By Ryan McGreal
Published January 28, 2009
The new Conservative budget is certainly less lousy than I expected, containing a mix of good, bad and ugly measures. Yet overall, it seems that the Conservatives just couldn't quite commit to doing the right things in the right ways (let alone for the right reasons).
A one-year home renovation tax credit - 15 percent on renovations between $1,000 and $10,000 - and an expansion to the social housing retrofit fund should encourage more business for building contractors while improving average housing energy efficiency.
Modest tax cuts for small business owners and low- to middle-income employees that raise the threshold for the lowest tax bracket will cost the government $4.4 billion in revenue but will mostly go into savings rather than new spending (even the government admits they will do little to stimulate the economy), and won't help the unemployed at all. In any case, they only improve slightly on tax cuts that were already planned for 2009.
Another problem with the tax cuts is that they will make it harder for the government to start balancing its books again once the economy improves. Given that the tax cuts won't help with the recession, it's hard to resist the suspicion that this is a bit of "starve the beast" snuck in for ideological reasons.
Improvements to Employment Insurance (EI) mean benefits will continue for an extra five weeks (to a maximum of 50), but eligibility rules haven't changed and benefit levels haven't increased.
$12 billion in infrastructure spending over two years will still flow (or, more likely, not flow) through the slow, clumsy Building Canada Fund rather than a Gas Tax-style transfer.
Any new projects funded through this mechanism will probably be too little and too late to make much of a difference, especially since the Building Canada Fund also requires matching contributions from municipalities - money that cities like Hamilton don't have and can't easily borrow.
Perhaps that's a blessing in disguise, since there's no federal plan to integrate public transit, and most of the "shovel ready" municipal plans are related to road and automotive infrastructure.
In the meantime, a $1 billion "clean technologies" fund mostly goes to nuclear power and carbon capture support for the Alberta oil industry, with little for renewable energy.
The budget isn't great, but it will probably play well in the media for people who don't look too closely at it. That puts Liberal leader Michael Ignatieff in a tough position: a vote against what superficially looks like a good budget will look like mere partisanship.
Yet the NDP and Bloc Quebecois have already indicated that they will vote against this budget and honour the coalition agreement the three parties made in the end of November to defeat the government in a confidence vote.
Ignatieff, who has been diffident about the coalition since it was negotiated, has a tough choice to make on whether to keep the Liberal end of the bargain.
It's impossible to know what Governor General Michäelle Jean would do if the opposition defeats Harper's government, but it's by no means certain that she would offer the coalition a chance to govern in its stead.
In any case, public support for the coalition is very soft, though it has improved considerably since Ignatieff replaced former Liberal leader Stéphane Dion as its leader. Support for the Liberal Party itself has also improved, which may tempt the Liberals to go it alone and try to win a future election without the support of the other parties.
At this point, Ignatieff's most pragmatic bet is to demand substantive changes to the budget in exchange for Liberal support: easing EI eligibility requirements and increasing payments; channeling infrastructure dollars through the gas tax transfer rather than the Building Canada Fund; and increasing support for sustainable transit and renewable energy.
If the Conservatives agree, the Liberals can vote to accept it and (almost) everyone wins - the Conservatives, who get to stay in power; the Liberals, who get to say they stood up to the Conservatives and fought for a better budget (recall that NDP leader Jack Layton squeezed considerable mileage out of the 2004 budget prepared by former Liberal leader Paul Martin's minority government); the voters, who get to avoid an election no one wants; and the Governor General, who doesn't have to decide whether to give the coalition a chance to govern.
The real test to Ignatieff's mettle will come if the Liberals demand changes but the Conservatives refuse to implement them. Should the Liberals roll over and accept the budget anyway, it will reveal Ignatieff as yet another callow, craven opportunist rather than a smart, principled leader.