There are no gold medals waiting for Stephen Harper in Ottawa this week as he prepares to unleash a new session of Parliament, as well as his government’s highly anticipated budget. But with signs pointing to economic growth and critics maligning how last year’s stimulus dollars were (or were not) spent, the Harper government has the monumental task of trying to slay a fiscal deficit while trying to keep everyone happy. The odds are not stacked in his favour.
Back from an Olympic jaunt that saw him appear on TV more times than most of Canada’s medallists combined, Harper must now deal with the unfortunate reality he has created — a Parliament still fuming from his decision to prorogue, a statistical dead-heat with the Liberal party and a national budget that will offer nowhere near the perks of last year’s.
The country already knows there will be no more tax breaks for home renovations, but what it doesn’t know is just how deeply Stockwell Day and Jim Flaherty will cut to make up for a deficit that currently stands at $39.4 billion. While last year’s budget was stacked with perks designed to get the economy running again, now that the worst is over the Conservatives have to deal with paying for those perks and the tab is going to be large. Already Flaherty has said there will be no home tax credit and, besides a few “nuggets” here and there, no new spending.
The government is hoping more positive numbers to come out of the economy to help boost its own ledger sheet. Results for Canada’s fourth quarter were released this week, showing the economy outdid expectations and grew five per cent, the highest level of GDP growth in the last nine years. Yet at the same time, we now know a key government recession-fighting plan has mostly overlooked the recession entirely. Of all the “shovel-ready” projects approved for stimulus funding under last year’s Economic Action Plan, only slightly more than half of the 6,700 approved projects actually began construction in 2009 — the rest won’t start until this year or next. With no information available on exactly how many jobs the plan created during the recession’s worst months, it appears most of the stimulus will come after the fact.
With a Conservative government in power, the idea of increasing taxes to help slay the mounting deficit is a non-starter. Even an idea as simple as reversing one per cent of the GST cuts wouldn’t even make it into the budget. Without any new sources of revenue on which to draw to make up for last year’s deficit, Harper, Day and Flaherty will have no choice but to cut. The public service is always a ripe target, but the Conservatives proved in their infamous “fiscal update” of 2008 that anything — even opposition parties — is fair game. Cutting government programming too sharply will eliminate any gains the action plan did — or will — generate.
What we can expect Thursday when the budget is presented is a raucous, partisan response. Harper might deliver the best possible budget, but someone somewhere will inevitably suffer. The perils of deficit spending mean finding a way to pay it off later and that too often comes on the backs of essential government services. Harper should tread cautiously and prepare for a fight.
