An alternative budget: balancing the books through stimulating growth, jobs

OTTAWA—Canada’s leading left-wing think-tank believes Canadians can have their cake and eat it too in the next federal budget—more spending to create jobs while still moving toward balancing the books.

The proposals are contained in the Canadian Centre for Policy Alternatives’ annual alternative federal budget, which Finance Minister Jim Flaherty has already dismissed out of hand, sight unseen.

Flaherty said he has no intentions of ramping up spending to stimulate the weak economy, and instead plans to trim further in order to meet his 2015 balanced budget target.

But the CCPA argues that Flaherty is going about it all wrong, and that his policies will only guarantee continued slow growth for Canada.

Economists believe Canada’s economy will advance by only about 1.7 per cent this year, similar to last year, constituting the worst two years of growth since the recession.

The think-tank points out that austerity has done little in Europe but help sink the continent’s economies, while at the same time driving up deficits as government revenues collapsed.

“Canada has a growth problem, not a deficit problem,” says alternative budget co-ordinator David Macdonald.

“More cuts will only lead to less growth and fewer opportunities for Canadians.”

The group notes that at 1.5 per cent of gross domestic product—the economy’s total annual output—and with interest rates at record lows, there’s no reason for Ottawa to obsess about the deficit.

By comparison, the U.S. recently posted deficits as high as 10 per cent of its GDP.

Instead, Flaherty should be investing billions of dollars to rebuild Canada’s infrastructure and in measures to reduce poverty through investments in child care, pharmacare, affordable housing and post-secondary education, and better income supports.

The alternative budget also would boost spending to meet the crisis in First Nations communities, including for housing, drinking water and education.

If all the proposals are adopted, the CCPA believes Ottawa will create 300,000 additional jobs and drive down the unemployment rate one point to six per cent by 2014.

To pay for the investments, the alternative budget calls for the creation of a new 35 per cent tax bracket to kick in on income over $250,000, and a roll-back of corporate tax cuts, which it argues enabled firms to stockpile over $600-billion in cash and short-term securities, while failing to trigger more investment.

According to the CCPA, if Ottawa follows its proposals, it will still be able to balance the books by 2016.

The Conservative government has given short attention to the CCPA’s recommendations in the past and is unlikely to adopt any in this year’s budget, expected in the last week of this month.