January 2014
FORGET FEBRUARY; ITS THE BUDGET OMNIBUS BILL THAT REALLY MATTERS
Last Monday, the Finance Minister announced that the 2014 Budget would be tabled in the House at 4 pm on February 11th. The reaction in the media and among the Opposition Parties was very quick. Why was the government planning to release its most important annual policy document during the Winter Olympics, when Canadians would be glued to their TV sets watching a tape of the “luge” event? Was the Government trying to deliver a “do nothing” budget, which would go unnoticed by all Canadians. Probably, but who cares?
Read MoreWHAT ARE THE CHANCES OF A BALANCED BUDGET IN 2014-15?
Following his meeting with the private sector economists, Mr. Flaherty was asked about the possibility of a balanced budget, or even a surplus, in 2014-15 – one year ahead of the government’s commitment to eliminate the deficit by 2015-16. The Minister did not directly answer the question, but did not explicitly rule out the possibility either. What are the chances that the deficit could be eliminated a year earlier? Even if the chances were good, why would the government want to announce it in the 2014 budget?
ANSWER THE PHONE MR.FLAHERTY, THE GOVERNOR IS CALLING
On Wednesday, the Bank of Canada issued its regular monetary policy report. To no one’s surprise, the Bank maintained its overnight rate at one per cent.
But the real message wasn’t the setting of the bank rate. That rate hasn’t changed since September 2010. The real message is that Governor is very concerned about the prospects for the Canadian economy. There is simply not enough aggregate demand in the economy and the prospects are not that certain.
Read MoreGOOD POLITICS BUT QESTIONABLEPOLICY-A FEELING OF DEJA VUE
In the October 16th Speech from the Throne, the Government announced its intention to introduce legislation, requiring “balanced budgets during normal economic times and concrete timelines for returning to balance in the event of an economic crisis”. No details or explanations were provided.
WHY IS FLAHERTY SO OPITIMISTIC ABOUT THE BUDGET?
The economy lost almost 46,000 jobs in December and the unemployment rate rose to 7.2 percent, with all job losses concentrated in full-time positions. In 2013, only 102,000 net jobs were created, the worst job creation record since 2009, with most of the gains in part-time employment.
Read MoreTAXATION AND MIDDLE INCOME FAMILIES
A few days ago, Paul Adams wrote a very compelling article about the nuances and complexities of being “middle class”. Apparently most Canadians consider themselves “middle class”, although the “middle-income is getting a smaller share of the total Canadians earn than they were 30 or 40 years ago”. His article is about the various ways middle income can be defined and what this may mean for Trudeau who is focused on the “middle class”.
What To Do In Budget 2014?
In our review of 2013, we concluded with the following:
In 2013, the federal government continued, as in the past, to show its ideological arrogance; its unwillingness to confront major economic challenges; its disdain for Parliament; its aversion to openness and transparency; its rejection of a federal role in working with the provinces to strengthen the Federation; and its inability to adopt evidence based policy.
This has been the government’s method of operation for the past seven years. Why change now? Expect more of the same in 2014.
2013 – A Year Like Every Other Year
Finance Minister Jim Flaherty will no doubt look back on 2013 as a very successful year. He is, after all, on track to achieve the only thing he cares about, and that is the elimination of the deficit in 2015-16. This will allow the government in the 2015 election to fulfill its 2011 election promises to introduce income splitting for families with children 18 years of age and under; to extend the fitness tax credit to adults, and to double the amount allowed for tax-free savings accounts.
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