Budget 2014: Economy Lab’s wish list
from The Globe and Mail
Finance Minister Jim Flaherty unveils the federal government’s new budget Tuesday. We asked our Economy Lab contributors to give us their best idea on what Ottawa could, or should, address in this budget. Here’s what they said:
STEPHEN TAPP, research director, Institute for Research on Public Policy
I’m interested to see if Budget 2014 provides details on the balanced-budget rule that was announced last October. In theory, a law would require the federal government to run surpluses in “normal economic times and [to provide] concrete timelines to return to balance in the event of an economic crisis.”
Several details could clarify how this fiscal rule would work in practice. What type of economic weakness would allow for a deficit? Over what time horizon would the law apply – in each year or on average over the economic cycle? Who would monitor and enforce compliance with the law, and would there be any penalty if it were breached? Would observed budget numbers be “adjusted” to account for the budgetary impacts of the economic cycle (using so-called cyclically-adjusted budget balances)? Details on these issues would provide a much clearer view on the constraints that may be placed on the fiscal policy choices of future federal governments.
ANDREW JACKSON, Packer Professor of Social Justice, York University
The budget could and should announce specific actions to assist the transition of young people from the education system into the work force, such as more apprenticeships, co-op placements and paid internships.
The youth participation rate in the work force is a full five percentage points below its pre-recession level, and many young adults with postsecondary qualifications are underemployed. We know that the education and skills of youth will eventually be in high demand due to an aging work force; we can’t run the risk of wasting talent in the period of transition.
CHRISTOPHER RAGAN, economics professor, McGill University
The Canadian income tax system is replete with billions of dollars of “tax expenditures” – the complex web of credits, deductions and exemptions. While some of these are sensible, many others needlessly complicate the income tax system and increase the growing perception of unfairness.
I challenge the government to commit to eliminating $2-billion to $3-billion of tax expenditures each year for the next three years. Once achieved, the stage would be set for a small overall reduction in tax rates.
ARMINE YALNIZYAN, senior economist, Canadian Centre for Policy Alternatives
The federal government should introduce a financial transactions tax. It raises cash and reduces market volatility, affecting high-frequency trading more than garden-variety investors. In Canada, finance is the only industrial sector exempt from paying value-added tax.
The Canadian Centre for Policy Alternatives’ Alternative Federal Budget proposes a levy of 0.5 per cent on trades of stocks (the rate in the U.K.), 0.25 per cent for bonds and 0.05 per cent on foreign exchange and interest rate derivatives. It would raise an estimated $4-billion – enough to pay for a Pharmacare program, modernize public transit nationwide, cut the number of poor seniors in half, or lift one in four children out of poverty.
SHERYL KING, independent macroeconomic strategist
With the global economy stuck in a rut of low growth, and no return to normal activity in sight, Canada needs an upturn in productivity growth to weather the doldrums.
The elements of sound policy aimed at boosting productivity are there, in continued infrastructure spending, the overhaul of job training, and immigration reform. However, what is lacking is a comprehensive plan designed to generate the most efficient and effective outcome possible to achieve a higher growth standard in these troubled global economic times.
JACK MINTZ, Palmer Chair, School of Public Policy, University of Calgary
This budget or the next should address a poverty problem that has been dismissed far too much. Phil Bazel and I published a paper last week showing that the incidence of poverty, measured conservatively, for single seniors living on their own is 20 per cent, twice higher than the general population and more than four times higher than senior couples.
We recommend a top-up to the Guaranteed Income Supplement for single seniors that would not cost more than $1.5-billion to reduce senior poverty by a half. We also suggest that the focus for the Canada Pension Plan should be on single seniors who have lost a partner, by increasing the CPP survivor benefit to 100 per cent from 60 per cent. CPP is adequate for many married couples, but not single seniors who are left on their own.
LINDSAY TEDDS, associate professor, School of Public Administration, University of Victoria
In Canada, child care costs to a maximum of either $4,000, $7,000, or $10,000 (depending on the tax payer’s situation) can be deducted from income for each eligible child. The caps on the amounts allowed to be deducted have not been revised, and pale in comparison to what parents are actually paying in child care costs.
Full-time daycare for one child can cost upward of $24,000 a year, depending on where you live, the age of the child, and the care provider. Given this government’s commitment to helping families and lowering their tax burden, my budget wish is for the maximum amount of this deduction to be increased in pace with actual child care costs, and an elimination of the criterion that the deduction cannot exceed two-thirds of your earned income.
TAMMY SCHIRLE, associate professor of economics, Wilfrid Laurier University
The accumulated sick-leave entitlements of federal public servants now enter the budget as part of the accumulated deficit, and rumours abound regarding the elimination of accumulated sick leave.
Uncertainty among workers surrounding the future negotiation of accumulated entitlements have demoralizing and expensive behavioural effects. The federal government needs to offer a clear and sensible proposal for managing accumulated entitlements that is not perceived as punishing responsible employees.