Budget 2012: Pennywise But Pound Foolish

Marc, Andrew and Toby have posted substantial analyses of yesterday’s federal budget and I have some comments in today’s Hamilton Spectator. My two cents about the budget’s economic forecasts follow.

Table 2.1 envisions a 7.5% unemployment rate this year, slightly above last year’s rate of 7.4%. That seems like an admission of failure from a budget ostensibly about job creation.

This table also projects real GDP growth rates of 2.3% in Canada versus 2.6% in the U.S. over the next five years. The higher American figure may well be realistic given that the U.S. economy is starting to bounce back from a more depressed level than Canada. However, these forecasts further deflate the Conservative talking point about outgrowing our American cousins and the rest of the world.

It’s worth reinforcing Andrew’s parenthetical observation that the budget provides no projection of how much the higher age threshold would reduce future Old Age Security spending. How can the Conservatives know that this change is required for fiscal sustainability without an estimate of how much money it might save? If the government has such an estimate, why not disclose it?

Here is the United Steelworkers press release:

Harper Budget Pennywise, Pound Foolish
Along with Penny, Conservatives Killing Jobs, Retirement Security

OTTAWA, March 29, 2012 – Eliminating the penny won’t distract from the Harper Conservatives’ deep cuts to important public services, jobs and retirement security, the United Steelworkers (USW) union says.

“The Harper government claims it has introduced a jobs budget, but it actually projects a higher unemployment rate this year than last year,” noted Ken Neumann, USW’s National Director for Canada.

“Conservative cuts will directly eliminate 19,200 jobs from the delivery of public services, and remove funding that helps support thousands of private-sector jobs,” Neumann said.

The Conservative budget raises the eligibility age for Old Age Security from 65 to 67 between 2023 and 2029 – even though the Parliamentary Budget Officer and other experts have confirmed that the existing program is fiscally sustainable. “Making Canadians wait longer for Old Age Security will push tens of thousands of seniors into poverty and onto provincial welfare rolls,” said Neumann. “The government should be enhancing the Canada Pension Plan rather than cutting Old Age Security.”

The Conservative budget also sets the stage for further weakening of environmental standards and the Employment Insurance system, which already fails hundreds of thousands of Canadians under the Harper government.