My 5 cents on the federal budget

For years the Liberals warned you of Stephen Harper's hidden agenda. Just wait until he gets a majority, and you won't recognize Canada.

For years, Conservatives quietly whispered to their base that they couldn't go as far as they wanted because of that damn minority government. The Liberals won't let us, the Senate won't let us!

So after waiting for nearly a decade, we finally got to see the long anticipated Harper majority budget. And what was the flagship change he needed a majority to bring in?

The elimination of the penny.

OK, so it wasn't exactly the "transformational" budget we'd long feared or hoped for, depending on our allegiances. But it does provide a good look at what kind of Prime Minister Stephen Harper truly wants to be.

This budget should tell us once and for all, that he's not a guy who wants to fundamentally change Canada. Sure, he's tossed a few symbolic gestures to the base, in the form of CBC budget cuts, the death of Katimavik, and a warning to environmental activists. But Harper remains the head of the biggest spending government in Canadian history, even after accounting for population growth and inflation.

The budget also shows us he's not hunting for a legacy, quite yet. There are some "big picture" reforms in this budget, but they're mostly fine tuning - a speedier immigration process, changes to the innovation agenda, pension reform. These are all worthy initiatives if they work, but they likely won't ever find their way into history textbooks. They're also the sort of things a Liberal government would do.

So, there you have the real Stephen Harper. A largely low key and pragmatic Prime Minister willing to toss symbolic gestures to his conservative base. A man whose greatest legacy at this point is the elimination of the penny.

Rerun Season

For the first time in a long time, we have a budget that can be judged on its content, rather than its electoral implications.

So while the opportunity now exists to read the actual document without worrying about who will vote for and against it, there's not a lot to be said about it - it was basically a re-release of Flaherty's March budget with the political subsidy phase out and a promise about HST cash for Quebec thrown in. As the least surprising budget in Canadian history, it will be hard for anyone to write anything remotely insightful about it.

So I'm not going to try.

If Flaherty can recycle his budget, I can recycle my response. Here's what I wrote about the budget back in March - it still stands today, except for the part of the electoral implications:

While it's a pretty uninspiring budget, it's a very impressive platform.

While I'm a little disappointed there's no blogging tax credit in this budget, Jim Flaherty appears to have given every single other Canadian some kind of token tax credit - something voters are sure to notice as they complete their taxes this April.

Have a sick relative? Well, there's the family caregiver tax credit, stolen from the Liberals' Family Care plan. Have a kid who plays piano? There's a tax credit for that. Are you a low income Senior? Here's an extra $12 a month.

Expecting to be mercilessly attacked on their corporate tax cuts, they've closed a corporate tax loophole. Knowing they'll be attacked on a dirty environmental record, the ecoEnergy program gets extended to much fanfare (even though it has existed for 14 years).

But surely this will anger the Tory base, n'est-ce-pas? Well, there's a tax credit for volunteer firefighters. And programs to get more doctors in rural areas.

The budget lacks direction. Nothing in it will do a lot for the economy. Most voters won't get more than a few dollars from it. But the budget is full of the kind of promises that sound good in stump speeches and look good in commercials.

Today we saw the Tory platform and, truth be told, it's an impressive document.

The point is, it was a platform-budget full of populist policies well suited for the pre-election landscape of the time. I obviously don't expect Jim Flaherty to re-write a budget he was just re-elected on, but starting next year, I hope we start to see more substance and a greater long term focus from Jim.

2010 in Pictures: The Year That Was

Jim Flaherty's Rally to Restore Fear

Jim Flaherty kicked off his Canada Club speech on Tuesday with a call to restore sanity to our political process:

Opposition politicians who talk down our economy for political gain at every opportunity.

To them I say: rise above petty politics.

However, 5 minutes later, he wasn't so much rising above petty politics as belly flopping in:

But the opposition coalition – the Michael Ignatieff-NDP-Bloc Québécois coalition – has been consistent in one thing, if only one thing.

From the beginning of the global economic crisis, they have put their own self-interest above Canadians.

[...]

Just five short years ago, Canada was led by a weak, dithering, and directionless government.

Support for Quebec sovereignty was on the rise.

And our ability to defend Canada’s sovereignty was on the decline.

