“It’s a left wing budget. Rejoice, there are goodies for everyone!” But not so fast, the devil is in the details. On April 19 the federal Liberals unveiled a projected $155-billion budget deficit after a $364-billion deficit last year. The debt-to-GDP ratio of the federal government is set to rocket up from 30 per cent to 50 per cent. Deficits are planned into the foreseeable future. While the budget does contain the potentially significant reform of $10/day childcare, the majority of the deficit spending goes to corporate welfare and childcare may never happen. Notable by its absence are any significant measures to transfer wealth from the pandemic profiteers who amassed billions while workers suffered. The Liberals have delayed the unavoidable question of “who pays?” This budget prepares inevitable austerity against the workers at some point in the future.
What is in the budget?
$120 billion over three years to recover from COVID-19 and “kick start the green economy.” This is largely corporate welfare packaged as green measures for any company that can greenwash whatever it was already doing.
$30 billion over five years to implement a $10/day childcare service by 2025. We will discuss this in more detail below.
$4.4 billion for green retrofits to homeowners. This primarily helps the rich and upper middle class to improve the value of their properties.
$3 billion for long-term care. It is unclear if this money will go to eradicate the scandal of the murderous death rates in private care. Potentially this money will just be more corporate welfare to these private corporations.
$2.5 billion to build and repair 35,000 low income housing units. This is insufficient to solve the crisis in housing across the country. For example, Toronto Community Housing Corporation alone has a $1.7-billion repairs backlog on its existing stock, before new builds are even considered.
$18 billion over five years for Indigenous communities. This is a significant increase in funding from the $4.5 billion announced in the 2019 budget. After massive protests against the oppression of Indigenous people, the Liberals have decided to try to buy their way to peace. However, even this amount does not absolve the Liberals from their broken promise to end boil-water advisories on reserves. $1.7 billion is earmarked to reserve infrastructure, less than half the amount necessary to resolve the scandal. And the Liberals are refusing to provide a timeline for when all reserves will have drinkable tap water.
A $15 per hour federal minimum wage: This would help 26,000 workers in private federally regulated workplaces. But after more than a decade of making this demand, inflation has made it totally insufficient. This idea is stolen from the NDP bureaucracy, who proposed the Liberal $15 at this month’s NDP convention. Luckily for the NDP brass, the rank-and-file saved the party’s honour by upping the NDP demand to $20.
Extension of the $2000/mo Canada Recovery Benefit (CRB) until July, which will be tapered off to $1200/mo in August and September before being cancelled.
Extension of the business wage and rent subsidies until September, to be transitioned to a business hiring bonus covering 50 per cent of wages of new hires from July to November
Here we see the diametrically opposed approach to businesses and workers in the pandemic. In February 2021 there were approximately 1.7 million workers claiming CRB. This number probably increased in following months due to third wave lockdowns. Employment prior to the third wave was about 300,000 below 2019 levels, with an extra 150,000 underemployed. Despite the terrible job market, the Liberals plan on coercing over a million workers onto starvation-level support of $1200, before forcing them into literal starvation and homelessness when they are cut off in October.
Note on the other side the approach to the wage subsidy that has been the main conduit of corporate welfare. Many corporations have sucked up millions in wage subsidies only to dole them out as shareholder dividends and executive bonuses. While the right wing vilify workers on CRB, it is projected to be less than half the cost of corporate wage and rent subsidies. Yet again the workers get the stick while the bosses get the carrot. The Liberals are hoping against hope that their hiring bonus will lead to the 1.7 million CRB recipients getting jobs. This seems very optimistic, and many are guaranteed to fall through the cracks. Even if there is economic growth, many of these companies will make do with fewer workers by increasing the rate of exploitation. If people are left unemployed without support there can be an explosion of anger heading into winter 2021.
