The NDP are the big winners in Budget 2023. The Liberals have delivered what the NDP needs to continue to shore up the Minority Liberals: a national dental care plan, a prohibition on the use of replacement workers during strikes and the requirement that recipients of investment tax credits pay a fair wage (whatever that means).
Canada is also responding in this Budget to continental economic challenges by amping up support in critical industries to compete with massive subsidies from our “friends” to the South. This includes support for clean technology, and energy infrastructure. Other new investments respond to supply chain weaknesses revealed by geopolitical realities. The Budget sets as a goal ensuring that “Canadian workers mine, process and build and sell the goods and resources our allies need”. This is, in effect, positioning Canada as the new: “Arsenal of Democracy” (apologies to FDR circa 1940).
Governments use Budgets to signal their demographic (and electoral) focus: “Middle Class Voters”, “Families”, “Hard Working Canadians”, “Ordinary Canadians”. The focus this time is blatantly on: “Workers”. Again a nod to the Liberals’ NDP partners and a Liberal Party lunge for those votes in the next Election. “Wealthy Canadians” are never a focus in these exercises except as a source of revenue. The hard electoral truth is that there are not enough of them in Canada and the way things are going, there never will be.
There are some spending cuts announced here and there. For revenue, the Government looks (again) to Canada’s banks as its personal ATM. This is of course an indirect tax on “Workers” and “Ordinary Canadians” as higher costs are passed on by the banks to their customers in higher fees.
There is no escaping the fact that the Budget spending (justified though much of it may be) is big. The resulting projected deficits and the impact on the critical debt-to-GDP ratio are troubling to even this Liberal.
Budget 2023 is based on a novel theory: “Modern Supply Side Economics”. Minister Freeland credits US Treasury Secretary Janet Yellin for the phrase (and the theory?).
“Modern Supply Side Economics” is the opposite of Thatcherite and Reaganite: “Supply Side Economics”, the quaint and appropriately discredited view that benefits delivered to the very richest in society would “trickle down” and benefit everyone. Well, the rich only got richer.
“Modern Supply Side Economics” posits that investments in people (read here: “not the rich”) to be better housed, in workers to become better skilled, in immigration to support and fuel a growing economy, and in child care, healthcare – the list goes on – will get us the economy we need. The problem is that those investments, however compelling, are very, very costly. The new expenditure on the national dental plan ($13 billion over 5 years and the over $4 billion a year thereafter) coupled with defence expenditures $55 billion (over 20 years) and some long overdue investments in infrastructure, clean energy, and critical supply chains, means that the government may be looking to another novel theory: “modern monetary theory” to make it all work. That theory posits that if you print money or borrow money to make good investments there is no downside. That may have been the case with low interest rates. But now, with high interest rates, the bloom is off that rose for most of us; but not the NDP.
Budget 2023 can be found here.
If you would like more information, please contact:
Barry Campbell: barry@campbellstrategies.com
