Is Federal Budget Boom or Bust for Canadians?
Recession-Driven Budget Promises Much, but Will it Deliver?
Feb 17, 2009
On January 27th, 2009, the federal government released its long-awaited budget, which it dubbed its “recession fighting budget”. This budget differs substantially from its fall Economic Statement, whereby surpluses are now a thing of the past and Keynesian economics may be the very pill this country needs to swallow to ride this current recession.
While the budget itself does have some support for laid off or unemployed workers in the way of a $1.5 billion retraining package for those eligible for Employment Insurance (EI), as well as a $500 million package for those ineligible. Employment Insurance, at one time the first line of defense when a job is lost, has gradually eroded into a benefit that is difficult to get for the majority of workers due to the cyclical nature of work and the changing economy. While Canadians aspired to see loosened eligibility requirements for EI, as well as increased benefit rates, the federal government did neither. However, it added five weeks to the end of the maximum benefit period, which currently sits at forty weeks.
Economic stimulus was provided for in the budget; however, provinces and municipalities requesting access to these funds must co-fund 1/3 of the amount requested. This requirement has many provinces and municipalities concerned that the federal government has no intention of spending this money, as many provinces and municipalities are financially strapped due to the cost of rising welfare, policing and health care costs, while ignoring desperately ageing infrastructure. There is also money promised for “housing”, but details are sketchy as to what this means.
There is also the homeowner’s renovation grant, which for up to $10,000 in renovation or contracting expenses a homeowner completes on their home for this fiscal year alone, a tax credit of up to $1,350 can be acquired. While certainly a benefit to those who are planning work on their homes this year, it does not help lower-income homeowners that cannot afford upfront payments for this purpose in the first place. The purpose for this credit of course is to spur legitimate renovation companies to hire more people as work orders for this type of work increase.
In addition, there are small increases to the Child Tax Credit and other related credits connected to children and families, as well as the Working Income Tax Credit (which is set up to assist workers in making the transition from welfare to low paid work). There are also tax cuts, which are certainly an item of controversy at this time. While the government tends to make it look like these tax cuts will benefit lower income families, tax cuts almost always disproportionately benefit people who pay more taxes. The more taxes one pays, the larger amount of money one “saves” regardless of the percentage cut provided. Concerns about tax cuts at a time of recession are recognized, as this may reduce revenues available to the government to finance health care and other important programs.
There were also more details given to the bailout package for General Motors, Ford and Chrysler. General Motors accepted some funds in a bailout, as well as Chrysler; however, Ford wanted to have funds available to it in the event it will need them at a later date. In the meantime, all three plants are bleeding jobs faster than the bailout money can get to them, which is many Canadians question the terms of the bailout and even if it was advisable to begin with.
The Ontario Government seemed fairly satisfied with the federal budget, although they still feel there is plenty of room to reform EI, as Ontarians still receive much less money per capita from this fund than other provinces, despite paying into the system. Those hoping for an anti-poverty strategy at the federal level were largely disappointed. Organizations such as Campaign 2000, Ontario Coalition of Social Justice and Canadian Centre for Policy Alternatives have repeatedly said that putting more money directly into the pockets of low-income people will lead to an immediate stimulus of spending, as such persons spend virtually every penny they get in their communities. It is hard to assess the actual impact of the federal budget until July of this year, when most people receive their annual tax assessments and new rates for their child-related benefits.
However, most people are not naïve enough to believe that the federal government actually put this budget together to look after the interests of Canadians. This budget is only put together to prevent the opposition coalition from taking over, which is now dead due to the Liberals choosing to lend their conditional support to it.
