The budget: some initial thoughts.
The centrepiece is an after-tax savings plan, which is a good idea coming, sadly, at the wrong time. Modelled on the US 401k, this will allow you to put aside up to $5,000 a year, have it augment tax-free, and then take it out in retirement without paying Ottawa a hunk of it. It’s something I have long advicated for, but regret that it comes when Canadians have a zero national savings rate.
After all, the traditional RRSP is a much better deal, and yet people put aside only 7% of what that plan allows each year. The fact is, no families will find an extra five grand just because Ottawa got the message.
The budget also does little to alleviate economic uncertainty, since there is precious little – $1 billion or so in new money – to help the manufacturing sector. That’s not even enough to retool one assembly line, and the capital cost allowance acceleration (also a good idea, but at the wrong time) will fail to keep faltering factories open.
The fiscal bottom line similarly warrants critical attention. After plopping another $10 billion against the debt this year, the surplus collapse to nothing in 2009-10, which means if Jim Flaherty is wrong on his economic projections, we’re back into the deficit soup. This is strange stuff for a government which just spent a few million dollars trying to scare the country into thinking the only deficits possible have a big red ‘L’ on them.
Overall, the budget uses a shotgun approach to throw little gobs of money in all directions – a little to culture, seniors, aboriginals, infrastructure, seniors and the environment. In that, it’s consistent with the Conservative approach of vote-shopping with signle-interest tax cuts, rather than inspiring a nation with a vision and a purpose.
Some of my colleagues call it a Liberal budget. Maybe so. But I find it wanting. The American eocnomy poses a seious risk to middle-class Canada, our embattled manufacturing sector and our collective financial future. We have an untreated climate change crisis. The real estate market is at growing risk. Canadian families are still massively over-taxed and facing dimming job prospects, with an uncompetitive dollar and a government in Ottawa which has just issued the third consecutive budget that sets a new all-time record for spending.
It’s a disappointment. But also a letdown is that this government will live another day.
Liberals Won’t Bring Down Conservative Government over Watered-Down Liberal Budget
OTTAWA – The Liberal Opposition will not bring down the Conservatives based on their latest budget because it adopts many of the measures the Liberal Party has championed, Liberal Leader StÃ©phane Dion said today.
“Because the Conservative government has already spent the cupboard bare with their previous budgets and Economic Update, this budget does not go as far as we would like in some areas, but it does not warrant an election that Canadians don’t want, at a time when so much remains to be done in this Parliament,” said Mr. Dion.
“With this budget, the Conservative government has begun to move in the direction that the Liberal Opposition has been pushing. This government is obviously lacking its own ideas, which is why it has adopted so many of ours from funding infrastructure, to bolstering R&D, and manufacturing.”
Mr. Dion pointed to the following initiatives, which were spear-headed by the Liberal Opposition:
– Making the Gas Tax transfer permanent, as we committed in February 2007;
– Providing direct support to the auto sector, as we called for in January 2008;
– Creating jobs and improving public transit through additional investments in infrastructure, as we advocated in February 2008;
– Increasing the Northern Residents Deduction, as we promised in December 2007;
– Providing funding to hire more police, as we committed in March 2007;
– Improving cash-flow support for livestock producers, and providing direct payments for hog farmers, as we recommended;
– Undoing some of the Conservative government’s previous cuts to the university granting councils and the indirect costs of research program, which would have grown substantially under the Liberal Economic Update of 2005; and,
– Bringing back some of the funding from the Liberals’ 2005 Update for Student Grants and modernizing the Canada Student Loans program.
However, Mr. Dion expressed concern that the Conservatives’ projected surpluses of $2.3 billion for this year and $1.3 billion for next year are well below the $3-billion contingency fund that Liberals consider the bare minimum to cushion against unanticipated economic shocks.
“This budget shows the Conservatives are adopting Liberal ideas, including bolstering the economy so it can weather a possible slow-down, but their actions over the last two years have left them virtually no room to maneuver should the economy continue to falter,” said Mr. Dion.