On the one hand, they will continue downsizing government operations, trimming public sector compensation by $7.4 billion over six years. On the other, they will increase state intervention in the economy, spending billions of dollars on job creation programs and corporate welfare. Not every industry is their friend, of course: They’re also hiking cigarette taxes by $4 a carton and will index the tax to inflation every five years.
Call it the New Corporatism, a world where Ottawa’s leaner-but-increasingly-
The Tories know the economy, and jobs in particular, are the top-of-mind issue for Canadians. So Adam Smith be damned; they have just under two years to micro-manage their way to better employment and growth numbers before facing the voters in 2015.
While Canada will have fewer bureaucrats picking winners and losers, you can bet they’ll be doing it under a watchful political eye. The government is committing half-a-billion over two years to the auto sector (hello, Ontario voters). It will spend $75 million over three years to get unemployed, older Canadians in small towns back to work (hello, rural vote). It will plow $40 million into entrepreneurship programs and another $40 million over two years into internships in “high demand fields” (hello younger and western voters). And in provinces that don’t sign on to the government’s Canada Jobs Grant program by April 1, the Tories will go it alone and give money directly to companies — and thereby take full credit for any jobs created.
The budget’s other big-ticket spending items are also designed to produce big-ballot returns. Infrastructure projects will yield dividends as well: shoring up the Champlain bridge in Quebec, improving the Windsor-Detroit border crossing and funding transit in Toronto and Vancouver are all natural vote-getters and job generators. And aboriginal education gets $1.9 billion at a time when First Nations support for oil pipeline projects is critical to the government’s western economic agenda.
Finally, the government is courting the consumer vote — though less aggressively than the opposition would like. Ottawa will end the practice of charging for paperless billing and promises to “address” the price discrepancies between identical goods sold in Canada and the United States.
Does that mean price-setting? We don’t know. But we do know that this is not a neutral proposition: Affected companies will seek a way to recoup lost revenue elsewhere. This could mean lowering labour costs by laying people off or hiring fewer new workers, which eventually would bite the government in the backside in the form of lower tax revenue and higher jobless numbers.
But the key word here is “eventually”. In the short term, the Tories’ Economic Action Plan, like all corporate welfare programs before it, will stir up activity and create jobs. Whether those jobs are sustainable once the funds dry up is the real question. By then, election 2015 will have come and gone and the government will have generated a juicy surplus to dole out in other voter-friendly ways.
That surplus promises to be $6.4 billion, almost double what was previously forecast. What will the government do with it? Will it rack up another raft of boutique tax credits? Will it continue “incentivizing” the private sector to create jobs? Or will it eschew corporatism for conservatism and deliver broad-based tax relief?
The Tories will have a lot of choices. Here’s hoping they finally make the right one.
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