What you won't find in Carney's mini-budget: More public sector cuts, real comparisons and details
OTTAWA — While it included mostly tepid steps in response to what Prime Minister Mark Carney has called a period of ruptures, Tuesday’s spring economic update was not without substance. For example, the document tabled Tuesday has a slightly lower deficit of $66.9 billion for the past year due to improved fiscal outcomes, and a rash of new spending thanks to the windfall.
But just as important as the document’s contents, as is often the case, were the items and information that were not included.
More public sector cuts
True, the Carney government has already announced a reduction to the federal bureaucracy, which it dubbed the Comprehensive Expenditure Review.
Here’s the thing about that review, however, despite its call to reduce the public service by about 40,000 positions over the next few years: It’s really not that comprehensive. Many of those positions will be eliminated through retirement and other forms of attrition, and those reductions would only return the size of the federal bureaucracy to what it was a few years ago amid the Trudeau hiring spree.
That’s despite further advancements in the digital world and the growth of artificial intelligence, both of which are allowing private companies to increase efficiencies through the use of more technology.
Tuesday’s spring economic update did not take the drive for further efficiency much further, beyond the latest promise to save money by relying less on consultants.
Apples to apples
The update’s international comparisons of national debt are not exactly apples to apples.
The Canadian net debt figure, for example, which is much rosier than that of each of the other G7 countries, is bolstered by the fact that Canada’s liabilities are significantly lower comparatively than its counterparts in large part because the Canada Pension Plan (and its Quebec counterpart) is fully funded.
In short, that means our future obligations for the country’s primary pension plan are basically covered, whereas many other countries simply use a pay-as-you-go system for pension costs, similar to how Canada manages employment insurance, Old Age Security and many other programs.
It’s a fiscal advantage for Canada to have those hefty pension costs taken care of in advance, but it leaves the international comparisons imperfect.
Future spending
Of course it’s impossible to say what new spending future governments will come up with. But given that we can be pretty sure they won’t be short of ideas, it makes many of the future spending and deficit projections — which always seem to be on the rosy side — less than valid.
Past projections, understandably, for example, were unable to account for recent governments’ new spending on everything from dental services, a massive expansion of the public service, or the pandemic.
Similarly, this spring update, which includes economic projections that stretch out over more than three decades, does not include the inevitable extra spending.
Seriously? More government?
This economic update trumpets the creation of the Defence Investment Agency as a stand-alone agency.
The new $103.8-million agency will be set up, according to the economic update, to deliver “more timely and transparent procurement.”
Is this not a core part of the mandate of the Department of National Defence?
This is not the first time that Carney has given a clear indication that he thinks he needs to set up a new government agency — remember the Major Projects Office? — to ensure that things can get done quickly enough.
If that’s the case, wouldn’t it be better to just fix the core problem within the existing government body?
Details
The devil may be in the details, but we’d still like to see them anyway.
Whether it’s the new sovereign wealth fund or the various national strategies (trade diversification, nature, housing, and the latest for auto), the government seems long on identifying big-picture problems and short on specific plans and tactics to solve them.
There may be times when the big-picture vehicle needs to come first. But this seems like a pattern.
Crisis? What crisis
Pretty much every economist in the country, including the prime minister, has commented on the Canadian productivity crisis that has stretched back at least a few decades. While it’s undoubtedly a nerdy word that makes people think about just about anything else, economists insist that it’s very important and is directly tied to economic growth and our standard of living.
And yet, there was in this economic update — like with the fall budget — no big swing to tackle this big problem.
What would a big swing look like?
Ottawa could, for example, return the federal component of consumption tax — with consumer spending rarely a problem — to seven per cent and use that extra revenue to dramatically lower those taxes, such as corporate income and payroll taxes, that hamper productivity and our economy to a much greater degree.
Taking a bigger slice out of the federal bureaucracy, including the regional economic development agencies, and reallocating that money to productivity-enhancing policies would also qualify as bold.
Instead, the Carney government added some modest changes to the Scientific Research and Experimental Development tax incentives and launched a $25-billion sovereign wealth fund to invest in projects that may turn out to be very important. But we can’t really evaluate this new fund yet because of the dearth of details that have been announced.
The update also unveiled the launch of a “whole-of-government competition plan” designed to strengthen productivity and affordability by promoting greater competition in government policies. The connection to tangible results is also yet to be clarified.
National Post
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