Five Tests By Which to Evaluate the Federal Budget

March 26, 2012

The coming government budget--if the advance billing is accurate-- could fundamentally change the direction of this country.

An austerity budget would not only threaten Canada’s halting economic recovery, it would be offside from what mainstream Canada considers its priorities: job creation, reducing income inequality, and ensuring public services such as health care and education are there for all of us.

Canada is one-third the way through what could well be a lost decade of high unemployment, depressed incomes, widening inequality, chronic insecurity, and shattered dreams for a generation of youth. 

Most Canadians believe that Canada is still in recession even though it officially ended two and a half years ago. Canadians’ attitudes about their well-being and that of their children have darkened significantly in recent times. 

The latest job numbers expose a largely hidden dimension of unemployment in the wake of the recession. The reason the unemployment rate fell to 7.4% in February was not because more jobs were created. In fact, 2,800 jobs were lost. Rather it fell because 28,000 discouraged workers simply disappeared from the labour market. 

The employment rate, which measures the percentage of the working age population that is employed, was 63.8% when the recession began in October 2008. As of February 2012, it was 61.6%, reflecting the huge numbers of discouraged workers that have dropped out of the labour market. If the employment rate had returned to its pre-recession level, 541,000 more people would be employed.

As opposition parties and civil society prepare to respond to the budget, here are five criteria that could help frame their evaluation.

  1. Inequality: This is the number one concern of Canadians (EKOS poll). Driven by exorbitant income gains of the richest 1%, the gap between the rich and the rest of society is at an all-time high and growing faster even than in the United States. Even the Bank of Canada is urging measures to reduce income disparity on the grounds that it will sustain growth. But inequality is a non-issue for this government. Budget measures should be evaluated in terms of whether or not they decrease inequality.
  2. Jobs: Corporate tax cuts were supposed to spur a job creation boom. They haven’t. Instead Canadian corporations have used their windfall to accumulate over $500 billion in cash. Apart from the hidden unemployment iceberg, the labour market has been shedding jobs in recent months; 37,000 fewer people were employed in February than last September. The budget will wipe out thousands more public and private sector jobs. The cumulative job impact of this and past budgets should be measured against the sheer magnitude of the unemployment problem.
  3. Social investments: Canadians assign a very high priority to public investments in education, health, pensions, etc. The expansion of military, police and ‘national security’ spending is crowding out essential public services that enhance peoples’ well-being. The federal government is abandoning Canada’s historic federal role in Medicare to the provinces. It is abandoning public solutions to the pensions crisis in favour of market “solutions” that will make retirement harder for future generations. Specific budget measures need to be examined as to whether they will further cripple our social safety net.
  4. Revenue generation: The huge cuts to corporate income taxes and taxes on the very rich have dramatically reduced the fiscal capacity of government to address the issues of our time. They have weakened social programs, worsened inequality, and failed to create the promised jobs. Tax cuts are sabotaging the ability of government to make the investments needed to improve living standards and reduce inequality. This linkage needs to be made repeatedly.
  5. Carbon emissions: The Harper government’s response to Canada’s spectacular failure to meet its Kyoto commitments was simply to pull the plug. It made new commitments to reduce carbon emissions 17% by 2020 relative to their 2005 level. Yet Environment Canada reported that, under existing measures, Canada would reduce its carbon emissions by only 4.2%, far short of these already diluted targets. A critical assessment of whether or not budget measures will significantly improve its emissions reduction performance is essential.

Canadians seek a positive alternative to the destructive free-market narrative that has dominated our lives for far too long—a new narrative that replaces cynicism with hope, restores Canadians’ trust in our public institutions, and builds confidence in the reality that, together, we can do great things.

Bruce Campbell is the Executive Director of the Canadian Centre for Policy Alternatives. The CCPA has just released its Alternative Federal Budget.