Federal budget more about politics than economics, says professor
House of Commons on Parliament Hill in Ottawa (REUTERS)
Finance Minister Joe Oliver's first budget appeases older voters but asks future governments to pay the bills.
Teetering on the brink of redundancy, economic experts say Oliver's walking a fine line between bringing in a balanced budget in a tough economy, while offering paltry sums to some and ignoring a large chunk of the middle class.
“This budget is not designed for our economic future, but their political future,” said Michael Johns, chairman of political science at Laurentian University in Barrie.
“If they had said to the Canadian people, we want to balance the books, but we can't – because of the economic surprise we faced with dropping oil prices – so here's our plan moving forward, they would have released a budget the public would have been sympathetic about," he added.
But Johns said robbing Peter to pay Paul – or pulling $2 billion out of the $3-billion contingency file to balance the budget – was the wrong way to go about it.
“It's a shell game. You can't take money out of the contingency plan and claim you've balanced the budget,” Johns said.
The $1.4-billion surplus Oliver announced Wednesday is the first time the nation's bottom line has been written in black ink since the last balanced budget released by the former finance minister Jim Flaherty in 2007.
Oliver says the contingency fund should be brought back up to $3 billion by 2019.
Using its nearly $300-billion cash flow to run the country, Oliver has spread small offerings around including almost doubling the Tax-Free Savings Accounts (TFSA) from $5,500 to $10,000, and reducing the amount of money seniors have to withdraw annually from their registered retirement income funds, lowering the tax they will have to pay.
The government is also increasing the Universal Child Tax Benefit to $2,000 per year for people with children under 18.
During his budget release address, Oliver said the Conservatives “stand with the military” and have offered $11.8 billion in defence increases in 3% increments, but they don't begin until 2017 and won't be paid out until 2027.
Small businesses will benefit by having their corporate tax rate drop by 11% to 9% but it will take four years to pan out.
“Generations of Canadian families understand you don't compromise tomorrow by spending recklessly today,” Oliver said in the House of Parliament. “It's prudent, practical and we've stuck to our plan.”
Barrie MP Patrick Brown agreed.
“I am proud to be part of a government that has continually lowered taxes every year since coming into office making Canada competitive and allowing our job-creating businesses to thrive. This government recognizes that the best way to grow the economy and help create more jobs is to keep taxes low and achieve a balanced budget," said Brown in a release. “And that is exactly what Minister Oliver has delivered for Canadians today.”
Oliver's also extended the compassionate care benefit from six weeks to six months and opened up post-secondary loans to help students borrow for training programs.
“I'm not a fan of these boutique budget items, they don't impress me much,” said Norm Smith, economics professor at Georgian College. “I'm looking at the big picture; who's going to benefit and who's the target?”
Smith said he believes the TFSA targets the rich, older generations and ignores younger people.
“The young adults starting out, their money goes into mortgages, so this isn't helping them. Very few people can take advantage of it, so he's pandering to this kind of older audience, older people who tend to vote," he said.
Smith said the middle class who are shouldering 50% of the government's expenditures in personal income tax, while corporations pay only 13%, is taking its toll on the economy.
Opposition NDP leader Thomas Mulcair responded by saying he's disappointed with the budget and won't vote for it in Parliament.
“He could have helped people instead of just helping 15% of the people who can take advantage of the income-splitting scheme and not the rest of the middle class,” Mulcair said. “We'd rather see $15-a-day daycare across the country and raising the minimum wage to $15 an hour.”