Waste, mismanagement, and corruption were rampant on the inside.

And regular Canadians – the people who work hard, pay their taxes, and play by the rules – were left on the outside.

[...]

Experts estimate the Michael Ignatieff-NDP-Bloc Québécois tax hikes would kill almost 400,000 jobs.

Coincidentally, that’s virtually the number of jobs Canada lost, but has since regained, during the recession.

Behind those 400,000 jobs are real Canadians, real families.

They deserve better than a Liberal leader who would risk their jobs, their livelihood.

I know he’s been abroad for a long time.

[...]

The coalition led by Mr. Ignatieff has its own agenda – power, power, power.

While their leader is untested and unready, their ideas are not.

They have been tested – and they have failed.

Bigger and bigger government.

Endless red tape.

Higher and higher taxes.

Any coalition that would give the NDP access to taxpayers’ wallets should strike fear in regular Canadians.

What’s more, any coalition that would give a veto on national policy to a party dedicated to the breakup of our country is unacceptable.

2009 Man of the Year

I've picked a "Person of the Year" for five years running now - it's not always someone I like (see: Klein, Ralph), and it's not always someone who had a very good year (see: Dion, Stephane). Rather, I like to pick someone who left their mark on Canadian politics over the past 12 months. And as a rule of thumb, unlike the Canadian Press award, I try to stay away from the Prime Minister, since that's a bit of a gimme most years.

With no federal election in 2009, there's a temptation to look at provincial politics - Dalton McGuinty was a busy boy, bring in the HST, the Green Energy Act, and full-day kindergarten, while fighting off scandal at EHealth. Gordon Campbell was re-elected, then pretty much guaranteed he wouldn't be in 2013. Darrell Dexter became Atlantic Canada's first NDP Premier.

Federally, the rise and fall of Michael Ignatieff got a lot of ink. As did Nanny-gate, Wafer-gate, RAIT-gate, and a slew of other stories that made us all question why it's really worth wasting time on Canadian politics that could be better spent doing something more productive...like, say, watching reality TV.

But, if you look beyond all the silliness in what was one of the most petty and trivial years in Canadian political history, there were a few important events. And the man at the centre of them earns this year's Person of the Year:




Jim Flaherty

Given how Stephen Harper rules his caucus, it's always a risk to give a Cabinet Minister credit for dressing himself, never mind making major policy decisions. But in a year dominated by talk of the economy, the Finance Minister was the face of several important decisions.

First and foremost was January's budget which ensured the survival of the Harper government and ended the coalition threat once and for all (or at least until the CPC attack ads hit the air next election). But the price was high - Canada's first deficit budget in 12 years, which had fiscal Conservatives pulling out their hair and wondering how the offspring of the Reform Party could become the biggest spending government in Canadian history. The projected size of the deficit also had a bad habit of increasing by several billion dollars every month.

The budget's stimulus program led to accusations of pork barrel politics and several studies showed that money was being disproportionately spent in Tory ridings. The opposition parties pounced on this, determined to make it as clear as possible to voters that the best way to get what your riding needed was by voting Conservative. It never turned out to be the game-changer they hoped it would be.

However it was Flaherty's 2008 budget which may have had the biggest impact on the political landscape in 2009. In was in that budget that he pushed hard for the provinces to harmonize their PSTs with the GST and, one year later, a pair of Premiers took him up on his offer. The end result may be the eventual defeat of two of Canada's longest-serving Premiers but, if economists are to be believed, it will also be a godsend for business in two of Canada's largest provinces.

And, while less headline-grabbing, Flaherty's push for a National Securities Regulator represents a real policy decision with meat and bones on it. It's also one of the few decisions the Harper government has made that hasn't been driven by Patrick Muttart's micro-targeted polling numbers.

Love him or hate him, Jim Flaherty is turning into one of the most memorable Finance Ministers in Canadian history. Hell, one somewhat misguided magazine named him the Finance Minister of the Year (no, it wasn't the Onion). So, in an otherwise banal year in politics, Flaherty gets another title, this time as my 2009 Person of the Year.


Previous Winners

2008: Stephane Dion
2007: Jean Charest
2006: Michael Ignatieff
2005: Belinda Stronach
2004: Ralph Klein

I’d like to tax the world in perfect harmony…

Jim Flaherty may have just become Dalton McGuinty’s new best friend. More on that in second.

