Economy

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. 

The recent federal election featured something of a debate on fiscal policy, with the Liberals promising to run modest deficits for three years in order to stimulate a sagging economy and finance needed long-term investments in infrastructure and social programs. This approach won wide support among both progressives and mainstream economists.

Seven years after the great financial crisis of 2008, the world economy remains at high risk of a new slump despite continued ultra low interest rates. The IMF has called on the United States to put any interest rate increase on hold so as not to worsen the still extremely weak economic situation in Europe and developing countries, notably China.

The so-called “middle class” tax cut promised by the newly elected Liberal government in the name of promoting greater fairness seems set to be quickly implemented for the 2016 tax year. Yet the distributional and revenue consequences of this measure are often misunderstood, and the proposed change merits reconsideration.

Currently there are four federal tax brackets: 15% on taxable incomes of less than $44,701; 22% on further income up to $89,401; 26% on further income up to $138,586; and 29% on income above that amount.  

Canada’s right-wing have fiercely denounced the Alberta NDP government’s first budget for its failure to deeply cut spending on social programs and public services so as to balance the books. The Fraser Institute has even gone so far as to claim, absurdly, that the large Alberta deficit of $6.1 billion this year is due to years of so-called over spending rather than because of the recent collapse of oil prices.