affluent, the CCB will have a positive impact upon the lamentably high rate of child poverty in Canada (which stood at 16.5% in 2013), and will promote greater income equality among families with children.

Somewhat ironically, the new program is an unintended consequence of the regressive policies of the Harper government which opened up the needed fiscal room for progressive change. 

The Budget reinvests significantly and appropriately in many important government programs broadly in line with the promises made in the Liberal platform. However, it falls short in some important areas, and the biggest failure is to restore federal fiscal capacity to support improved social programs and public services over the long term.

The bottom line is that the Budget increases federal government program spending from 13.6% of GDP in 2015-16, the last year of the Conservative government, to 14.6% of GDP in each of the next two fiscal years. This represents a significant increase in spending of about $20 Billion in the coming year, 2016-17. Program spending is, however, forecast to gradually decline as a share of GDP back to the 2015-16 level after the next two years.

The idea of a basic income guarantee for all Canadians has again moved to the front burner with the House of Commons Finance Committee and the Ontario government supporting further study and experimentation. This could be an important step forward, but incremental reform towards an income tested guarantee for working age Canadians delivered through the tax system will be the best path forward as opposed to more visionary “big bang” solutions.

The concept of a basic income has won support from both the political right and left. For the former, it promises to simplify complex income security programs and to replace most if not all welfare state programs with a single cash payment which would allow individuals to meet their needs in the market. For the latter, it is a means to free people from dependence upon the job market, a tool for social solidarity amidst a rapidly changing world of work, and a means to abolish poverty.

Seldom does a social policy idea make headlines for weeks. 

More than twenty years ago, back in 1994, the federal government released the report of the Advisory Group on Working Time and Distribution of Work. (Disclosure: I served as the Labour Adviser.) The central message of the report has been pretty much ignored by governments ever since, even though it is more relevant than ever today in a slow growth world where good jobs are hard to find. 

The Broadbent Institute is an independent, non partisan organization that promotes progressive change. Grounded in social democratic values and ideas, the Institute seeks to deepen our democracy, encourage strong action to counter growing economic and social inequality, and fuel a transition to a more innovative and sustainable economy. This submission lays out concrete policy proposals that the government should consider if it is serious about implementing progressive reforms in Budget 2016.

As the new Liberal Government takes over the reins of power from the Harper government it will be interesting to see what has and hasn’t changed in Canada’s approach to international trade policy. The early signs, for those concerned with how new trade and investment agreements impact policy making in the public interest, are cause for concern. 

Low oil prices have taken their toll on an already weak Canadian economy, where household debt levels are at record highs and business investment continues to lag. The Bank of Canada held off on a further rate cut this week, opting instead to wait and see the size and structure of fiscal stimulus in the upcoming federal budget.

With a plunging Canadian dollar, collapsing oil prices, slumping stock markets and signs that the economy stalled in the last quarter of 2015, it is easy to think that we are on the cusp of economic disaster. But the state of the Canadian economy, while indeed dismal, does not justify alarmist pronouncements that threaten to make things even worse by undermining consumer and business confidence.

The new Liberal government is on track to seriously address the growing problem of poverty in old age. But their election promises need some critical reconsideration.