McGuinty brought forward his first recession budget today, joining virtually every other jurisdiction in the world by sending the province spiraling into deficit (including Newfoundland!). The bulk of the spending is on infrastructure - 32.5 billion over two years. If you're curious where everything else is going (and I know you're not), you can read the full budget here.

But let’s be honest – there's only one thing in this budget people will be talking about. And the word of the day is “harmonization”, after McGuinty’s pledge to harmonize the GST and PST in Ontario:

Ontario will also undertake major tax reforms, including a move to implement a harmonized sales tax that will combine the 8 per cent provincial sales tax with the 5 per cent federal goods and services tax. The move will save Ontario businesses $500-million in paperwork costs, Mr. Duncan said.

But it will also raise the price of many goods and services, including essentials such as gasoline, home heating oil, newspapers and coffee, said New Democratic Party Leader Andrea Horwath.

Harmonizing the taxes will add to “the burden of average families who need help the most and give that money to those that need help the least,” she said.

To cushion the blow of the tax changes, the federal government is providing the province with $4.3-billion in transitional funding over three years. Ontario will use the money to cut cheques totalling $1,000 to every family in the province that earns less than $160,000. Individuals who earn less than $80,000 will get $300.

This is certainly a risk. The broken promise on health care premiums was a giant target that John Tory failed to hit last election campaign – McGuinty has now drawn a giant target for the next Tory leader shoot at in 2011.

You can be sure that the “tax on everything” attack that buried Stephane Dion will be heard loud and clear across Ontario over the next two and a half years. But before we all pile on McGuinty for doing something which may turn out to be hugely unpopular, it is important to keep in mind the big difference between this and the Green Shift – primarily, that McGuinty is in power. A great policy that is politically toxic is useless to an opposition party because it will never see the light of day. A great policy that is politically toxic at least serves the greater good if it’s brought in by a government in power. After all, being in power is about bringing forward positive change – not just running for re-election.

So this raises two distinct questions:

1. Is this a great policy?
2. Is it politically toxic?

On the first question, most would tend to agree this is the right thing to do from an economic perspective (yeah, yeah, it's the National Post, but still...). And with counterbalancing measures, exemptions, and rebates in place, it likely won’t be too punitive on Ontario’s poor. It’s not the thing legacies are built on, but it’s solid policy.

As for its' toxicity? Well, anytime you mess around with tax shifting, there are risks. But, as the teaser said, McGuinty’s secret weapon in all of this may be his old foe, Jim Flaherty. McGuinty is doing exactly what Flaherty has asked for and, one presumes, the Finance Minister will be quite supportive of this. That certainly puts Flaherty's wife - and PC leadership candidate - Christine Elliott in a bind but, either way, it should provide McGuinty with some cover on this one. He'll still be vulnerable on the left, but with the federal Tories and most business groups onside, his rank flank should hold up.

Don't get me wrong - McGuinty will take a hit on this one. But, I don't think it will be a fatal one.

Donald Trump Syndrome

OTTAWA–Finance Minister Jim Flaherty should be fired in the wake of General Motors saying it is closing its Oshawa truck plant, Liberal Leader Stéphane Dion says.

GM's announcement that it will shut the plant in 2009, throwing 2,000 people out of work, caused an uproar in both the House of Commons and the Ontario Legislature yesterday.

"The finance minister told the world not to invest in Ontario," Dion said in the Commons.

"Unfortunately, General Motors took his advice and the workers and their families are paying the price. Any finance minister who discourages investment and job growth is not fit to be finance minister."

Harper shrugged off the planned layoffs, saying it was the result of "a couple of one-time events" in an otherwise healthy economy.

You know, it’s not necessary to call for a Minister to resign every single time something goes wrong. Yet, we seem to get at least a dozen demands along those lines every year. Radwanski had a good take on this feigned fury earlier this spring (the point stands even though the post was about Bernier).

Back to Flaherty. Yes, his “last place to invest” comments were stupid. But does anyone really think that was the reason GM closed up shop?

What is interesting amid these calls for Flaherty’s resignation is that the Tories aren’t trotting out the “blame Dalton” talking points on this one, preferring instead to downplay the seriousness of the economic slump.

