Crawl Across the Ocean

Thursday, February 24, 2005

The Budget - Part 2

My general take on the budget was in part 1. This post is basically a list of all the spending / tax cut initiatives in the budget along with my opinion on them (where I have one).

The format is: Initiative Title / Amount this year / Amount in 2005-2006 / Amount in 2006-2007 / Amount in 2008-2009 / Amount in 2009-2010 / 2 year total (this year + 05/06 + 06/07) / 5 year total (from this year out until 09/10). It's in (roughly) descending order of size based on the 2 year total and all figures are in billions of dollars and rounded off to the nearest $100 million. Let me know if you see any errors.

Note that the two biggest items, health care and the new equalization framework had already been included in the fall update last November, so they're not really new as of the budget).

(yeah, I know, I should put it in a table, but I'm lazy, what can you do? -
Update: Andrew at Bound by Gravity has created some charts which do a great job of capturing the figures which follow.

Health Care deal: $5.8 / $2.6 / $2.4 / $2.3 / $2.6 / $3.2 / 2 yrs: $10.8B / 5 yrs: $18.9

I guess if the provinces are too chicken to raise their own taxes to pay for their health system properly, they have no right to complain about federal intrusion on their jurisdiction.

Equalization Framework: $1.5 / $1.6 / $2.0 / $2.5 / $3.0 / $3.5 / 2 yrs: $5.1 / 5 yrs: $14

If there's one file that could turn into a huge mess in the next few years, it's probably this one. I don't mind equalization too much, I guess it's fair compensation for poorer regions getting saddled with a currency which is kept at a level too high for them to compete at, thanks to the efforts of economically stronger regions.

Child Care plan: $0.2 / $0.5 / $0.7 / $1.2 / $1.2 / $1.2 / 2 yrs: $1.4 / 5 yrs: $5

I would put increased spending on early child care and education at the top of my priority list. The discrepancy between what we spend on university vs. the first few years of people's lives (when they can learn so much more) is pretty hard to justify. Still, the question of how to go about spending money in a fair and effective manner is quite a tricky one. I don't envy Ken Dryden, but hopefully at least some of this money ends up translating into higher quality care (whether private, public of family given) for our young children.

Gas Tax Money for CitiesCommunities: $0 / $0.6 / $0.6 / $0.8 / $1.0 / $2.0 / 2 yrs: $1.2 / 5 yrs: $5

Note that the Federal government isn't actually giving the cities the right to collect tax on gas (or even collecting the tax on their behalf) - they are giving the cities an amount of money roughly equivalent to 5 cents worth of gas tax - well they are planning to in 2009-2010 anyway. Municipalities really need some added taxation power of their own and gas taxes would be a logical place to start.

Strengthening National Defense: $0 / $0.5 / $0.6 / $1.1 / $2.1 / $2.7 / 2 yrs: $1.1 / 5 yrs: $7

While I'm not a huge fan of spending a ton of money on the military, I think that more money was needed at this point so this seems reasonable. What puzzles me is this:
"[the budget] provides Canada's military with $7 billion in new budgetary funding over the next five years, which will support $12.8 billion in additional expenditures by the Forces in that period. ... In the budgetary funding estimates shown in the summary table at the end of this chapter, the actual cost of the capital is spread over its life, and the annual budgetary amounts include only a fraction of the full capital cost. However, DND will have to pay the full costs of the capital in cash in the years that it is acquired. The Government will make that cash available to DND as it is needed."

So there is $7 billion in the budget, but there's an extra $5.8 billion that the government will 'make available' to the DND. I need to study government some more, I thought the purpose of a budget was to identify cash that the government was going to make available.

Investing Everywhere Except Southern Ontario in Regions and Sectors: $0.1 / $0.4 / $0.4 / $0.4 / $0.4 / $0.4 / 2 yrs: $0.9 / 5 yrs: $1.7

Maybe it's the born and raised southern Ontarian in me but this extra $0.4 a year for a motley collection of government pork projects (with some worthwhile ones mixed in) is probably the most offensive part of the budget to me.

Among the various recipients of funds here are: "provision of an additional $50 million in funding to the Textiles Production Efficiency Component of the Canadian Apparel and Textile Industry Program" and "new funding of $73.5 million in the next five years. With this funding, WD [Western Economic Diversification Canada] will launch a new Partnerships for Community Action initiative to work with communities vulnerable to economic adjustment pressures and with Western cities, such as Vancouver, Regina and Winnipeg, on their specific economic issues, and support other Western Canadian priorities. As well, WD will be provided with $18.2 million over five years to increase its contribution to Community Futures Development Corporations throughout Western Canada."

