Canada’s 2018 budget: virtue signaling all the way

Canada’s 2018 budget was released on February 26th.  It projects an estimated deficit of $17.8 billion for 2018.  In subsequent years the budget deficit is expected to decrease, but only to $13 billion.

Canada’s economy is currently strong.  Unemployment is at record lows and GDP growth is as high as could be expected.

Conventional Keynesian economics would expect a budget surplus under these conditions.  Admittedly the budget deficit is lower than had been expected a year ago due to the strong economy.  This was seen as a signal for the Trudeau government to increase spending and introduce new programs.

However, here is a strong likelihood that there will be a major recession in the next 4 years. The Trudeau government has not made any allowance for this. Such a recession would increase the deficit greatly.

The new programs are aimed at issues important to the politically correct, especially in gender inequality and indigenous benefits. “Every single decision on expenditure and tax measures was informed” by a gender based analysis. As such, they represent “virtue signalling”

However, there was no acknowledgement of the wider economy.

Some highlights from the Budget:

Gender Equality

• Proposed pay-equity legislation. No dollar amount specified but I’m surprised that this is deemed necessary today. As usual, this hinges on the definition of “pay-equity”.
• Parental leave. 1.2 billion over 5 years to create a 5-week incentive for new fathers to take parental leave. Covers 55% of second parent’s income. Intended to encourage parents to share the responsibility of raising a child. An expensive program which may be useful in some cases, e.g. third child, no relatives nearby to help. The motivation however seems to be ideological and “responsibility” is taken to mean that both parents share exactly the same tasks.

Indigenous Issues:

• $447 million over 5 tears to create a new “Indigenous Skills and Employment Training Program.
• $1.4 billion over 6 years for First Nations child and family services.
• Legalisation of cannabis – $62.5 million on public educations and $10 million on research. Targeted at “communities at risk” and Indigenous organizations.

Presumably this is additional to the $12 billion the Federal Government gives to the First Nations, which should fund such initiatives. Though all are admirable in intent, they are “top-down” programs. Such programs rarely reach the intended recipients and fail to achieve their goals.

Other items in the budget, such as increased spending on research, cyber security and cybercrime are laudable and necessary in this day and age.

(Much of the information here has been taken, often verbatim, from “Federal budget highlights: Twelve things you need to know” Michelle Zilio, Tom Cardoso and Matt Lundy, Feb 27, 2018, Globe and Mail(

A recent headline highlights problems for the future for Canada’s economy:

• “In Justin Trudeau’s Canada, We Still Can’t Get Anything Big Done”, Tony Fell, Contributed to The Globe and Mail.

The consequence of this is shown by two more headlines:

• “Philip Cross: Statscan’s Latest Report Shows How Badly The Government’s Demolished Business Investment”, Financial Post, March 1, 2018
• “Foreign Direct Investment In Canada Plunges To The Lowest In Eight Years”, Bloomberg News, Theophilos Argitis, March 1, 2018

Clearly Canada’s “sunny ways” are unsustainable.

The lack of attention to the wider economy can also be seen from the following quote:

‘Much attention has focused recently on the potential impact of U.S. tax reforms, dropping corporate tax rates to 21 per cent from 35 per cent. As well, the Americans have increased the pace of capital expense write-offs for machinery and equipment.

Business groups and corporate leaders were hoping Finance Minister Morneau would address these challenges in the federal budget on Wednesday, but were left disappointed.

Asked what the budget would do to make Canada’s energy sector more competitive, Crescent Point Energy CEO Scott Saxberg was blunt.

“Not much,” he said Thursday. “The understanding of competitiveness, obviously with this budget and just in general, hasn’t got to the federal level yet.” ‘ Steve Varcoe, Calgary Herald, March 2, 2018