New Budget Will Be Lifeline or Noose for Tories

Unnamed sources in the Prime Minister's Office leaking key budget details. Ministers making major funding announcements on network television. Jack Layton espousing his supreme distrust of Stephen Harper.

Welcome to another season of Canadian politics. Pull up a chair and get comfortable, it's going to be quite a show.

Part two of the nation's 40th Parliament officially began yesterday with the speech from the throne. But all eyes are on today's budget, much of which has been leaked over the past few days in an unprecedented attempt by a government to get ahead of the bad news.

So far, we know the deficit over the next two years is projected to hit $64 billion. We know the Conservatives want to pump $7 billion into infrastructure projects. We know employment insurance will get a boost, as will the forestry sector, farmers and resource towns hit hard by the economic downturn. We know there will be investments in social housing and help for on-reserve aboriginals, seniors and people with disabilities.

What we don't know is if the Conservative government's plan to stimulate the economy is enough to buy them the support they urgently need from the Liberals to remain in power. And will it go far enough to protect Canadians from the growing crisis?

David Macdonald doesn't think so.

"This is half as much as Canadians need," the coordinator of the Alternative Federal Budget for the Canadian Centre for Policy Alternatives told The Tyee.

Based on the numbers he's seen so far, Macdonald is anticipating a $40-billion stimulus package over two years. Of that amount, a total of $13 billion has already been announced.

Because Canada boasts the lowest debt burden of G7 countries, Macdonald said the federal government could afford to do more. "We're most capable of spending on a stimulus package that would buffer Canadians against the recession, but we seem to be the least interested, so our package will come in much lower than what we've seen internationally. What that means is that Canadians are going to see higher unemployment and more challenging circumstances over the next two years than they needed to," he said.

'We've built up a cushion'

Macdonald explained the government should address its economic woes by employing two lines of defence -- infrastructure spending and tax measures directed to low income Canadians.

Yesterday's announcement of $7 billion in infrastructure came in much lower than what the CCPA outlined in its budget. The feds unveiled plans for a $4-billion Infrastructure Stimulus Fund over two years, and allotted $2 billion to colleges and universities and $1 billion to the Green Infrastructure Fund.

"There is concern the infrastructure side, which would have really been the engine of growth in Canada, is very small," Macdonald said.

The CCPA budget proposed a $6.6 billion investment in general municipal infrastructure and an additional $13.9 billion over two years in the Green Infrastructure Fund.

The prime minister has suggested as recently as last weekend that the budget will include permanent tax cuts for individuals and businesses. Macdonald says that's not a good idea.

"If you sent all Canadians a cheque for $200, most of that money would find its way into debt repayment or savings to buffer against the coming recession," he said. "The point of stimulus is that it's being spent in the economy right now to create jobs, not saved to be spent four or five years from now when things are better."

Doubling the GST tax rebate and increasing the child tax benefit and rebates for low-income seniors are the kind of tax measures Macdonald suggests because the people who receive that cash are far more likely to put that money directly back into the economy.

As for that $64-billion shortfall -- the first deficit after 10 years of balanced books -- Macdonald takes it in stride. "We've got fiscal room to spend on a deficit. We've been running surpluses for a decade, we've built up a cushion and if there's any time to use the cushion, now is the time," he said.

'Make it look palatable to Liberals'

Over the past few weeks, the Liberals and their new leader Michael Ignatieff have given the Conservatives a lot of rope to work with as Finance Minister Jim Flaherty puts the finishing touches on the budget. The question is whether the Harper government will use the rope as a lifeline or a noose.

The Liberals have said they want protection for the most vulnerable, safeguards for employment, job creation and regional balance. In layman's terms, it means they want quick spending on infrastructure projects to get people working. They want re-training programs for older workers and green initiatives on energy efficiency and retrofitting. And they want money spread across the country -- if Ontario's auto industry gets a boost, so too should B.C.'s forest industry.

"We're pretty clear on the direction we want to see," Liberal finance critic John McCallum told The Tyee. "The Conservatives don't want us to defeat their budget so they'll try to make it look as palatable to Liberals as they can."

What the Liberals don't want to see are large, across-the-board tax cuts, which McCallum -- a former chief economist for the Royal Bank of Canada -- said aren't an efficient form of stimulus and run the risk of leading to a large permanent deficit.

While much of what the Conservatives have leaked over the past few days seems in line with what the Liberals have called for, McCallum says his party's support is not in the bag.

"We will vote against the budget if we think it's a bad budget," he said. "We have to look at the budget as a whole and see if it's good enough for Canada. A budget is a big document and there will always be things we like and things we do not like, so we'll have to make a judgment whether this is an adequate budget."

Igantieff has said he will sleep on it and let his intentions be known on Wednesday.

'We are trying not to pick winners or losers'

That could make for a sleepless night for many Conservatives. But Ted Menzies, the parliamentary secretary to the minister of finance, told The Tyee he hopes any nightmares can be avoided.

"In my dreams, I would see the budget passed and we'd move forward with the House of Commons working together to grow this country," the Alberta MP said.

Since Parliament prorogued in December, Menzies and the minister have criss-crossed the country to hold pre-budget consultations. The government also ran online consultations. Menzies said the message he and Flaherty heard over and over was a push for greater access to credit. "It's the number one issue," he said.

Regional balance is also important. "We are trying not to pick any winners or losers in any region because to Canadians, no matter where they live, a job is very important," he said.

Transport Minister John Baird made yesterday's infrastructure announcement at a press conference in Ottawa. His colleague, Human Resources Minister Diane Finley, appeared on CTV's Question Period on Sunday and announced a total of $2 billion in funding to help re-train workers, including $500 million targeted at older workers. The day before, Finley announced more than $2 billion to build more public housing and renovate existing spaces.

But will it be enough to satisfy the Liberals?

"We'll have to look carefully at the budget and ask ourselves, 'Where is the meat? Is this real? Is this substantial? Or is it just token?'," McCallum said.

'Spending like drunken sailors'

If the Conservatives use the rope they've been given as a noose, the Liberals may vote against the budget and resurrect the coalition with the NDP. That could cast Jack Layton as the hangman.

McCallum said the coalition is a better option than going back to the polls for an election, which Ignatieff, speaking to reporters in Montreal last week, said Canadians need like, "a hole in the head."

As finance critic, the responsibility has fallen on McCallum's shoulders to have a shadow budget ready to go in the event the government falls and the coalition rises. "We have to be ready for every contingency," he said. Details of the shadow budget have not been made public, but McCallum said he's been in touch with Thomas Mulcair, the NDP's deputy leader and finance critic.

Mulcair himself had a 90-minute meeting with the finance minister earlier this month, but it doesn't sound like he was won over.

"The Conservatives are probably going to say a bunch of things they don't really believe to try to survive the budget vote, but when you push and prod Jim Flaherty, you realize he's the same neo-con he's always been. He doesn't believe the government has a role in the economy," Mulcair told The Tyee.

"For three years, they've been spending like drunken sailors despite their lecturing about fiscal responsibility and the result has been the most precarious financial situation in a generation," he added.

Help for low-income Canadians and investments in infrastructure, housing and renewable energy are the NDP's top priorities.

The finance minister will present the budget in the House of Commons today starting at 4 p.m.

Related Tyee stories:

• Bracing for the new budget
• Fire Up the Digital Jobs Machine
  Flaherty budget needs to broadly define 'infrastructure projects.'
• In Canada, a Push for Obama-style Green Stimulus
  PM to get plan backed by 850,000 group members.