With the election fully underway, we're seeing more spending promises rolling out from the parties, but as our economy seems to be teetering closer to a "technical" recession, and as oil prices and the dollar continues to slide with markets falling on news of slowing growth in China, the question again becomes how parties plan to pay for them all. They're all promising balanced budgets more or less but can any of them really afford to with the current economic climate?
While the government claimed that their latest budget was balanced, that "balance" came at the expense of their GM shares, the contingency reserve and the EI fund. With oil prices far below what was costed in the budget, and GDP growth similarly downgraded, the Parliamentary Budget Officer has projected that the budget will come in at least a billion dollars in deficit. This affects all of the parties in terms of what they had built their platforms on, and is going to make any party's balanced budget promises even more suspect.
For Conservative promises, well, there haven't been any big-ticket items so far, so any concerns about the affordability of their plans are probably less pronounced than with the opposition parties. Most of their pledges to date have revolved around boutique tax credits measures which unnecessarily complicate the tax code but generally wind up costing the treasury very little (though as the Auditor General noted in his last report, they don't wind up tracking those very same tax credits so we have very little information about how useful they are in promoting the things they intend to). That said, if they're going to still insist on balancing the budget, it's going to mean pushing off some capital expenditures into future years to achieve a balance on paper, and you can pretty much guarantee that much of that will come from the military's budget the same military budget that has been deemed unsustainable at current levels, and to which the PBO has estimated will need an additional $3 billion per year to just maintain current capabilities.
The NDP have been making some of the biggest promises to date, with their $15/day childcare plan, but also pledges money for transit, infrastructure, income assistance for seniors, and the manufacturing sector. What they haven't said is how it's all going to be paid for after all, small increases in corporate income taxes, eliminating tax exemptions for stock options and even closing tax havens is going to amount to small change in the broader scheme of things particularly with falling oil prices and slow GDP growth. Thomas Mulcair is fond of saying that they'll pay for things by making different choices, such as eliminating the Conservatives' income splitting policy, but again, that might only mean a couple of billion dollars. What's also interesting is that the NDP have been pushing off some of those very same promises, such as increasing GIS funding by $400 million per year by the end of four years, or creating those million childcare spaces by the end of eight years (provided that provinces sign on as well), but that kind of timeline also seems to make some particular assumptions about economic growth growth that we can no longer count on.
As for the Liberals, they too have some hefty promises, such as their revamped child benefit payments, promises for veterans and clean energy promises, but again, they haven't yet said how it'll all be paid for. Some of it they've laid out, like increasing the tax rate on the top earners, and cancelling income splitting, along with the line of "making different choices," but they say the costing document is still coming. That said, it should also be noted that Justin Trudeau has started hedging a little more on the promises of a balanced budget, saying that while they still plan to achieve balance, they won't say how long it will take until they've seen how great the mess left behind by the Conservatives really is.
Amidst all of these promises, however, is the underlying assumption that while the global economy is currently fragile, it should still bounce back and we'll return to steady growth at some point. What some economists like Stephen Gordon of Laval University, or former top Department of Finance officials C. Scott Clark and Peter DeVries have written recently is that we need to start looking at this economic slowdown as the new normal that we're not going to return to the same levels of growth that we're used to seeing. None of the parties have any plans for a growth strategy, and I'm not convinced that providing childcare nearly a decade down the road (which will largely benefit wealthier Canadians, if the Quebec model is any indication), or focusing on middle class tax breaks, can really count as an actual growth strategy.
It also bears mentioning that most of the future surpluses that the current government was booking have been predicated on continued austerity something that the opposition parties have not yet indicated whether they will continue. While we wait for the parties to come out with their full platforms and costing documents, one has to wonder if we're going to need to look at increased taxes in order to try and get back to balanced budgets. After all, we cannot ignore that it was the Conservatives' decision to cut two points off the GST that pushed them to deficit territory even before the 2008 financial crisis. Most economists will tell you that if you were going to raise taxes, consumption taxes like the GST would be the least bad option. All of the parties have denied that they would consider raising it another box that Harper has put them in but unless they're willing to break out of such a box, how can any of their promises, and plans for paying for them, really be seen as feasible in the current climate?
