Budget forecast: hot and stormy

After a cold and bitter winter in Central and Eastern Canada and balmier weather in the west, temperatures across Canada are about to rise—and not just because spring is officially upon us. Budget season has started and it looks like it will soon get hot and stormy.

For the first time in memory Quebec will boast a number of years of balanced budgets while Alberta simultaneously runs deficits—but that’s not where the real dividing lines are.

Over 60,000 Quebec students started rotating strikes to protest spending cuts and austerity measures anticipated in the province’s budget tabled on Thursday and are planning another stormy spring with many actions against austerity. The Liberal government of Phillipe Couillard has already made its intentions quite clear. Its spending review commission proposed cuts of over $2 billion, primarily by slashing support to municipalities, agriculture, education, ambulance and childcare programs, where the government has already hiked rates. This is even though Quebec already has the lowest program spending per resident of all provinces.

These cuts will allow the Quebec government to triumphantly announce a balanced budget then likely proceed with regressive tax changes including cuts to income taxes but big hikes to sales taxes and user fees. The Common Front of unions representing 400,000 public sector workers, including CUPE, is planning to head into negotiations loaded with a full strike mandate after the Couillard government offered wage increases of only 3 per cent over five years. After years of suppressed wages, they are mobilizing against austerity and advocating for progressive taxes.

After months of dire warnings, Albertans also find out on Thursday what their provincial government has planned for them in its budget. While a solid majority support increasing taxes on corporations, cigarettes and on higher incomes, the Prentice government instead appears prepared to increase health care premiums, impose steep cuts on government programs and target public sector workers for savings. Unions and progressive organizations are fighting back with a campaign showing that Alberta public sector spending and wages are far from out of line—and that the province could generate many billions more with progressive tax measures, while still having the lowest taxes in the country, as the Parkland Institute has also demonstrated.

Despite being elected on a jobs and growth platform the Liberal government in New Brunswick quickly turned to advocating the same type of austerity policies that had brought the province’s economy and previous Conservative government down. It has generated alarmism over the deficit and is advocating spending cuts and regressive tax changes—even though the province’s deficit is almost eliminated and no structural deficit exists, contrary to the government’s claims. New Brunswick’s Common Front for Social Justice is mobilizing against these cuts and advocating progressive alternatives in preparation for the budget March 31.

Provincial budgets already tabled in British Columbia and Saskatchewan escaped with less controversy. That’s largely because B.C. is B.C. and has already suffered under years of austerity, while Saskatchewan is balancing its budget by dipping into its rainy day funds and will now finance infrastructure through another separate off-book fund.

Other Eastern provinces are also planning spending cuts and/or regressive tax changes in their budgets. Prince Edward Island is direly warning of “structural deficits” (once again without evidence) while the Nova Scotia government appears to be planning regressive tax reforms and spending cuts.

The federal and Ontario governments haven’t revealed dates for their budgets yet, but no matter how much effort they put into the packaging, the contents aren’t likely to be pretty for everyone. There have been numerous layoffs at hospitals across Ontario, base wage increases for public sector workers in Ontario have been below inflation for four years running, and the provincial government’s squeeze on spending has led to unresolved strikes on university campuses.

The Harper government blew most of its projected surplus on regressive tax cuts (including family income splitting) last fall before oil prices plummeted. Since then it has been scrambling to put together a balanced budget with pre-election goodies, but that won’t be easy with the economy floundering.

The Canadian Centre for Policy Alternatives has already released its Alternative Federal Budget for 2015, Delivering the Good. This detailed plan shows how a progressive federal budget could lift close to 900,000 Canadians out of poverty, boost economic growth, reduce carbon emissions, and create or sustain 300,000 jobs a year, all funded with progressive tax reforms. But there’s little chance the Harper government will follow this advice.

Conservative economists such as Stephen Gordon may claim there’s a consensus that corporate taxes and income taxes are bad and consumption taxes are good for the economy—but that’s not true and he represents out-dated views. The consensus among economic experts worldwide has changed. Now even the IMF, World Bank OECD and others recognize that inequality and slow wage growth are holding back our economic growth and have proposed higher taxes on capital, corporations and top incomes. But most of our governments, supported by corporate interests, are still peddling austerity and economic approaches that have failed to deliver for the majority of Canadians.

Spring may have returned for some, but the cold winter of austerity is far from over for most Canadians. And that’s why battle lines are forming over budget lines as governments lay out their fiscal—and political—agendas for the coming year.

Briefly:

  • Record streak of anemic job growth. Job growth in Canada has been below one per cent for 15 months in a row now. That’s the longest stretch of slow job growth outside of recessions in 40 years of record-keeping, reports Tavia Grant in the Globe. Meanwhile job growth in the U.S. is much higher and is expected to reach two per cent this year, nore than twice Canada’s rate. And, as Daniel Tencer at Huffington Post wrote, Canada’s job figures are likely to get worse, which is why Harper now just wants to talk about the threat of terrorists and women wearing niqabs rather than the state of the economy.
  • Business attacks public sector wages. The Canadian Federation of Independent Business (CFIB) issued another of their Wage Watch reports, claiming public sector workers are overpaid. But it includes the same faulty math and distortions in their previous reports, which CUPE exposed in its Battle of the Wages Public sector wages on average are very similar to the private sector but are more equitable all around, with smaller pay gaps especially for women, racialized workers and aboriginal Canadians. The public sector has higher wages for lower paid occupations such as cooks, cleaners and clerks but lower compensation for executives. And as the Eye concluded last month “The real point should be that average wages for all workers have barely kept up with inflation while top incomes and corporate profits have skyrocketed.”
  • Corporate profits hit record (again). With final tax figures in, Statistics Canada quietly reported that corporate profits hit another record in 2013: $367 billion. That’s up 57 per cent since 2009, almost triple the growth in the economy and more than triple the increase in the taxes these corporations paid. Corporate profits ate up 19.4 per cent of our economy in 2013, up from 15.2 per cent in 2003. Meanwhile their combined tax rate has declined from 21 per cent down to 17.2 per cent, with most of that because of lower federal corporate tax rates. In fact, if corporations paid the same federal corporate tax rate in 2013 as they did ten years earlier, federal revenues would be $16 billion higher.
  • Time to focus on the working class. Even the right-wingers at Calgary’s School of Public Policy now acknowledge there’s been rising inequality, lower income workers have lost ground and that more attention should be paid to working-class Canadians instead of the nebulous and increasingly polarized “middle-class”.

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