My First Take on the Canadian Budget of 2018

The ruling Liberal party of Canada just released their federal budget.  You can get the official document here. Like a lot of pointy heads around the country, I’m trying to understand what it means.

Interestingly, many of the actual numbers are difficult for me to find.  Admittedly, I haven’t been looking too hard, as all of this will come to the fore in coming days as the document is dissected on news programs and on social media.

But based upon this Globe and Mail summary, here is how I see the money divided:

A few more categories are mysteriously devoid of clear numbers:

• Gender parity
• Workers’ benefits
• Pharmacare research
• Small business tax

Interestingly, the parental leave dispensation is not new money, but rather redistributed existing funds. And the gender focus appears to flow from a McKinsey report that suggests that achieving “gender parity” in the workplace might render an additional $150 billion in Canadian GDP. (I put “gender parity” in quotes because I am not sure how McKinsey defined this phenomenon, or what assumptions were made when doing their math, so I’m covering my ass.) It’s an intriguing concept: leveraging social justice to create measurable wealth, as the McKinsey report recommends. It’s a gamble, though, and from what I can tell the evidence does not make it a slam-dunk.

The quoted numbers only amount to just over $220 billion per year. Last year, official federal revenue was $305 billion, while expenditures were $330 billion. So this budget is still in line with previous years’ ballpark figures, once those “mysterious categories” are fleshed out.

Here is a quick and dirty pie chart of these numbers that I just threw together:

Keep in mind that the numbers in my pie chart represent expenditures per year, based upon the time frames reported in the Globe article. As a result, the G7 summit cost is the 2nd largest expenditure, since it’s a one year thing. That aside, it is encouraging that “research and innovation” is one of the biggest budget items, as this is how one builds infrastructure for future growth. I don’t know the details, though, of how those R&D monies will be disbursed; something tells me a big chunk will be eaten up in administration.

So where are my concerns? At this very early stage, three big points jump out:

(1) There is no obvious plan for deficit and debt reduction. I know that these days all healthy Western liberal democracies are expected to run deficits. But having a plan to diminish the debt is a responsible tack that sends a message to the markets. The cost of borrowing money is sure to increase.

(2)This budget is largely aspirational and light on specifics, much the same way that some laws passed in Parliament doesn’t mean much until the actual regulations are specified by the bureaucrats.

(3)Lastly, all of this is smoke and mirrors. The single biggest budgetary expenditure for every federal government for several years now is transfer payments to the elderly. That means all of these feel-good parental leave and gender parity investments are mere slivers of the pie, totallying maybe 18-20% of the available funds. Until we figure out a way to better care for our elderly in a financially manageable way, we are still just playing in the financial margins.

I will end with my disclaimer: this is my first reaction based upon a quick Google search of the numbers. I might have a lot of it wrong, so I reserve the right to change my mind about everything tomorrow.

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