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Finance Minister Chrystia Freeland tables the federal budget in the House of Commons on April 7.Adrian Wyld/The Canadian Press

Finance Minister Chrystia Freeland’s first postpandemic budget had four big tasks.

First, she had to get the country’s finances back on track, returning deficit and debt to their prepandemic path, and getting fiscal and monetary policy on the same anti-inflationary page.

Second, she had to deal with Canada’s housing crisis.

Third, she had to address the long-term challenge of Canada’s low productivity growth.

And fourth, she had to fund promised new programs, from pharmacare to child care to a big boost in military spending, while respecting the first item on the agenda.

So how did Budget 2022 do?

Ms. Freeland gets a passing grade, barely, on Item 1. She gets bouquets and brickbats on Item 2. Item 3 earns a question mark. Item 4 also gets a question mark – or maybe a docked grade for incomplete work.

The good news is that, as Ms. Freeland put it, the economy is booming. Canada has regained 112 per cent of the jobs lost during the pandemic, and unemployment is below where it was in early 2020.

It proves that a heavy dose of fiscal stimulus – lots of government borrowing – was what was needed to beat the pandemic downturn. It also proves that the opposite is what’s required now.

After a deficit of $314-billion in 2020-21, and an expected shortfall of $114-billion in the fiscal year just ended, Ottawa is projecting a deficit of $52.8-billion this year. A chunk of that is actuarial adjustments that fluctuate with interest rates; on the basis of cash going in and out, Ms. Freeland is projecting a deficit this year of $43.9-billion. That falls to $33.8-billion next year and $10.2-billion four years out.

Better would have been to put fiscal and monetary policy on the same anti-inflation page, via a smaller deficit. That could happen through any combination of spending cuts or tax increases; what’s inflationary is not the level of government spending per se, but the economic stimulus that comes from pulling future spending into the present, via deficits.

That said, today’s deficit is modest enough that the debt-to-GDP ratio is back on a downward slope. And Ms. Freeland has mostly avoided the fallacy of trying to fight inflation by handing out free money. Many of her provincial counterparts, in contrast, have been unable to restrain themselves. Alberta is temporarily ditching its gas tax; Ontario is refunding vehicle licensing fees; British Columbia is cutting public car insurance rates; Quebec is sending $500 cheques to almost everyone, just because.

Still, her government couldn’t resist the temptation to hand out money in the one place where it’s most likely to stoke inflation: housing.

The budget does include new measures to stimulate the building of more and denser housing. But Ms. Freeland is also doubling the first-time home buyer’s tax credit, to $1,500, and creating a new tax shelter called the “Tax-Free First Homes Savings Account.” These will use taxpayer dollars to juice housing inflation. The only saving grace is that these programs are not that big: a mere $1.4-billion over five years.

As for her plans to boost productivity, we don’t want to be ungenerous but they look like the subsidize-a-cluster recipes that have been tried before, with mixed results.

The budget also promises to find an extra $16.1-billion in tax revenue, over five years, under the rubric of “A Fair Tax System.” More than $6-billion will come from levies on banks and insurers, creepily classified as “Requiring Financial Institutions to Help Pay for the Recovery.” Nearly $8-billion will come from tightening up loopholes, notably preventing the use of foreign corporations to avoid tax.

And finally there are the new programs the Liberals promised, including those that are part of their deal with the New Democrats. The cost of national child care is fully accounted for, and there is $5.3-billion for a national dental care program for lower-income people. But a couple of other big items are AWOL.

National defence gets a budget increase, but it’s relatively modest. Five years out, Canada will still be nowhere near the NATO goal of spending 2 per cent of GDP on defence.

And then there’s pharmacare. Or rather: Where’s pharmacare? Ms. Freeland’s explanation is that Thursday’s budget is just the first chapter in her government’s four-year mandate. Pharmacare is for next year’s budget. Or maybe the year after.

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