Further thoughts on the Canadian Budget

 

  • Federal budgeting is a game played by finance ministers and their officials. Expectations are created and numbers inserted which will make the government look good. For example, no one has any idea what the price of oil will be over the next twelve months. By using US$25 per barrel oil a $30bn deficit is forecast. Oil prices will likely be higher and the government can then show a lower deficit and debt.

 

  • Canadians, and especially Ontarians, should be concerned about the deficit situations of three levels of government, federal, provincial and municipal. All three deal with one set of taxpayers. The feds can reduce expenditures by lessening payments to the provinces, which in turn can lessen payments to municipalities. If municipal rates rise, or if snow clearing and road maintenance deteriorate, it may be triggered by decisions made by other levels of government.

 

  • As background to the budget, largely ignored are the unemployment rate and growth of the economy. Today’s unemployment rate is 7.3% in Canada and 4.9% in the US (Economist March 26, 2016). While the two are calculated slightly differently, the gap exists, and the Canadian rate has been rising since 2014. Also the forecast for GDP growth in Canada is 1.6% and in the US 2.0%.

 

  • Other numbers to digest are Canada’s balance of payments where the balance of trade has swung from surplus to deficit since 2008, and the current account balance to an increasing deficit over the same period. It is the direction of change which shows the way the economy is changing.

 

  • Political support for Trump and Sanders in the US is in large part fuelled by worker dissatisfaction with jobs and pay, especially when matched against those in high income tax brackets, and actions taken by the Washington and corporate elite to feather their nests. Similar feelings have not yet emerged in Canada to the same extent, but the political support given to the late Rob Ford in Toronto, and his style of politics, came from people who felt they were overtaxed in the suburbs to support those living in the downtown area. While Ford’s political conduct was not as obscene as Trump’s it tended to that end of the political spectrum. Canada is not immune from the political and economic forces present in the US.

 

  • If some in the US want to build a southern wall to keep out Mexicans (except perhaps those who enter using drones), the same people may want Canada to pay for the defense it receives from US military expenditures, due to the failure of Canada to provide the financing to equip its forces. If Canadians were told that fire brigades were unable to provide protection at home, because the equipment was on order, and had been for a number of years, they would likely complain. And yet, the failure of this and previous federal governments to equip our military, leaves us either undefended or reliant on others (the US) to do the job.

 

 

 

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