These are the key questions facing government budget-crafters in every developed country in this era of slow, unsteady recovery from a nasty global recession. It's not that a rich nation like Canada can't ultimately have both kinds of outcomes - a combination of stronger growth and better social policy - it's that we can't have everything first. We need to establish priorities, and that's what a budget does.
Two pre-budget analyses published recently pay at least lip service to both sides of the equation. But their thrusts are opposite.
The labour-linked Canadian Centre of Policy Alternatives makes pointed references to the need to balance the books in its alternative federal budget released last week. It proposed bolstering revenue with tax measures to ensure the rich and the corporations pay "their fair share," but the overarching emphasis was on spending. The list was long - poverty-busting programs, job creation, a national child care program, expanded public health care, Pharmacare, infrastructure investment for community-level projects ranging from climate change to transportation to housing, improved public pensions, and greater investment in First Nations, in education, and in environmental protection.
By contrast, the business-linked C.D. Howe Institute focused on spending less. Its shadow budget, released Monday, said federal revenue and spending could be balanced ahead of schedule, by 2014/15, through rigorous measures to limit the increases in transfers to the provinces, and to cut back on its payroll.
These two approaches reflect quite different economic philosophies: the belief that government spending can foster and sustain economic growth versus the view that it saps money and energy from the private sector, which must build the nation's prosperity before it can be shared.
You can bet that Finance Minister Jim Flaherty's real budget on Wednesday will sound more like the Howe institute's than the CCPA's.
Yet, while I don't doubt Flaherty will be tight with the purse strings, his track record suggests some of his talk will merely be rhetoric.
The Harper government certainly has walked the conservative walk on some aspects of economic management. Its treatment of corporate taxes - today's 15-per-cent rate is barely more than half of what it was in 2000 - is one good example. (Or bad example, if you agree with the CCPA, which thinks those cuts should be reversed.)
But its other tax measures have been a mishmash, based on no discernible principle other than political expediency. This started with a decision announced in 2006, the year the government was first elected, to lower the GST rate from seven to five per cent. This flew in the face of solid evidence that an income-tax cut would have done more to boost the economy. It continued in the years since with a host of "boutique" tax breaks for various special interests - measures that individually or collectively do nothing to make the economy more efficient or the tax system more fair.
On the spending side, the Conservatives have presided over a huge increase in the federal civil service, not just negating the Liberal staff reductions of the late 1990s, but growing the number to a record 380,000 last year. That they've been able to do this at a time when countless Canadians are complaining about cuts to federal services is a remarkable feat, though not one that most conservatives would brag about.
As well, as the Howe analysis notes, "Ottawa's average cost of employing a full-time worker - wages and salaries plus employer contributions to health, dental, disability, workers' compensation, social security, pension, and other postretirement benefits - more than doubled from 1998/99, when it was about $56,700 per employee, to 2011/12, when it reached $114,100 per employee.
"Over the same period, business sector compensation per worker in Canada rose by less than half, from $33,300 to $49,000."
So, by all means listen to what the finance minister has to say when he rises to present his budget tomorrow. But if you want to know what's really happening, watch what he does.
Original Article
Source: canada.com
Author: Don Cayo
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