On the revenue side, there is a one per cent tax on vacant property owned by non-Canadians. A luxury tax on private jets, sports cars valued over $100,000, and luxury yachts priced over $250,000. And a three per cent “digital services tax” on web giants. These petty measures of taxing the rich, much like the yachts and Ferraris owned by the billionaires, are designed purely for show. Where Stephen Harper had boutique tax cuts, Justin Trudeau now has boutique tax hikes that will only generate about $1-billion per year. The property tax will do nothing to cool the over-inflated housing bubble, and the Netflix tax will merely be passed on to consumers dollar-for-dollar.
Austerity is fairly minor in the 2021 budget and is mostly related to cuts in travel budgets for federal departments expected to increasingly use Zoom and work from home.
What is not in the budget?
Pharmacare. Despite being promised in every Liberal election platform for the last couple of decades, and even being in the September 2020 throne speech, pharmacare was absent from the 2021 budget! Canada is one of the only major economies with socialized medicare that does not also have socialized drug coverage. Thousands of people are bankrupted every year due to the exorbitant price of pharmaceuticals that they need to live. Study after study has shown that a socialized pharmacare system massively reduces the aggregate cost of medicines, with the federal government utilizing economies of scale and bulk discounts unavailable to individual consumers. These costs can be reduced even further when combined with the nationalization of pharmaceutical production. This just goes to show that Liberals are lying liars who lie and you can’t believe a single word they say.
Making the bosses pay. Apart from the symbolic boutique tax hikes on jets and yachts, there is nothing in the budget that will generate the revenue necessary to bring the deficit under control. The NDP has correctly said that “Justin Trudeau continues to give a free ride to the ultra-rich and leaves everyday people behind… Today’s budget shows who Trudeau is choosing to pay for the pandemic recovery, and he’s telling the ultra-rich it won’t be them. It will be you.”
Canada’s 47 billionaires collectively increased their wealth during the pandemic by $78-billion! 47 profiteering parasites amassed enough cash to cut the budget deficit in half. And this ignores the fact that Canadian corporations squirrelled away over $587-billion in 2020, for a total dead money hoard of almost $1.6 trillion dollars in Q4 of 2020. There is more than enough wealth in society to meet the needs of working class people, but due to the rules of capitalism it is unproductively stockpiled by the capitalist class.
Unfortunately, while the NDP’s attack on the Liberals and the “ultra-rich” is spot-on, their solutions do not reach the mark. On the one side, the NDP has been consistently propping up the Liberals and therefore have zero credibility with regard to their criticism. This was seen in the media coverage of the budget, where news reports never bothered detailing the NDP’s critique, which has no consequences; they only reported on the fact that the party was going to support the Liberals.
The NDP’s plan “to make the ultra-rich and the pandemic profiteers pay their fair share” is heavy on verbiage but weak on content. At his April convention, NDP leader Jagmeet Singh spoke in favour of a resolution proposing a one per cent tax on personal wealth above $20 million, closing tax loopholes, cracking down on tax havens, and doubling corporate tax on excess profits in 2020. This resolution seems to be the template for the NDP platform in a likely 2021 election. But even by the most optimistic estimates, these measures will only bring in $20-$30 billion dollars. And that is under the very unlikely assumption that there isn’t corporate tax evasion and sabotage. This simply isn’t enough money to make a fundamental dent in the problem of a $150-billion deficit without resorting to austerity.
The only measures that will generate the wealth to defeat the pandemic, rebuild afterwards, and provide the things workers need like pharmacare, a massive social housing program, free education, free public transit, an end to boil-water advisories, and environmental sustainability, is to nationalize the idle wealth of the capitalists under control of the workers themselves. But that requires an all out struggle against the capitalist class, something that fills the NDP bureaucracy with dread.
Twenty eight years after first promising childcare, the Liberals have finally put it in a budget. Many children who were abandoned by the Liberals are now parents having their own kids. It goes without saying that this would never have happened if it were not for decades of mobilization by those fighting for equality of women, who gain the most by this reform. But it is far far too early to declare victory. The Liberals have only promised $10/day childcare for 2025, and there are guaranteed to be one or even two elections before that time. Broken promises on pharmacare and boil water advisories teach us never to trust a lying Liberal.
