The Budget is a Bust

As I feared, there are major tax cuts in this budget. The Conservatives are cutting taxes by $1.9 billion this year, and $2 billion on a continuing basis by moving the tax brackets upward. I will admit, that these are not the worst tax cuts there could have been, there could have been corporate income tax cuts, or cuts for the top tax bracket. The cuts that are in this budget do help to fight bracket creep, and that is generally speaking a good thing. These cuts are not, however, targeted to help the poorest of the poor, and those earning the least, those for whom tax cuts flow directly back into the economy in the form of spending on staples like food and clothing.

Also bad, is $4 billion over two years in tax credits for home renovations. This is a stupid way of doing things. Firstly, the credit isn't tied to any environmental objective. Someone expanding their monster home to build a heated swimming pool would get this credit the same as someone who is renovating their home to put in solar panels, geothermal heat sinks and improved insulation. Secondly, this programme requires individuals to outlay, and then claim back on their tax returns. This is stupid and produces unnecessary paper shuffling. The better way is simply for the government to directly reimburse for costs of pro-environmental renovations.

A good thing is to see extended EI benefits, to fifty weeks. But very bad is that there is no expanded eligibility. Part of the problem with the EI programme now is that only a tiny percentage of people who pay into it will ever be able to collect. The government should have expanded eligibility rules to ensure that more laid-off workers have access to the plan.

The budget includes $4 billion over two years for new infrastructure projects. This is paltry compared to the demand that is out there, and the massive infrastructure debt that this country faces. Public transit projects alone could gobble up all of this money.

Where is the money for social housing? Where is the money for retraining programmes for laid-off workers?

The deficit for this year is expected to be $33.7 billion, for 2010-2011 $29.8 billion, for 2011-2012 $13 billion and for 2012-2013 $7.3 billion. That means that the government expects to lose $83.8 billion over the next four years. That undoes almost a decade of debt repayment that was bought with the suffering of Canadians from slashed healthcare transfers, cuts to education, the outright theft of the EI surplus and a myriad of other cuts.

This budget is a bust, and if the Liberals support it, as far as I am concerned the coalition is dead.

Update: On further review, this budget is even more garbage than I thought it was. It places a huge load on the provinces and the municipalities to provide matching funds for infrastructure projects, which is insane since cities can't run deficits. The feds can borrow at a much lower interest rate than provinces. Those jurisdictions that cannot come up with the matching funds will be unable to access the federal money. This budget is a sham. Further, it is based on the 2008 fiscal statement (you know, the one that produced the first major constitutional crisis in a decade), and therefore includes by reference the elimination of pay equity, the attack on workers' rights and the ending of public campaign financing.

With regard to EI, I should add that the lack of increased eligibility is a disgrace, since the government blatantly stole $50 billion from the EI surplus during the 1990s and 2000s to pay for corporate tax cuts.

For an excellent explanation of why this budget will not stimulate the economy, see The Progressive Economics Forum.