Canada's 2015 Federal Budget: A signal to the middle class

April 21, 2015
Cardus

It’s a middle-class budget. But what exactly does “middle-class” mean?

Government budgets always involve “cheques and balances,” but election-year budgets are equally about messaging and vote-getting.

Many of the key messages were leaked in advance. A $1.4 surplus after seven years of deficit is designed to mark the success of the Economic Action Plan in response to the 2008 international economic collapse. Balanced budget legislation is designed to make it more difficult for future governments to return to deficit. When it comes to overall economic growth and jobs, the government is sending a cautious signal. Slow growth rates are assumed, and contingencies designed to allow for unforeseen changes in economic circumstance reinforce a cautious forecast. The complicated impact of lower oil prices are also highlighted. As a net exporter of oil, lower prices reduced our gross domestic product and the value of our trade. However, they also freed up over $12 billion for consumers to spend on other products (about 1 percent of the GDP) over the past few quarters.

The “supporting jobs and growth” agenda relies on a catalogue of tweaks to tax rules (lowering the small business tax rate from 11 percent to 9 percent), encouraging the harmonization of apprenticeship training across provinces, and adjusting the formulas that determine eligibility for student loan programs. Many will be affected (albeit in relatively small manner) by specific measures. The big-ticket items are infrastructure investment, especially transit infrastructure, spread out over time. Bridges, highways, water treatment plants and ports are highlighted as “shovels in the ground” projects, undoubtedly with a prominent government promotion sign reminding voters that their tax dollars are working for them.

Though budgets are more than balance sheets and dollars, we make important statements about our social priorities through our financial priorities. A very welcome inclusion in this budget is the extension of the Compassionate Care Benefit, effective January 2016. Presently, if someone receives a terminal diagnosis of six months, family members can receive up to six weeks of combined income support in order to provide care for their dying relative over that period. Building on the recommendations of an all-party 2011 Parliamentary report and the advocacy of various groups (including Cardus), this budget increases the benefit from six weeks to six months, at an estimated annual cost to the EI system of $37 million.

There are many other groups who are similarly supported. Measures targeting support for those with autism, an extension of the Registered Disability Savings Plan, and a provision that will allow charities to receive private shares donations exempt from capital gains tax are but a few of the very specific targeted supports that are included in the budget.

The federal budget comprises 518 pages worth of details, covering a wide range of initiatives. However, at its core, the message is straight-forward. The books are in balance and the government intends to keep it that way. Tax cuts are a priority and there is a reliance on the private sector to create jobs. Incentives for individuals to save money, whether through an expanded Tax Free Savings Account or changed Registered Retirement Income Fund rules for seniors, are designed to create less reliance of government. The task of government in the economy is seen as one in partnership and cooperation with other groups, from other levels of government to private-public infrastructure plans.

Undoubtedly this budget will be pitched as support for middle class families—that coveted middle space of uncommitted voters who will decide the next election. The Conservative appeal to the middle class is to pitch them as consumers: “We’ll leave you with enough of your own money.” It’s about savings and private-sector opportunity, with the government’s focus on opening up trade and catalyzing activity through very targeted limited projects.

Time will tell what the opposition responses will be, but if they follow the narrative they have been following since the Throne Speech, they will seek a different appeal to the middle class. The opposition New Democrats focus on expanding the middle class with an increased minimum wage, subsidizing daycare, and using the tax system to bring more people into the middle class and lessening the extremes. The Liberals call for “giving the middle class a raise,” saying government should build new infrastructure and taking a more prominent, visionary leadership role.

It would seem that at least part of the decision voters will be determining in Election 2015 is how the government should support the middle class.

The Conservatives say it’s by getting out of the road, leaving them with more of their own money to save and spend as they see fit.

The New Democrats imply that it is by using the tax system to ensure that more are included and that the middle class is, in fact, the biggest class.

The Liberals have argued that the government needs to use its influence to give the middle class a raise, investing in infrastructure and other programs that will help us dream big dreams together.

Yes, it’s a budget, but it’s also another warm-up for the not-yet-official election campaign. On the surface, it sounds like a “muddle in the middle.” However, there are fundamentally different presumptions about what defines these voters. And as non-ideological as most Canadians think themselves, it may in fact be their implicit anthropology that is a significant determinant of the next election campaign. When forced to prioritize, is it our consumerism, entitlement, or shared aspiration that will come out on top?

ABOUT CARDUS

Cardus is a non-partisan, not-for-profit public policy think tank focused on the following areas: education, family, work & economics, social cities, end-of-life care, and religious freedom. It conducts independent and original research, produces several periodicals, and regularly stages events with Senior Fellows and interested constituents across Canada and the U.S.