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Harper government uses sleight of hand to balance its budget

Photo: Flickr/imagesmoney

There's one measure in Finance Minister Joe Oliver's 2015 budget that even his harshest critics are likely to agree with: extending compassionate care benefits through Employment Insurance.

Those benefits will go from six weeks to six months, and will no doubt be welcomed by thousands of family caregivers.

In a rare instance for this government of following the evidence, the budget quotes a Parliamentary Committee report from 2011 that pointed out how desperate the lives of so many who care for sick or disabled relatives are, and how crucial their contribution to the economy is.

The Committee report assigned monetary value to caregivers' work: $25 billion per year.

Given that, the $37 million increase in benefits in Tuesday's budget is a pittance.

But it is better than nothing.

Nothing is what Canada's cities will get for public transit -- that is, they get nothing until 2017.

That is when a new Public Transit Fund will kick in, to start at a modest $750 million over two years in 2017-2018, and then to rise to $1 billion per year after that. 

Municipalities may feel obliged to express their gratitude, although 2019-2020, when the full (non-inflation adjusted) amount kicks in, is a long way off.

When Olivia Chow was the NDP's transport critic she tried valiantly to get the Transport Committee to formulate a national public transit policy.

Chow used to say that Canada is one of the very few highly developed countries in which the national government plays almost no role in the development of urban transit -- with the result that cities such as Toronto experience some of the worst gridlock on the planet.

Conservatives on the Transport Committee, such as Pierre Poilievre, used to push back, saying that transit was a provincial responsibility. And in any case, they would add, the government has no money for such trivialities.

Tuesday's budget belatedly adopts Chow's view.

"Public transit," Oliver's budget says, "helps reduce overall urban congestion, which...supports productive and growing cities."

Critics will say it is too little, too late, and they will cavil at the lack of a strategic framework.

But as with compassionate care, a government known for its meanness will have succeeded in showing its humane and caring side, just in time for the election -- and without any impact on the bottom line.

That bottom line is, of course, what the Harper government considers to be the big news.

The budget is balanced -- or, rather, it projects a surplus, if only a very small one of $1.4 billion.

It is, indeed, a squeaker of a surplus. By its own account, the government very nearly failed to achieve even that small number.

Back in the fall of 2014 the government was projecting a surplus of $4.9 billion excluding what it calls the "set-aside for contingencies".

But the economy has not performed well since that forecast a mere half-year ago.

The economic decline, the budget document states, "is primarily due to lower projections for tax revenues driven by weaker-than-expected year-to-date results and lower forecast for nominal Gross Domestic Product (GDP)." 

The budget also notes that the government's fiscal position suffered from "lower expected rate of return on interest-bearing assets..."

All-in-all, despite the Finance Minister's brave rhetoric, the 2015-2016 budget does not describe a brilliant economic performance.

In fact, the only way the government could achieve a modest surplus was by selling assets and eliminating the multi-billion dollar contingency fund that had been a part of federal budgets since the 1990s. 

When asked about the latter, Oliver was dismissive. 

At the end of the fiscal year, he said, contingency monies go directly to paying down debt, as does any other accumulated surplus, so there is really no need to have that dedicated contingency reserve.

The Minister's odd statement begs the question as to why governments, including the current one, have bothered with this "prudence" measure for more than two decades.

The reason -- you guessed it -- has been to shelter public finances from unexpected shocks to the economy, shocks such as, say, a sudden drop in oil prices and a corresponding drop in tax revenue.

Those who argue that balanced budgets are, for the most part, economic nonsense, don't fret over whether or not there is a contingency reserve that allows a government to hit its fiscal targets -- to use Paul Martin's famous phrase -- "come hell or high water."

But Harper's Finance Minister is not one of those balanced budget skeptics.

Joe Oliver would claim he is a firm believer in the gospel of fiscal prudence.

Based on Tuesday's budget, however, it seems the Finance Minister's commitment to fiscal balance is more of a pose than a deeply held belief, especially when you consider the fact that not only did the government need to gobble the contingency reserve to achieve balance, it also had to use the Employment Insurance (EI) fund surplus and unload $3.4 billion in assets.

In that latter category, the budget lists the sale of General Motors (GM) shares, a sale which resulted in a significant loss of leverage over a company that Canadian tax dollars helped save from certain bankruptcy.

The budget document says the net gain of this sale was $3 billion, but somehow also says the "contribution to budgetary balance" of all asset sales, including that of GM shares, is only $1 billion.

Still, without that $1 billion, and the EI fund surplus, and the end of the contingency reserve the government would be projecting a small deficit for this coming year, not a surplus.

Such a deficit would not, in reality, matter a whit to the health of the economy. But since the Conservatives are bragging to anyone who will listen about the fact that the budget is, at last, balanced, it is worth pointing out how they did it.  

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