Front Burner - Liberals unveil slimmer federal budget

Episode Date: April 8, 2022

The Liberals’ new budget doesn’t come with the hefty price tag of last year’s plan for pandemic recovery. But it isn’t thrifty either, pledging about $31.2 billion in net new spending over the next five years — mainly for housing, defence, and climate change. Today, CBC’s host of Power and Politics Vassy Kapelos joins us to break down the big-ticket items in the government's new spending plan, and look at whether it will help make life more affordable for Canadians.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Jamie Poisson. Our ability to spend is not infinite. The time for extraordinary COVID support is over. Because that is the responsible thing to do.

Christia Freeland's second budget as finance minister is very different from her first last year. The document she presented is actually 500 pages shorter. And the projected deficit is half what it was for 2021. But while Freeland spoke yesterday about the priority her government is placing on fiscal responsibility and growing the economy. As you can hear, not everyone in the House of Commons is buying it. This is our fiscal anchor. This is a line we will not cross. It will ensure that our finances remain. There's fewer items to go through here, but some very big ones still. We're talking housing, defense, climate. So today, Power and Politics host Vashika Palos is back on the pod to walk us through the numbers and explain why they matter. Hey, Vash. Happy Budget Day.

Hi, Jamie. Happy Budget Day to you, too. We heard whispers ahead of this budget that it was a back-to-basics document. Big pandemic spending was over, a thing of the past. Now that we've got the budget, what does back to basics look like for the Liberals? I think it does mean that pandemic spending is over, but it doesn't mean that spending is done. I think back to basics was how they telegraphed it coming up to today. But it's not exactly like a budget of restraint. It's not massive cuts to spending or even anything close to it. It's just maybe not as huge amount of spending as we had become used to over the past few years, thanks to so many of the supports that were put into place for people who were affected by the pandemic.

Mm-hmm. So spending, but not as much spending. Yeah. Honestly, that's probably the way you can describe it. Let's get into some of the big programs that Freeland is spending on in this budget, starting with housing. What are this budget's commitments to fix our housing crisis? I think it's fair to say this was the number one priority. Yeah, certainly. I think in the way in which it was framed as a budget that could help address the issue of affordability or lack thereof, the big ticket item here is housing, and in particular, addressing a couple of major issues. One, that houses are just so expensive, and two, that it's really hard to even enter the market for the first time. So there's two

different ways or a few different ways, that they aim to do that through this budget. The first is addressing the supply side of things, right? Over the next 10 years, we will double the number of new homes we will build. I mean, prices go up because there's so much demand and there's just not enough supply. So they're pledging more than $5 billion to build tens of thousands of houses over the next number of years. I think it's over the next five years.

And then they've created this kind of interesting new tax-free savings account that you can access if you're under 40 and you're a first-time buyer. account that you can access if you're under 40 and you're a first-time buyer. There's also some supports, for example, for people who have trouble affording rent, like a direct payment, and some rental construction pursuits as well. But overall, the price tag or the investment tag is about $10 billion when it comes to housing. I would say that a lot of that money has been promised in the past, or at least the issue has been promised to be addressed by the liberals in the past. They unveiled a big housing strategy that basically aimed to do the same thing back in 2017. So really key here is going to be whether this, especially on the supply side, that new construction can materialize at the rate

that they're promising. Also on the demand side of things, maybe making it easier for people to buy a house. I know that some of the experts we've had on this show have criticized policies that would give new home buyers more money in their pockets because that would just pour gasoline on the fire, right? Like, does this budget address that concern? Well, I think the concern is a valid one. I think it's almost two parts. So the first is by helping people get into the market, are you driving up demand?

And if supply can't be increased at a rate commensurate to that, then do you in fact even spike prices further? The second kind of criticism of that avenue is also that it's helping people who probably can afford it, just a little, you know what I mean, who can afford to save that money, actually get a little bit of a break on it. And I'm not saying that's entirely a bad thing, because I think that is like all over this country, right? Anyone our age who you talk to, like buying a home in a place like Toronto and Vancouver or even Ottawa right now just feels

next to impossible, right? And so I think it's trying to address a very real problem. The concern is whether or not it exacerbates it in the long run or if it doesn't necessarily target everyone who might need some help. I have a feeling that we're probably going to be talking about this more in upcoming podcasts. I want to talk to you a little bit about defense spending. Since Russia's latest invasion in Ukraine, even our more pacifist allies like Germany have been pumping billions into defense spending. Krzysztof Freeland had a lot to say about Russia

in the budget yesterday. On that dark morning of February 24th, a day of infamy, we woke up to a world utterly transformed. When Putin opened fire on the people of Ukraine, he also turned his guns on the unprecedented era of prosperity. What does this budget's defense spending actually look like? So it's an additional $8 billion with very few details attached to how that will be spent. And it's also a promise to basically review the strategy that they introduced a number of years ago. I think it was back in 2017. I could be wrong, but I remember how hot it was that day.

