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rfmcdonaldThe Harper government will aim to get consumers spending with a federal budget today that provides tax breaks for middle- and lower-income Canadians, incentives for home renovations and a promise of relief for credit-card borrowers.
The budget - which many are calling the most important since the deficit-fighting budgets of the mid-1990s - will also resolve the government's future, as opposition leaders decide whether to defeat the Tories and replace them with a Liberal-NDP coalition or force an election.
In addition to the $13-billion already announced, The Globe and Mail has learned that Finance Minister Jim Flaherty plans modest but permanent tax breaks for people in middle- and lower-income tax brackets, with one senior official saying the cuts will apply to those earning $80,000 a year or less. Money will also be provided for home renovations, although it's unclear how much the program will be worth.
Mr. Flaherty will also move to give Ottawa power to regulate credit cards, allowing the federal government to intervene if necessary, sources said.
[. . .]
The budget is expected to include a deficit of $30-billion this year and $34-billion in 2009-2010.
The overall stimulus package is expected to exceed $30-billion over a two-year period, putting Canada into deficit for the first time in 13 years.
Among other measures, sources said, the Tories expect to accelerate already planned corporate-tax reductions. The existing plan, laid out in a mini-budget last fall, calls for the rate, now 19 per cent, to sink to 15 per cent by 2012.
The Conservatives, it should be noted, came to power based on claims that they would be fiscally responsible. John Ivison, of the (Conservative-linked) National Post, is not so forgiving.
The focus of this budget is not on setting Canada on the road to recovery. Rather, the principal goal appears to be ensuring a Conservative victory at the next election.
If the Bloc Québécois votes against the budget and we are forced to go to the polls again, the Conservatives will be able to champion the $160-million in new spending on cultural projects that Heritage Minister, James Moore, revealed exclusively to La Presse over the weekend. If the Liberals and NDP vote against the government, the Tories will point out that they are denying the most vulnerable Canadians $2-billion in spending on new public housing.
We are even going to see a new $250-million economic development agency for southern Ontario from the Prime Minister who campaigned for the elimination all corporate subsidies and industrial development schemes in the 2004 election.
The $64-billion question is, will the government’s plan work?
Dale Orr, managing director at Global Insight Canada, suggests that this stimulus package will add perhaps 0.5% to economic growth this year -- welcome but hardly transformative.
Bill Robson, president of the C.D. Howe Institute, is far more pessimistic, believing that the large deficits anticipated in the short-term will persuade people to retrench because they forsee higher taxes, reduced government programs and higher debt service costs in future years. “I’m not sure we’re going to see much benefit for the economy because the bigger the numbers get, the more frightening they get. And this overall budget number is pretty frightening.
“[Governments] act as though the world is about to end unless we throw tens of millions of taxpayers’ dollars onto a fiscal bonfire, just as they are doing in the U.S. Well, the world won’t end,” he said.
In the life of every ministry, there comes a moment when convictions have been worn down by the constant pressures of power, leaving the government on all sides of every issue, standing for everything and nothing.
Stephen Harper’s government may well have reached that point with this budget.
