At the Department of Finance, the officials have a term for a budget like the one delivered on Tuesday — a Christmas tree.
By that, they mean that it is literally full of brightly coloured baubles, none of which are ultimately very substantial nor add up to much. They use the term disparagingly.
In this budget, the government looks to have taken every demand placed on it and given almost everyone a partial loaf. Not enough to make a fundamental difference in economic terms, but a political difference that will buy them time in office.
There are worthy initiatives in this budget that will be helpful. Some thought the government might propose politically popular but very expensive tax cuts aimed at the middle class or higher. Instead it aimed its tax relief at lower and middle income earners, where it is most needed and will do the most good. The cuts are slight, however, and more relief in those brackets would have been more powerful stimulus. What would we all give to have those billions of dollars back from a lousy 2 per cent reduction in the GST?
Also positive is the money for housing, schools and water for Canada's aboriginal people - the youngest, fastest growing, and poorest segment of our population. The money for infrastructure addresses both a need for short-term stimulus and, hopefully, quality investments in our cities - although the required contribution from municipalities and provinces will most likely have to be revisited. The big investments in social housing will also be of much benefit to Canadian cities and the most vulnerable who live in them.
Clearly, the measures in the budget for the financial sector are welcome and signal a real concern for the health of our banking system in the midst of a global crisis. The government has taken substantial additional measures to free up the life blood of the economy.
The functioning of our financial markets lies at the heart of this crisis. The scope and quantity of the actions also raise a real question as to what dangers still may still lay ahead.
Yet this budget is disappointing in several respects, aside from its lack of focus. Two that stand out are a fiscal and deficit track that marks a return to the days when government forecasts had no credibility, and the lack of investment in the economy of the future.
The credibility of the fiscal projections is, for the first budget in a long time, questionable. Few are debating the need for massive stimulus and therefore deficits. But the government has chosen to base its forecasts on the most favourable of conceivable scenarios. There are two consequences of this.
First, by making such positive assumptions about economic growth, government revenues, expenditures and deficits for 2010 and beyond, it risks losing credibility with Canadians and markets if those assumptions turn out to be wrong.
Second, using such optimistic forecasts allows the government to promise Canadians a painless return to balanced budgets. It has avoided the hard work of actually thinking about how to do that. Nor has it leveled with Canadians and told them that after this binge of spending, real choices and restraint will be necessary to get our financial house back in order.
Meanwhile, as much as the stimulus measures comprise some welcome investment, they lack a central view of where the government believes all of this will lead us. What does the government see the Canadian economy looking like five years or 10 years from now?
It was obvious well before this crisis hit that Canada has serious long-term competitiveness challenges. Our standard of living cannot be taken for granted over the long term. This economic crisis and the demand for government intervention place an enormous challenge before us — but also present us with an opportunity.
To refocus and reinvest in other elements of the economy that will leave us more diversified and less vulnerable to energy price fluctuations or commodity price ups and downs. To enhance our productivity with investments in new sectors and educational and retraining initiatives targeted to new markets and new jobs. To promote new environmental initiatives that will lead to more sustainable investments in our automotive and energy sectors. To envision a prosperous central Canada despite the much-diminished manufacturing base that is the emerging reality. To see education as the key to our strength and competitiveness as a nation. To face the demographic challenges that threaten the viability of our health and pension systems.
That is the narrative that is missing. There is no doubt that there are massive actions in this budget. But there is not much of a plan for the future.
We have given a little bit of money to everyone everywhere. It's classic and time-tested as a political strategy, but it has no focus and no blueprint for sustained economic growth. What a missed opportunity.
Terrie O'Leary was chief of staff to finance minister Paul Martin from 1993-98
Special to The Globe and Mail
