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Tories winging it with new budget

If Preston Manning were dead, he’d be rolling in his grave this week following the release of the new federal budget. The massive amounts of spending and huge deficits are anathema to the Reform party and its followers, the core supporters of Stephen Harper’s Conservatives.

The prime minister himself undoubtedly finds the whole thing equally cringe-worthy. This budget is simple political expediency: Canadians are unhappy with the way Harper’s government has handled the economic crisis it was denying just months ago. That the opposition parties were threatening to pull the plug on the government – and Harper’s career – added to the urgency surrounding the fiscal about-face.

The most notable part of the budget is the planned $64 billion deficit over the next two years ($85 billion over five), even as Harper promised there would be no deficit and that Canada would ride out the recession, even posting a surplus to round out 2008 – wrong on all counts.

Having gone 12 years with surpluses that helped pay down the accumulated debt, Canada was in better shape than most of the other industrialized countries when the financial meltdown and resultant recession hit. But two years of the Conservative government spending like sailors on shore leave while also cutting taxes in the most ineffective manner – the two percentage points from the GST, for instance – left the coffers bare when the recession hit, apparently catching nobody but the Tories by surprise.

Tuesday’s budget represents a major shift in the government’s position. On tap is some $40 billion in stimulus over the next two years, featuring a mix of infrastructure spending and tax cuts (about $20 billion worth over five years).

The budget also solidified plans for the auto industry bailout ($2.7 billion in short-term loans). As well, the government will float up $200 billion to inject some liquidity into the markets, allowing lenders to make money more readily available to businesses and consumers.

While Harper has certainly broken with ideology and opted to pour billions into the economy, there’s every reason to doubt the move will be successful – there are far too many things that can go wrong.

On the spending side, the government has already shown itself adept at announcing infrastructure programs, but far less so at actually paying out the cash. Of the $12 billion announced for infrastructure projects, only $7 billion is new money, the rest is already in the pipeline. As local municipalities have discovered, it can be a few years before projects get approval and the cheque arrives. If that’s the case again here, the stimulus may be wasted.

As for the tax cuts, they’ll prove minimal in most cases – we’re talking a few hundred dollars. While those at the lowest income levels can reasonably be expected to spend the money in short order, many of us may opt to pocket the savings or apply it against mounting debt loads.

To add insult to injury, some of the tax cuts may be temporary, but there’s a real risk the government’s direction will undermine future efforts to bring deficits under control, just as we saw under the Mulroney tenure.

The jury is still out, but with no real vision for the future – where’s the push to move beyond old technologies? – being optimistic requires a leap of faith.


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