That's all I really remember because I did cover when they unveiled their kind of white paper on what their defensive strategy would look like. So they'll re-examine that. But where the money is concerned, it's about $8 billion. $500 million of that is a very specific targeted measure to buy weapons that Ukraine says it needs and send them to Ukraine. The reason that Canada needs to do that is because it's already exhausted its own supply of lethal aid for Ukraine. So it has to buy it from elsewhere and send it. So that's one specific thing.

But as far as like the rest of the money, two things. First, like I said, not a whole lot of details. Like the defense minister had signaled there's big plans for NORAD, which is kind of the defense system for the U.S. and Canada together for North America. Not a whole lot of meat on that bone in this budget at this point. And then as well, just the amount. Like it sounds like a lot. It does.

We could buy a lot of houses. I know. A billion dollars. We could. We certainly could. But you mentioned, for example, a pacifist ally like Germany. They announced a few days after this war started $100 billion of new spending on defense and a real path charted to get to that 2% of GDP target that NATO had stipulated and that allies, including Canada, have agreed to. So there's nothing in here that charts a path to that.

I asked the minister about that, you know, like, what do you say to your allies? And she insists that Canada's contribution is a valued one. And she also said, and I'm paraphrasing, but basically, like, if we had put a whole bunch more money into it, but didn't have exactly where it would go, or it wasn't being spent in ways that actually meaningfully made a difference, then what's the point of having all that money in there? So I found it interesting. I also know from having the defense minister on my program that she was putting forward like very aggressive options. Options which would see potentially exceeding the 2% level, hitting the

2% level, and then below the 2% level. This is not that option. So something happened in the past few weeks that made the government and in particular the finance minister say, thanks, but no thanks. What do you think that might be? Well, I mean, again, I put it to the minister and she basically said it would be inappropriate to talk about any sort of discussions between cabinet ministers. Okay, fine. I tried. But then she also said that she sort of harkened back to that thing that we started off the pod with, which is this idea of fiscal responsibility or restraint. And like I had to draw the line somewhere basically. Again, I'm paraphrasing. But that's what I interpreted her as saying that like can't go for everything and had to make some tough decisions.

Okay. Let's move to climate. If people heard our episode this week about the Liberals new climate plan, we talked about how we were expecting details from the budget, especially around carbon capture. So what new details did we learn here? Well, the big new detail is the price tag attached to the tax credit that the Liberals will provide. It's $2.6 billion, which is really interesting. provide. It's $2.6 billion, which is really interesting. I don't know. I mean, carbon capture is, having worked in Alberta, something that's been around for a long time that companies have known about for a long time, but not really invested their own capital to build. It's very expensive. And there's a lot of critique, and I know you've covered on the pod about how effective

it is. Like how much bang do you get for your buck using that as a method for decreasing carbon in the atmosphere? Could you funnel that money into solar energy, into wind? Yeah. I mean, basically, is this the best way to reduce our emissions? Is this the most cost-efficient way of doing it? There are a lot of arguments that have been put forth that it's not. But it is certainly something that we've heard from stakeholders in Alberta. They are interested in pursuing.

It's just are they going to spend their profits on it? And certainly the opposition, in particular the NDP and the Bloc Québécois, are critical of this move because they say it amounts to like a subsidy to basically big oil companies or big companies that could have made this decision on their own. You know, the government's response is this is incentivizing something they feel will actually make a difference and is a good thing. And that's not a bad objective to go. angel capital organization empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo. 50 percent. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your

partner create a financial vision together. To listen to this podcast, just search for Money for Couples. Some details in here on electric cars, too. Tell me a little bit about that. Yeah, and the government has kind of signified in the past few weeks that this is going to be a priority. I'm thinking of all those. I don't know if you've watched, but we like to call them the Oprah moments with Francois-Philippe Champagne, the Minister of Innovation, and Doug Ford. Like at all these electric vehicle plants and part plants, like, you know, this is amazing. You get a car. You get a car.

