Well, the 2017 federal budget is out and I have put together some comments in two parts: general and northern Ontario specific.
General Comments
Today’s federal budget addresses Canada’s economic
uncertainty by stimulating spending without adequately addressing the
long-term productivity growth of Canada’s economy.
Total spending is expected to rise from 315.1 billion dollars in 2016-17
to reach 371.8 billion dollars by 2021-22 – an increase of 18 percent. The 2017 federal budget is disquieting
given that revenues will still rise from 292.1 billion dollars to 356 billion
dollars – an increase of 22 percent - over the same period and yet still result
in the accumulation of more deficits.
The
federal debt is 637.1 billion dollars in 2016-17 and projected at 756.9 billion
dollars by 2021-22. Debt service costs will rise from 24.3 to 33.3
billion dollars over the same period. The deficit will be 23 billion dollars in
2016-17, 28.5 billion dollars in 2017-18, 27.4 billion dollars in 2018-19 and
decline moderately to 18.8 billion dollars in 2021-22.
While the introduction of a contingency reserve is welcome,
it still remains there is no long-term plan for addressing the fiscal deficit situation
of the federal government.
This is
of concern given the importance of private sector confidence when it comes to
making investment and business decisions.
This is also worrisome given that interest rates are projected to
rise as well as the economic uncertainty we still face
given the trade and economic policies of the Trump administration in
Washington.
Despite the increased spending, there is to date relatively
little to show for promised federal infrastructure investment and the federal
government’s promises of a bold and transformative agenda have fallen flat when
it comes to actual implementation. While today’s budget focus on social policies such as more
skills training, better access to child care, innovation and infrastructure
spending for First Nations is commendable, there is really no assurance that
the government will be able to implement anything given its slow pace of
implementation on the preceding year’s infrastructure and spending commitments.
According to a recent report from the Institute of Fiscal
Studies and Democracy, the federal government already spends nearly $23 billion
on innovation, skills development and training across 147 activities and there
is little available in the way of performance measurement to evaluate what
works and what does not.
In the case of assistance to the middle class, it remains
that the recent reduction in middle class tax rates from 22 to 20.5 percent
generally benefited tax filers making between $50,000 and $100,000 per year
while nearly two-thirds of Canadian tax-filers report total income below
$50,000 and saw no benefit from the tax decrease. Moreover, the increase in
unemployment insurance premiums in 2018 to partly offset the government’s
skills-training proposals and the increase in excise taxes constitute a tax increase on the middle class.
However, the government is to be commended for not further increasing the tax
burden via increases in capital gains taxation.
While the federal government has grand aspirations and seems
willing to spend a lot of money it falls short on achievement and does not
appear able to fully address concerns that it is generating the best value for
money. A budget must be more than
an aspirational document that announces spending that is to be spread out over
time. It should set goals and then
achieve them.
Northern Ontario
Comments
This is a government that has decided to run large deficits
and add substantially to the public debt.
In the case of northern Ontario, one has to ask where the regional
benefits of this increased spending are given the federal emphasis on
infrastructure investment, the innovation agenda and assistance to the middle
class? In many respects, the
budget is a disappointment with respect to some of the specific issues the
northern Ontario economy faces. Northern Ontario is still
characterized by slower economic and employment growth relative to the rest of
the country and given that its has substantial representation at the federal
level both in terms of MPs as well as cabinet, one wonders where the federal
growth agenda for northern Ontario is now that we are two years into the
federal mandate?
Northern Ontario receives little in the way of specific mention in Budget 2017. An extra 25 million dollars over five years for Fednor is not much in a world of multi-billion dollar spending projects. Here is what I would have liked to see
in the 2017 federal budget with respect to the economic future of northern
Ontario.
·
1. It is Canada’s 150th
anniversary. Where is the federal
vision that would see us embark on finally completing the Trans-Canada highway
through northern Ontario up to a standard that is worthy of a nation as wealthy
and developed as Canada? When will
there finally be a commitment to complete a four-lane national highway through
the middle of Canada fully linking east and west?
· 2. Northern Ontario municipalities have not had the
increase in economic base characteristic of larger urban centers and their revenue
is increasingly being borne by residential ratepayers. At the same time, the physical
infrastructure in northern Ontario municipalities is increasingly in need of
repair and renewal.
Notwithstanding the announcements of investing in infrastructure, where
are the federal infrastructure projects and dollars infrastructure in terms of
roads, bridges and sewers here in northern Ontario?
·
3. Where is federal leadership when it comes to investing
in the Ring of Fire? Commodity
prices have bottomed out and are in the process of starting an upturn. What are the federal plans to providing
the infrastructure investment to assist in development of mining resources in
northern Ontario in advance of the coming upturn in commodity prices?
·
4. The federal government maintains it is committed
to research and innovation and economic development. When can we see some direct and more substantial federal
investment in research directly related to northern Ontario economic
development issues, to the analysis of the regional economy of northern Ontario,
and the economics of natural resources, mining and transportation? Where are the Federal Research Chairs
and research support directly dedicated to these areas?
·
5. The 2016 Federal Budget said it planned to
invest $8.4 billion over five years for indigenous people with $1.5 billion
earmarked for 2016-17 and the 2017 Budget earmarks an additional 3.4 billion
over the next five years. The
money was supposed to be spent on health, infrastructure, renovating and
building schools on-reserve as well as improving water supply and treatment
infrastructure. How much of this
in 2016-17 made its way to northern Ontario? How much in 2017-18?
