The 2009 Federal Budget
By Jim Knisley
Jan. 29, 2009 – The budget produced by Stephen Harper and the Conservative is like a blast from the past.
The budget produced by Stephan Harper and the Conservative is like a blast from the past.
Pierre Trudeau or Brian Mulroney would feel comfortable with its structure, if not all the details. The budget released Jan. 27 is political in nature and political in design. It is unfocussed and offers up a bit of something for virtually everyone.
The two dominant themes are tax cuts and infrastructure. While the tax cuts look impressive and are impressive on Ottawa's balance sheet they are less so at an individual's level. Ottawa is giving up billions, which translates to about $5 a week for many wage earners.
While every little bit helps, an extra five spot in your pocket is unlikely to cause anyone to go on a wild spending spree.
There are other drips and drabs and if you are really lucky and qualify for everything you might have an extra $10 a week to use to stimulate the economy.
The other biggish item is for homeowners. It will allow a $1,350 tax credit for renovation projects worth $10,000.
If you were planning to do the work anyway this is a bonus. But if you had no plans or are worried about getting laid off it is unlikely you will spend $10,000 to get a $1,350 tax credit next spring.
The infrastructure programs could be a big deal in doing needed work and generating employment. The problem here is that municipalities have to apply to Ottawa for the cash. Traditionally this involves a mountain of paper, weeks of work by municipal employees to prepare the application and then a wait of many months or even years for approval or rejection and another wait for the cash to be paid.
Adding to the dismay, most municipalities have been unable to figure out why some requests are approved and others rejected.
Canada's municipal leaders had proposed that the federal government distribute the money on a per capita basis and let the municipalities themselves decide which projects to move forward.
Ottawa rejected that idea and has kept control over who gets what and who does what.
If Ottawa wants to maintain that control and move projects ahead quickly there are two obvious ways of doing it. The first is to have federal officials take a quick look and rubber stamp the proposals. The other is for federal politicians to get involved and recommend what work is to get done.
In the U.S. they have a simple four letter word for the second procedure – pork. Pork is usually defined as federal spending designed to please local voters and effectively buy votes.
It's not that our politicians would ever do that, but the infrastructure program may offer the opportunity.
There are a couple of smaller, but related programs that could be equally tempting. The first is a fund to repair, refurbish and rebuild community recreation and other facilities. Every council I'm acquainted with could use some of that money. Who will decide who gets it?
The other program is a Southern Ontario Economic Development Agency. The fact that such an agency was created demonstrates just how bad things have gotten down here in the former industrial heartland. Every local newspaper in the region now seems to have a standing front page headline that reads "Hundreds of Layoffs at (fill in the name of the company)."
How will the money be distributed? The details are unclear but it wouldn't hurt to become friendly with your local MP.
In the U.S. the Obama administration has struck on an interesting idea. According to the New York Times, the U.S. government will list on the World Wide Web the projects that the federal government is financing.
A quick listing of the who, what and where of projects would be healthy for Canada as well.
David Leonhardt, an economics writer at The New York Times, suggests that the U.S. government "create a small-scale version of an infrastructure bank, a free-standing entity that could make more merit-based decisions than Congress does."
He also suggests the creation of new state offices to conduct cost-benefit analyses of proposed projects.
This might seem cumbersome, but it need not be. Professionals working with sound computer models could quickly sort the laughable from the laudable. Such cost-benefit analysis could be made public to show why one project was favoured over another.
As for the overall impact of the budget, it will provide some stimulus to the economy. How much will depend upon how quickly the infrastructure money gets out of Ottawa and how effective it is when it hits the ground.
But it is unlikely to be a quick stimulus. For that the government would have had to quickly get money to those who are being hardest hit by the recession and would spend the money.
That wasn't really a focus of the budget. Employment Insurance will be extended for five weeks for those who qualify and the premiums have been frozen at current levels.
But the system that allows those in some regions to collect for many more weeks than those in other regions continues despite the extension. The system that requires people in some parts of the country to work many more hours than those in other parts of the country before qualifying for EI continues. The payout levels were not increased ensuring that those laid off, sometimes after decades of work, struggle.
As for agriculture, there is little. The government is pumping more money into the latest in a long line of income stabilization-type programs and there is some money for slaughterhouses.
Hopefully, buried deep in the budget details, there is also some money for a livestock insurance plan to compensate producers whose animals are culled to control disease.