Chrystia Freeland’s first budget is extremely big – and surprisingly modest

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Measured in number of pages and volume of words, Finance Minister Chrystia Freeland’s budget is bigger than anything produced by any of her predecessors. There’s a lot in it, because a minority government eyeing an early election has reason to offer pecuniary acknowledgment to virtually every constituency imaginable. At a hundred million bucks here and a billion bucks there, it starts to add up.

Yet, this giant, doorstopper of a fiscal map is notable, and surprising, for how it delivers somewhat less than expected – whether you were hoping for more, or fearing it.

Those hoping for a sweeping, postpandemic rethink of the economy, including major new taxes and a jump in the size and role of government, will find it less than satisfying. Those who were fearing the same will find the full-length movie a lot less scary than the trailer.

Federal budget 2021 highlights: Child care, recovery benefits, OAS increases – everything you need to know

By 2025, the budget projects that federal program spending will be 14.9 per cent of the economy. The year before the pandemic, it was 14.6 per cent. If this is a fiscal revolution, then the Niagara Escarpment is the Himalayas.

Yes, the budget contains tens of billions of new dollars for temporary pandemic supports for workers and businesses. (What’s missing? No fix for the badly designed sick-leave program, and no indication that the Liberals will ever take pandemic border security seriously.) Last year’s initial emergency program has proved to be slightly less expensive than expected, with the economy having bounced back faster than predicted, but the current third-wave shutdowns mean that more money has to be set aside for 2021-22.

However, once the virus is beaten back through vaccination, emergency spending should begin to wind down. That could begin in a matter of months. Canada is, let us hope, finally on the cusp of the postpandemic era.

And the Liberal government’s biggest postpandemic idea is, as promised, a national child care program.

Ottawa aims to take Quebec’s universal child care program national, with significant funding from Ottawa to entice other provinces to sign on. By 2025, Ms. Freeland expects to be spending $9.3-billion on child care, $8.2-billion of which will be new money.

Negotiating the details with the provinces could take years. It’s reminiscent of what a previous Liberal minority government did more than a half a century ago, when it created national medicare from Saskatchewan’s first-in-the-nation model. The financial scale of this is smaller, but it’s still substantial.

It may also be politically less challenging than medicare, since Quebec – normally resistant to federal initiatives – could reap a financial windfall, in the form of federal dollars for its existing program.

The pitch for child care is that, in the long run, it could literally pay for itself. Over the past two decades, women’s labour force participation in Quebec has gone from below the national average to well above. That has meant more people working and earning a paycheque – and paying more in taxes.

Beyond child care, there are some things Ms. Freeland is planning that deserve criticism, and some things her government isn’t doing that deserve praise.

One of the biggest new items is an expansion of Old Age Security. In August, Ms. Freeland plans to send an extra $500 cheque to everyone over the age of 75. Next year, she wants to permanently increase OAS payments – currently $7,421 a year – by 10 per cent for those over 75 years of age.

If this were targeted at low-income seniors, it would make sense. But it isn’t, so it doesn’t. OAS goes to every senior; a partial clawback starts only at incomes over $79,000.

By 2025, this expansion of OAS will be costing Ottawa $3-billion a year, and rising. A lot of that money will be going to middle- and upper-middle income retirees.

What’s happily missing from the budget? A massive program of green subsidies. Yes, there’s lots of money for green initiatives like home energy retrofits, and they add up to billions of dollars. Yet over all, it’s less costly than it might have been. Ottawa’s primary emissions-fighting vehicle remains carbon pricing, along with various emission regulations. Good.

Unfortunately AWOL from Ms. Freeland’s budget? Pharmacare. Repeatedly promised by the Liberals, it’s been kicked to the curb once again. Maybe next year.

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