New federal budget 'unimaginative for a government that's this far in,' economist says

Let’s bring in Moshe Lander now. He’s a senior lecturer in the Department of Economics at Concordia University. Thanks for coming on. Hello. First of all, first impressions of this budget. What do you think? Up or down the thumbs, actually, I thought it was a big honor. It it was very unimaginative. For a government that’s this far in it, it kind of shows that they’re out of ideas and they’re not quite sure what to do. There was a lot of big spending plans, but overall the deficits not going up. There were attempts at taxes to finance it, but the taxes were pretty unimaginative. The real issue, of course, for the Canadian economy, whatever is that we need to boost productivity and there was almost nothing in that budget that shows me that they know how to boost productivity or how to encourage boosting productivity. So it just, it kind of left me a little nonplus, all right. But overall, I mean, this budget was designed to help younger generations, calling it the generational fairness. Let’s say the government says it’s trying to help them in housing, in the housing area specifically. Do you think this budget will appeal to them? If it doesn’t to you, no. So I’m not young, but I’m not old either. I can, I can straddle the two generations. I can see this isn’t going to do anything when you’re trying to help young people. You know, one of the biggest problems that young people are going to have with trying to buy a home is they can’t come up with the 3035% down payment. So if you want to buy a condo in Montreal for half, $1,000,000, you need about $150,000 in cash in hand. So it doesn’t really matter whether you qualify for the mortgage or not. The fact that you don’t have $150,000 there isn’t going to help. This budget isn’t putting 150, $50,000 in people’s pockets. It’s not even helping young people to get $150,000 in their pocket, so it’s still going to keep them shut out of the housing market. You can build as many houses as you want. It’s not going to come online fast enough to make a difference, OK? The government is spending though 52.9 billion over the next five years with a deficit of 40 billion, which was what Freeland was predicting. Is the deficit a concern for you? No, $40 billion is a lot of money. It actually brought down the Mulroney government 40 years ago over such a huge number. But when you look at it in relation to an economy that’s over $2 trillion big, $40 billion is about 2% of the overall economy. That’s like me spending an extra $0.02 more for every dollar that I earn. Where you might accuse that of being reckless, it depends on what that money is being spent on. And the fact is that as long as my income continues to grow, I can keep spending more than my income, ’cause I just pay it back next year. And that’s what the government does. They’re forecasting strong growth in the next couple of years relative to a recession that we were worried about. Revenues will continue to rise, they’ll be able to pay for that. You mentioned a concern about a lack of anything in the budget to grow the economy. What about inflation? Is there anything of concern there about all of the spending on inflation? Well, if you listen to the leader of the Conservative Party, you would think that this budget is going to do nothing but create inflation. I think he’s a little off the mark and he’s just tapping into people’s anger. This is not really an inflationary budget by any means. There is a a built in expectation that revenues are going to grow. In fact, they presented that the revenues were about $8 billion higher than what they thought, in part because the economy grew faster than what they thought. This is not going to contribute to inflation despite the fact that inflation ticked up today. It’s not because of this budget. One quick last question. The government is hoping to collect about $19 billion by imposing new capital gains taxes on the richer part of the population. Do you think that they will be able to collect that $19 billion? No. Cut it in half and they’ll be lucky if they get half that amount. The thing with wealthy people is that wealthy people don’t stand still when you try and tax them. There’s a reason why they’re wealthy. And so all it is is 1 phone call to a tax lawyer, tax accountant that says figure out a way to get me around this tax. They are perfectly within the law, but what they’re going to do is they’re not going to stand still and take it. And so it’s really trying to kind of pin Jello to the wall. It it doesn’t work particularly well and it’s not very effective. You’re going to find that the government just needed to find about $20 billion in their revenue side to justify the expense side. This seems to work. And so they expanded it from, say, the 110th of the one percenters to the one seventh of one percenters. It’s not going to generate the revenue that they hope for. But all they need to do is just buy themselves another every year to say, hey, the economy grew. So we got the money from elsewhere. Don’t worry about it. Why? Shalinda, thank you anytime.