There are significant problems with the $30-billion Liberal plan. While this would seem to be a lot of money, it is not sufficient by itself to implement the program. Trudeau is relying on the provinces to agree to 50 per cent of the costs and childcare is an area of provincial jurisdiction. The 50:50 cost-share arrangement has historical significance, as it is the same formula used for the implementation of medicare in the 1950s and 60s. But in the intervening years the federal government reduced its health transfers so they only now cover 22 per cent of healthcare spending. Instead of a new program that will cost them billions, the provinces have been calling for Ottawa to increase its share of healthcare funding by 13 per cent. Given the delinquent track record of the federal government one can understand the reticence of the provinces to join in another expensive partnership on a new program. Provinces with right wing governments are also philosophically opposed to childcare and will do everything in their power to stop policy that could potentially liberate women.
Another significant hurdle is not just cost, but access and quality. $200 per month would be a huge advance for a working parent in Toronto, where childcare often costs $2000 per infant. But financial barriers are not the only blockage. Often parents cannot find a quality childcare spot with trained early childhood educators (ECEs). There are horror stories of working parents being forced to rely on crowded and unregulated private care where children have been hurt or even killed. This is related to proper pay, conditions, and union rights for childcare workers, ideally employed by a public sector provider. Just like in long term care, there will be significant corporate pressure to waste childcare dollars on private sector providers with lower pay for workers and worse care for children. Quebec workers won a historic victory in childcare in 1997, and the province has significantly increased female participation in the workforce with associated economic benefits for society. But now, despite the fact the program costs about $8 per day, it is very difficult for parents to find a place for their child.
There needs to be a mass mobilization to ensure not just affordable childcare, but a massive expansion of spaces as part of a public sector provider. There must be highly trained and properly paid unionized ECEs, with low child-to-caregiver ratios. Every parent who has their kid in care understands this. Happy workers means happy kids. The Liberals are going to dangle childcare like a carrot in every upcoming election only to drop it in the event that there is a reduction of pressure. We cannot trust the Liberals and must continue mobilizing against any backsliding by federal or provincial governments. Only this way will working class mothers and fathers get this vitally needed reform.
Austerity to come
The Liberals are trying to ignore the question of who pays and are living in a capitalist dream world where spontaneous growth solves all of their problems.
Andrew Coyne, writing in the Globe and Mail, explained the situation: “It takes a set of pretty rosy assumptions–real growth averaging more than 3 per cent per year, inflation remaining under control, spending slashed to merely the historic record highs it had reached before the pandemic–just to muscle the debt-to-GDP ratio back below 50 per cent.”
Growth needs to be high, inflation needs to be low, and additional costs must be kept under control, or the deficit will become unmanageable. But these conditions are very unlikely to be met. Even under Trudeau’s “rosy assumptions,” debt servicing charges are set to double from $20 billion to $40 billion per year. Even a modest increase in interest rates and inflation, or a failure in growth targets, will make managing the debt impossible.
To make matters worse, success in one area tends to lead to failure in other areas. There is an expectation of a post-pandemic bounceback where wealthier individuals spend the savings they made not going to restaurants or to the Carribean. This has been referred to as “preloaded stimulus.” But this growth is essentially unsustainable and inflationary. The inflation will lead to increased interest rates and debt-servicing charges for the government. It will also provoke the class struggle and other costs as workers aim to keep up with increased prices.
Apart from an immediate period of bounce back, three per cent growth seems to be totally unrealistic. Canada has not averaged such growth rates for generations. Over the last twenty years, GDP has approximately tracked population growth of between one and two per cent.
Therefore the Liberals are stuck in a dilemma. They either continue with new “stimulatory” programs and corporate welfare to artificially promote growth at the expense of the deficit and inflation. Or they move to reduce inflation and interest payments by austerity, cutting off prospects of further growth. The longer they avoid austerity by taking the first path, the harder will be the road to bring the economy into balance. Austerity is unavoidable.
What is more important is that the class struggle is unavoidable. Trudeau or his successor will eventually be forced to attack the workers; it is only a matter of time. Inflation also looms as a threat to the real wealth of workers. Whether we like it or not, the only way forward is by fighting.