Temper Extravagant Expectations and Protect Path Back to Surplus Says Shadow Budget - C.D. Howe Institute

TORONTO, March 16, 2016 /CNW/ - Ottawa must rein in expectations for huge increases in federal spending and borrowing, says the C.D. Howe Institute's 2016 shadow federal budget. In "Where the Bucks Stop: A Shadow Federal Budget for 2016," William Robson and Alexandre Laurin target deficits of $15.3 billion and $12.2 billion in the next two fiscal years, setting the stage for a return to surplus in 2019/20.

"Canada needs fiscal measures that will boost productive capacity, while holding the line on costs," state the authors. "This Shadow Budget emphasizes growth-friendly tax policy, modernizing public infrastructure, openness to trade and competition, and supportive reform of institutions and regulations." On much anticipated infrastructure spending, they prioritize federal projects, while holding the line on the total amounts committed to projects under provincial or municipal control.  

Robson and Laurin's Shadow Budget has four key themes:

1. Realistic Infrastructure Spending: The commitment during the election campaign to borrow for infrastructure can justify only modest deficits, since only the annual amortization, which is small on long-lived projects, shows on the bottom line. Deficits not related to capital spending hurt growth by absorbing saving that would otherwise fund Canadian investment.
2. Boosts to Productivity: Canada needs fiscal measures that boost productive capacity. The Shadow Budget emphasizes growth-friendly tax policy, openness to trade and competition, and supportive reform of institutions and regulations.
3. Containing Federal Compensation Costs: The Shadow Budget proposes measures to curb growth in wages and salaries, and reduce taxpayers' exposure to pensions and other benefits for federal employees.
4. Providing Opportunities for Canadians: In pursuit of the goal of widespread prosperity, the Shadow Budget proposes increased federal support for provincial drug programs and on-reserve education, equal access to Employment Insurance benefits in all regions, and measures to level the playing field for Canadians saving for retirement.

Long-term success in all these areas also requires the federal government to lay out a credible plan for fiscal sustainability. The 2016 Shadow Budget aims to assure Canadians that "the federal government is dealing successfully with the country's economic and demographic challenges," they conclude.

For the report go to: https://www.cdhowe.org/public-policy-research/where-bucks-stop-shadow-federal-budget-2016

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

SOURCE C.D. Howe Institute

William B.P. Robson, President and CEO of the C.D. Howe Institute; Alexandre Laurin, Director of Research, C.D. Howe Institute; or Daniel Schwanen, V.P. Research at the C.D. Howe Institute, at 416-865-1904; E-mail: [email protected].