Are you now or have you ever been a Bruins fan?

Sports and politics often clash, and while the Olympics seem to be the real hot button issue of late, it’s Canada and it’s payoff time, so it’s not too surprising that pucks and politics have become intertwined yet again.

The latest round of controversy comes from Quebec. The Mayor of Montreal has demanded that local firefighters take down Habs logos painted on fire stations – by the time this one is done, this may make David Miller and Dave Bronconnier’s headaches over “support our troops” decals seem mild by comparison. We’ve already seen the CP headline “Montreal Mayor Defends Team Spirit”. I’m sure we can expect “Mayor denies ties to Zdeno Chara”, “Protesters demand Mayor wear jersey”, and “Mayor resigns amid Habs-gate scandal” headlines in the weeks ahead.

Also in hot water is Michael Fortier. The Senator appears to be far more forthcoming with his hockey opinions than with government polling reports, telling reporters he believes the New York Rangers will win the Stanley Cup. Uh-oh. Certainly a valid hockey opinion, but you have to wonder how the guy ever got elected in Montreal saying things like…what? Oh right.

So, anyways, Dion hears this and decides to score some points in Quebec so he goes and chews out Fortier for not having faith in the Habs. Unfortunately, a smart assed reporter asks Dion who Montreal is playing in the first round of the playoffs and Dion hums and haws until his aid jumps in with the answer. Oops. I guess it’s not too surprising that, given his blind faith in the Liberal Quebec election readiness team, he’d also have blind faith in the Canadiens.

Stephen Harper has yet to comment on the playoffs but this time of the year is no doubt difficult for a closet Leafs fan like him. Luckily, Jim Flaherty has jumped in to let Quebecers know that, yes, the Conservative Party’s respect for Quebec goes beyond the nation resolution, and includes a love of all things bleu blanc rouge. Although it's not mentioned in the article, I can only assume that Flaherty went on to blame Dalton McGuinty for the Leafs’ missing the playoffs.

Also showing a lack of faith is Mario Dumont, who has picked the Sharks to win the Cup. That prompted the following rebuke from Jean Charest, which I can only hope (but doubt) was tongue in cheek: "Mr. Dumont will have to explain to Quebecers. ... That is unacceptable." No word on Pauline Marois’ view but one assumes she’s just pissed that the team is called “Canadiens”.

All of this and we're just a few games into the first round! And you just know Denis Coderre is already drafting his witness list for the inquiry into Shane Doan’s upcoming re-appointment as Team Canada captain. So stay tuned.

Trick or Treat

It's interesting to see the Tories rush what would have been a good news spring budget up to October and take a 1% GST cut out of their next election platform by bringing it in now. I suppose with money to burn and Dion calling for tax cuts, it was inevitable that Flaherty would be slashing taxes. As for the GST cut, given that every economist and every news story calls it "bad policy but good politics", I suspect Harper recognized that it's usefulness as an election issue had passed and that he might as well get it off the table. People aren't stupid - after a while "bad policy but good politics" simply becomes "bad policy and bad politics".

More interesting is the arrival of a new auditor general's report. Even from Paris, the timing looks a little coincidental:

Back in the mid-'00s, we used to enjoy a chuckle whenever the Paul Martin crew would come up with some extraordinarily contrived sideshow in an attempt to bury an embarrassing headline.

But even that PMO would never have thought it could get away with announcing tax cuts on 24 hours' notice, simply to bury an auditor general's report.

UPDATE: As pointed out by an astute reader, the federal government must give 60 days notice to the provinces that harmonize their taxes before changing the GST. As a result, if they wanted to make the change for January 1st, it had to be announced yesterday so it was likely not connected to the AG's report. It's still interesting to see them rush the GST cut to January 1st, but it doesn't look like there's anything involved in the day-to-day timing of it.


UPDATE2: I elaborate a bit more on my thoughts on this Macleans post.

Galleons, Sickles, and Knuts

Finance Minister Jim Flaherty said distributors and retailers should lower prices "as soon as possible" to reflect a soaring Canadian dollar, and held up a copy of the latest Harry Potter book as an example of how some items are still much cheaper in the U.S.

[...]

