{"id":318,"date":"2022-04-14T14:39:00","date_gmt":"2022-04-14T20:39:00","guid":{"rendered":"https:\/\/cpcparl.ca\/gregmclean\/?p=318"},"modified":"2022-12-30T16:30:28","modified_gmt":"2022-12-30T20:30:28","slug":"e-newsletter-0422","status":"publish","type":"post","link":"https:\/\/gregmcleanmp.ca\/e-newsletter-0422\/","title":{"rendered":"E-Newsletter"},"content":{"rendered":"\n

April 14, 2022<\/strong><\/p>\n\n\n\n

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Last week, the federal government released its budget for 2022-23. They billed it as being prudent and responsible, but advertising can be misleading. The Minister of Finance said it would make life more affordable for Canadians, but I challenge you to find ways this budget will make your life more affordable. As with so many things in this government, the \u2018double-speak\u2019 was delivered in gallons.<\/strong><\/p>\n\n\n\n

\u2018Unemployment is near record lows and Canada has gained back 112% of the jobs lost during the pandemic\u2019<\/em> \u2013 yet, we still need to run a projected $52.4 billion deficit to stimulate the economy.<\/strong><\/p>\n\n\n\n

\u2018Inflation is making life more expensive for Canadians\u2019<\/em> \u2013 yet, let\u2019s continue to pump money into program spending to fuel more inflation.<\/strong><\/p>\n\n\n\n

\u2018Canada has a proud tradition of fiscal responsibility. It is my job to maintain it \u2013 and I will.\u2019<\/em> \u2013 Those words do not match the budget.<\/strong><\/p>\n\n\n\n

I could go on \u2013 but the premise of governments running large, structural deficits in periods of strong employment represents an inability to plan for the future. Choices are required, for every decision-maker<\/strong>. Promising expensive
programs today that are predicated on the taxpayers of tomorrow paying the bill is an exercise in moral hazard, and we are seeing the effect of this government\u2019s nonchalance to the country\u2019s finances in our daily lives. Escalating inflation is now upon us \u2013 and its arrival is textbook economics. This haphazard approach to Canada\u2019s finances needs to end.<\/p>\n\n\n\n

Below I’ve highlighted a few areas of concern. The biggest failure in this budget is its refusal to tackle inflation. Big spending leads to big inflation.<\/strong> Inflation is good for governments – it increases revenues (as we see clearly in the past year\u2019s tax revenues) – but it is bad for ordinary Canadians, and particularly bad for those on low and fixed incomes. The government can’t just keep borrowing and printing money, and expect that demand will not exceed supply and cause prices to rise.<\/p>\n\n\n\n

Ruth and I and the rest of our family wish you and yours a Happy Easter, Happy Passover, Happy Vaisakhi, Blessed Ramadan!<\/strong><\/p>\n\n\n\n


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HIGHLIGHTS OF THE FEDERAL BUDGET<\/h2>\n\n\n\n

You will have seen many specific highlights in the news, but here are a few things that concern me:<\/strong><\/p>\n\n\n\n

Deficit<\/strong>: The deficit for this year just ended is $113.8 billion, projected to decline to $52.8 billion next year. Right direction, but that’s still a lot of money. The improvement isn’t due to more prudent spending – it is the result of a windfall of revenues. Inflation and commodity revenues, plus recovering employment and economic activity, improved the government’s revenues by about $85 billion. Of that, about $63 billion was allocated to new spending initiatives, resulting in continued deficit spending.<\/p>\n\n\n\n

Debt<\/strong>: The debt is going to rise to $1.14 Trillion dollars. We pay billions every year to service this debt – money we cannot allocate to higher priority spending or tax relief. This year, we will pay about $26.9 billion in service charges. The
Parliamentary Budget Office projects that could reach $40 Billion by 2025-26.<\/p>\n\n\n\n

Why does Debt matter<\/strong>: Beyond the “opportunity cost” of servicing debt instead of more important expenditures, interest rates are at historically low levels, so some argue this amount of debt and interest is manageable. However, when interest rates go up – and they will – managing debt becomes more and more expensive. There are no measures in this budget to tackle debt – and every year we run a deficit, that debt grows larger and eats up an increasing percentage of revenues – currently above 6% and projected to exceed 8% by 2025-26.<\/p>\n\n\n\n

Debt to GDP Ratio: This government \u2013 starting seven years ago \u2013<\/strong> abandoned the idea of a balanced budget as being an appropriate fiscal anchor,<\/strong> and shifted to a metric of Debt to GDP. Frankly, as a financial professional, I think the metric is a smokescreen \u2013 and it\u2019s really used to compare debtor nations with other debtor nations \u2013 as in, \u2018we\u2019re not as bad as them\u2019; however, what\u2019s included in the metric differs by country, so it has always been misleading. In my opinion, it has become a ruse to allow debtor nations to convince people that the continuous accumulation of debt is sustainable, and to distract attention from the problems of greater government debt \u2013 which we have experienced, and we ignore at our peril.<\/p>\n\n\n\n

Spending and Taxes:<\/strong> Of the $63 billion in new spending, the government projects they will recoup roughly half of that from new taxes on large corporations. They can also count on increased GST revenues: as inflation causes prices to rise, GST revenue also rises; and from increased revenue from rising commodity prices such as oil and gas. But don’t be mistaken – this budget spending is the highest in history (discounting two pandemic years) at $434 Billion, up by 6% per capita from 2020, the last non-pandemic budget. The Globe and Mail’s Andrew Coyne said the Liberals plan to spend more per capita in the next three years than any government in modern history. And he reminds us that budget projections generally understate what actually gets spent.<\/p>\n\n\n\n

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DOES THE BUDGET MAKE LIFE MORE AFFORDABLE FOR YOU?<\/h2>\n\n\n\n

Chances are, you will not find much, if any, relief in this budget.<\/em><\/strong><\/p>\n\n\n\n

Taxes are up.<\/em><\/strong><\/p>\n\n\n\n