Another finance minister, at another time, might have waited for improvement of the economy to look more like a lasting trend, before rushing to say the government is expanding supports like the Canada Child Benefit. One might have waited until the next full budget. Not Bill Morneau, not now.
This was an emergency. Mr. Morneau has taken a beating for months over proposed changes to small-business taxes, and then for failing to sell his shares in the family business to guard against conflicts of interest. He's battered. The Liberal government is sliding in opinion polls. Quick, get the keys to the treasury, and a team of spin-doctors! This was time to act. Or at least to look like you're acting.
The Finance Minister announced the inflation-indexation of the Canada Child Benefit, the $22-billion transfer to families with children, will start two years earlier than previously planned, beginning next July. And then he announced a $500-million expansion to the Working Income Tax Benefit, paid to lower-income workers, starting in 2019.
Check the dates: both begin after Mr. Morneau's full budget. There was no real urgent need to announce them now. The details of the expansion of the Working Income Tax Benefit weren't even put forward, since the federal government wants to talk about it with the provinces.
These are, in the event, both relatively modest additions to the supports for lower-income and lower-middle-class individuals, but Mr. Morneau and the Liberals played them up. One of the press releases issued with the economic statement was titled "Doubling Down on Progress for the Middle Class."
But they were a political necessity now. The last thing Mr. Morneau wanted was to have the fall economic statement again draw focus to the small-business tax changes that caused him so much grief. His boss, Prime Minister Justin Trudeau, didn't want that either. The PM wants Mr. Morneau to get the government past that – hopefully, with the Finance Minister's reputation repairable.
Mr. Morneau needed something else. If he had just re-announced the (heavily adjusted) small-business tax measures that he has been signaling for days, it would refocused attention on them. In the end, the small-business package included in the economic statement wasn't a bad place to end up – it included measures to block tax strategies like income sprinkling, but backed off measures with the most politically-controversial consequences, and restricted some others to undeniably high-income earners. But that's just about cauterizing a wound now. Mr. Morneau needed a way to talk about something other than his scars.
If it hadn't been for his politically-terrible-no-good-really-bad summer, Mr. Morneau probably would have just walked through this fall update feeling chuffed to how well the Canadian economy is doing. If the Liberals hadn't spent new money, the deficit for this year and the next two years would have been $9-billion to $10-billion less than was forecast in the budget last spring.
Now he couldn't be so subtle. So the tale told to Canadians had more of an obvious moral: the economy is doing better now because of Liberal "investments" in social spending like the Canada Chilld Benefit, and now that Ottawa is reaping the benefits it is time to pump more in those investments, to generate more improvements in the economy, and so on. Mr. Morneau made it seem like a virtuous circle.
There are a lot of ways to make economic arguments against that. Even those who argue the CCB encouraged consumer spending that stimulated the economy can't really expect that to mean that the more is pumped into it, the better the economy will be, forever.
And there is, of course, that gloomy cloud of risk that hangs over the Canadian economy, from household debt and housing and the fear that a collapse in NAFTA trade talks will disrupt trade and provoke a recession.
But Mr. Morneau has had to learn some hard lessons in politics this year, and one of them is that subtlety is not a virtue. The point of making those announcements about the CCB and the WITB now is to claim credit for a good economy, and in doing so, draw attention to the strong economy. If Conservatives in opposition claim it's the wrong prescription, and he should instead have been more cautious, and cut the deficit, Mr. Morneau should be happy to fight that out. That might just put him past those small-business tax troubles.