Here's the deal, we already have one equalization program, we don't need two. If it was up to me, I'd take the next 3 years budget for all these regional programs, use them to capitalize a venture capital firm for each region, appoint a board of directors from that region, give a share to everyone from that region and launch publicly traded venture capital firms in every region of the country. These organizations would be controlled by their shareholders who would (initially) be the residents of those regions. If they wanted to use the funds to invest in their region, fine and if they wanted to invest in China, so be it.

Anyway, I'm not saying that these programs don't do (some) good work, just that the money could be put to use more efficiently outside of these bureaucratic government programs.

Tax Cuts: $0 / $0.2 / $0.6 / $1.1 / $4.3 / $6.6 / 2 yrs: $0.8 / 5 yrs: $12.8

Increases to the basic personal exemption are welcome and in my view one of the most sensible ways to reduce taxes. For one thing, just about everybody gets the same benefit and for another, it saves a large number of people from paying a small amount of taxes each, thus saving both their time and the government's time. It's just too bad the amount won't make a significant move until 2008-2009 (not that I can see anyone forming a government and rescinding this measure, so it's just a question of when, not if, we'll get this tax cut.)

Meanwhile, Canada keeps running to keep up with all the other countries who are racing to see who can cut corporate taxes to 0 first, although we are mainly just trying to stay ahead of the U.S. by reducing the [federal] corporate tax rate from 21% to 19% starting in 2008 with the surtax disappearing in 2008 as well. Hopefully that was the last federal surtax left, since in my view surtaxes are just an unnecessary complication of the tax system. Tax rates for corporations above a certain size are crying out for an international agreement to stop this ongoing round of countries competing against each other to lure globally mobile corporations to their door. But I'm not holding my breath.

Canadian Heritage: $0 / $0.4 / $0.3 / $0.3 / $0.3 / $0.3 / 2 yrs: $0.7 / 5 yrs: $1.6

The (almost) majority of this ($0.7 over five years) money goes to something called the 'the Tomorrow Starts Today art and culture package' while another $0.2 (over 5 years) goes to 'help Canadian diversity find its voice in communities across the country'. I appreciate that government has a role to play in supporting culture which is non-commercial in nature but sometimes I think the Liberals come up with names for this stuff which are basically designed to thumb their noses at Conservative types and say hey look over here, we're spending money on this and you can't stop us - nah nah na nah nah.

There's also an extra $0.35 (over 5 years) for Sport Canada which doubles its budget. The rational part of my brain figures it may be silly to double our budget for amateur athletics but the irrational part of my brain wants the country to kick butt at the 2010 Olympics in Vancouver and is happy to see this.

Sustainable Environment: $0.3 / $0.1 / $0.1 / $0.3 / $0.8 / $1.0 / 2 yrs: $0.5 / 5 yrs: $2.6

And you thought the military spending was backloaded! (Note: I excluded amounts included in previous budgets - $2.2 which is now being planned to be spent in the next few years).

This funding is very widely scattered. The biggest item is the 'Clean Fund' which gets small change for the next 2 years and then roughly $0.3/year starting in 2007-2008. From the description it sounds like a (hybrid) vehicle through which the government will pay people to reduce their emissions. e.g. I undertake an action to reduce my emissions by 5 tonnes and the clean fund gives me $20/tonne or $100 (pulling numbers out of the air here). While the idea is interesting, I would have preferred a less bureaucratic approach, along the lines of the Wind Power Production Initiative which gets just $0.2 total over five years added to it's budget.

What's interesting is that the government seems to be moving in the direction of using the tax system more actively to encourage emission reductions. Whether they'll ever get beyond their current tentative steps such as giving renewable energy projects the same beneficial tax treatment as fossil fuels get remains to be seen.

Seniors (GIS Increases): $0 / $0.1 / $0.4 / $0.7 / $0.7 / $0.7 / 2 yrs: $0.5 / 5 yrs: $2.6

Maybe I'm cold, but I hope we don't regret this in 15 years.

Anyway, there's lots (and lots and lots) more but I think I've covered the biggest spending items - let me know if I missed anything.

If I'm not sick of the budget, I may do a part 3 on the annexes (scroll down) which the government publishes with the budget and which, to a policy geek like myself, make for pretty interesting reading.

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  • Wow - thanks for doing the legwork Declan. I may pretty that up tomorrow if I get bored (and you don't mind)

    By Blogger Andrew, at 6:52 PM  

  • Go nuts. If you're trying to get yourself into a bored state, I recommend reading the full budget document...

    By Blogger Declan, at 10:13 PM  

  • Wow. Great budget coverage Declan. Puts my own to shame, which is why I decided it would be best for my readers if I linked to yours. :)
    Thanks for doing the heavy lifting on this.

    By Blogger Timmy the G, at 12:13 PM  

  • Very nicely done. And I agree that the five year plan stuff is just BS, especially from a minority government.


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