Flaherty said he looked at a copy of the recent Harry Potter book in Washington this past weekend, which was selling for US$29.74 before tax. He came back to Ottawa and purchased the Canadian version, which was $36 before tax.

What the wire story forgot to include was the following:

Upon learning that Dumbledore was gay, a visibly shaken Flaherty promptly returned both the American and Canadian copies of the book.

In other Flaherty news, it appears Jim will be presenting a fall mini budget as part of he who cannot be named's devious scheme to plunge us into an election. The thinking is, I guess, that the Liberals will want to fight an election against tax cuts. Some advice to the dark lord - if the Tories really want an election, just put forward the "Kitten Genocide Bill" and it will happen. Proposing popular tax cuts is not going to do it, especially when the Libs support all the proposals except the GST cut.

Peace in our Time - Day 93

Have-no provinces only want their fair share: MacDonald

Federal minister tears strip off Newfoundland Premier

Calvert not backing down from lawsuit against feds


I know it's petty to say I told you so. But when it's Jim Flaherty on the other end, I don't really feel that bad about it.

So Jim. I told you so.

Peace in our Time - Day 3

"The long, tiring, unproductive era of bickering between the provincial and federal governments is over."

-Jim Flaherty


Calvert Calls Budget a Betrayal

Budget unfair to Ontario: McGuinty

Equalization plan unfair MacDonald says

The political wrath of Premier Williams

Federeal budget fails: Boudreau

BC blasts budget for favouring Quebec

Provinces slam Tories fiscal gap cure

Budget's Central Canada solution splits regions

Budget 2007

I know most of my fellow Libloggers will classify today's budget as everything from "a disaster" to "the end of Canada". Personally, I'd say it's not bad. I mean, with the Canadian economy in the shape it's in, it's hard to deliver a bad budget. Harper resisted the urge to go down the typical conservative route of massive upper class tax cuts, massive middle class tax cuts, massive corporate tax cuts, and military spending. It reminds me a lot of the kind of budgets Ralph Goodale delivered during the Martin months; lots of scattershot spending with no real theme and enough pre-election goodies to satisfy everyone and cut off the opposition. With that in mind, a few general comments:


1. There's some good analysis of the budget here and here.


2. Via Wells comes this gem from Mario Dumont:

The premier called Dumont "an empty shell" last week. Now Dumont says, approximately: "Well, I say he's a hermit crab. You know what a hermit crab is. It's those little creatures that have no shell of their own and need somebody else's shell to live in. Mr. Charest has no record to run on, so he has to run on Stephen Harper's."

The BQ supporting the budget certainly is good news for Charest who I still think can salvage a minority win.


3. Andrew Coyne was, predictably, in a bad mood calling this the most free spending budget in the history of confederation.


4. Not that Phil Fontaine is ever happy, but he certainly wasn't happy with the budget.


5. Danny Williams waging war with Ottawa has become somewhat comical outside of Newfoundland, but I suspect there may be some repercussions for the flip-flop on equalization on the Rock. There are also some votes to be lost in Saskatchewan. That said, there are a lot more votes in Quebec and Ontario than Newfoundland and Saskatchewan, so I doubt Steve will lose much sleep over this.


6. The Liberals and NDP have both been rather ineffective at communicating why this is a bad budget. I've watched the coverage and read the press releases and it's hard to get a clear message or theme as to what's wrong with the budget from either of them. Obviously Flaherty has done a good job of not giving them anything to latch onto.


7. If Harper was going to "fix" the "fiscal imbalance" by spending in provincial jurisdictions, he should have directed more to education. The post-secondary component of this budget is a joke. More for the RESP program won't improve access or quality to higher education for any Canadians.


8. Like I said bellow, anyone who thinks this will mean the end of the provinces asking for more from Ottawa needs to lay off the ganja.



So, when all is said and done, a very political savvy budget which won't do much harm but won't do anything to drastically improve the lives of Canadians either.

Fixing Health Care for a Generation

"The long, tiring, unproductive era of bickering between the provincial and federal governments is over."

-Jim Flaherty


Uh-huh. Glad we finally got that problem solved. More bold proclamations from Canada's Finance Minister:

Mr. Flaherty said the budget should "end the bickering" between provinces over the issue [of equalization].

"The day of governments with their hands out to other governments has passed."