Five tests for Tuesday’s federal budget


BY Marc Lee, a senior economist with the Canadian Centre for Policy Alternatives (CCPA) BC office and David Macdonald, CCPA Alternative Federal Budget.

…. When the Prime Minister and his minority government come out of hiding to face the people, and his political opposition, they face a test of historic proportions.

Their task is to make right what they failed to do last fall: Bring in a stimulus budget that creates jobs, invests in strategic long-term initiatives and helps those who need it most.

But will Tuesday’s budget [Jan 27, 2009] meet the challenge that confronts us? Or will the opposition parties be justified in rejecting it?

We lay out five tests for Tuesday’s budget, to help Canadians and our politicians make a choice that plants the seed for a strong, prosperous and greener Canada.

Tuesday’s budget needs to do these five things:

1. Budget 2009 should help the hundreds of thousands of newly unemployed Canadians by increasing Employment Insurance (EI) benefits from 55 per cent to 60 per cent of insured earnings and extending the period for receiving those benefits to 50 weeks.

2. Budget 2009 should support the hardest hit Canadians, such as unemployed, low-income Canadians, and hard hit communities by making a commitment to reduce poverty in Canada by 25 per cent in the next five years.

3. Budget 2009 should implement an ambitious social, physical and green public infrastructure program — a measure that could create hundreds of thousands of new jobs just when we need them.

4. Budget 2009 should support key value-added sectors with restructuring criteria to ensure they become green and sustainable. It’s about keeping the lights on in key sectors in the short term, but re-orienting those sectors so they can come out stronger and more responsive to the demands of the day in the long term.

5. Finally, Budget 2009 should emphasize spending over tax cuts.

There is growing consensus on a number of these tests.

EI is the federal government’s most important automatic stabilizer and most agree it has been greatly weakened and must be reinforced to face rising unemployment.

Most agree on infrastructure investment as a good means of stimulating the economy and creating jobs. But the kind of infrastructure we invest in and the type of jobs we create are important to consider.

…. On the infrastructure file, this means major investments in green projects — public transit, renewable energy — that reduce Canada’s carbon footprint and plant the seeds for a sustainable economy.

However, infrastructure isn’t just about roads and bridges: it’s also about investing in social infrastructure — health care, post-secondary education, child care, and social housing — to ensure balanced job creation between male- and female-dominated professions and the expansion of public programs to all Canadians.

The Prime Minister has talked about Canada’s middle class, and how they need tax cuts in the upcoming stimulus budget. But we will get better bang for the buck if we deliver money into the hands of those who will spend it right away, particularly those with lower incomes.

The majority of Canadians, especially the middle class, benefit more from public services such as good education, health care, and affordable child care than they have from years of federal tax cuts. That’s where the investments need to be in Budget 2009….

They need to face reality: research shows that tax cuts end up in savings or get used to pay down household debt. Those dollars don’t end up in the economy where they are desperately needed….