Like they're very pumped about these announcements. So it was a big sign that something like this was coming down. It looks like there's about $3 billion earmarked in the budget for development and making the electric vehicles more accessible for Canadians. But also, a big part of that investment is geared towards, I think what they're calling like a critical mineral strategy. Basically, the parts that make the, or the minerals that go into making the battery to pivot away from a reliance on China for that. So that's a big part of this as well. I feel like we got to mention before we move on from climate that we just found out Wednesday

that the Liberals approved an offshore oil megaproject in Newfoundland called Beta Nord. approved an offshore oil megaproject in Newfoundland called Betanord. Norwegian company Equinor says it could pump out about 200,000 barrels daily from this project. Well, I think, I mean, in the political context, for me, this is where the NDP-Liberal deal becomes very tricky, maybe, or very interesting insofar as the NDP has said that they wanted more about climate change in the budgets. They want the Liberals to do more about climate change. There are certainly a very, you know, there's a very convincing set of arguments to be made about that project, in particular, you know, $3.5 billion worth of government revenues, thousands of jobs in the construction of it. And then as well, the oil itself is less emissions intensive for the most part until you burn it than pretty much any other oil that you

could extract. So there are certainly arguments in favor of it. However, bottom line, 200,000 barrels of extra oil are going to be pumped out in production a day because of that project. And it puts the NDP, I think, in a sort of tricky position because how do you, you know, you've said you're supporting the government, you got your dental care, sure, you got a few other things. But at the flip side, you're getting a government now that's going to subsidize oil companies for carbon capture, and it's also going to approve more production of oil. That's not, you know, is that really the deal that you made? So I think from a political perspective, it's kind of, it becomes a fascinating,

almost like tightrope walk for the NDP. Yeah. And so I know you had Jagmeet Singh on your show today. Did you talk to him about this? Because- Yeah, it was my first question. Yo, yo, yo. There you go.

What is the red line for you? Well, these are two things that you've outlined that we were absolutely opposed to. We think that it's wrong to increase subsidies of fossil fuel companies. We had said really clearly we believe in ending those subsidies because we think public money should go towards workers, should go towards renewable energy. As you mentioned, they got denticare, but they didn't get pharmacare in this budget. And there's lots of things in it that I would imagine they maybe didn't get pharmacare in this budget. And there's lots of things in it that they, I would imagine, maybe didn't like. Yeah, I mean, his basic argument is we can still criticize.

And that's fine. And that's true. And he's probably right that Canadians don't want the government to keep falling every time there's a budget, right? That people are okay with a few years of some stability when it comes to elections. But it's also, you know, there's got to be some interesting consequences politically for his party. Like you criticize that stuff but the government still did it. And then you agree to support that government so that it remains in power. Like there's a connect the dots there that ultimately he'll have to spend time answering questions on pretty much all the time when he's talking about a liberal

budget. Okay, so let's move to another opposition party, the Conservatives. This is overall a slimmer budget, and I think maybe fair to say a slimmer one than was even expected. And so I'm interested in the reaction from Conservatives. And what did interim leader Candace Bergen have to say? It's definitely slimmer. It's 200 and some pages compared to 700 and some pages in the last budget. Ms. Bergen's criticism of the government remains, though, that it is – the spending is not sustainable in that it's inflated the size of government to the detriment of Canadians. And more specifically, the argument that the Conservatives are making is that increased spending leads to increased inflation,

which is another way of saying the government is making your life more expensive. Now, government spending and high levels of it certainly do contribute to inflation, but there's a whole other side of that supply side of the argument,

which is out of Canada's control, which involves the supply chain issues due to the pandemic, the size of economic growth since the pandemic, and then also supply chain issues due to the war in Ukraine. So there's like a whole bunch of things that go into it. But certainly the focus for the Conservatives is this is too much spending. And the result of that spending is your life is more expensive. And oh, by the way, there's also not a lot in this budget that specifically targets that part of it that makes your life less expensive right now.

What did we see and what are we seeing in this NDP Liberal budget? Well, we are seeing out of control spending, no plan for long term growth or productivity. We are seeing taxes go up, which in the end, Canadians, everyday Canadians will be paying for. which in the end Canadians, everyday Canadians, will be paying for. Do they have a point? Like if I'm just wondering how this budget might affect my ability to buy groceries and gas and other day-to-day expenses right now, is this going to move the needle for me? I think it's a great question, and I think to a certain degree they do have a point. I think the Liberals also have a point in that they are investing in things like childcare and dental care and housing

so that those aspects of your life are a little bit more easy to grapple with, a little less expensive. But the conservatives are right that there's no tax break in here. There's no pause on, for example, the carbon tax or any aspect of the GST. There's nothing that will really put a bit more money in your pocket at this point. Maybe there's a debate to be had about what role the federal government has there, but there really isn't. There's nothing in the immediate future in this that, you know, you or I will next week go somewhere and expect to pay less for things that have really become quite expensive. I mean, like the rate of inflation here is higher than it's been since 1991. It's second highest in the G7 right now, I'm pretty sure, or tied with Italy for second,

something along those lines. Like it's, it ain't pretty. The last thing I want to talk to you about before we go is our debt situation, I guess. Freeland pointed to some numbers like the debt to GDP ratio today, saying at least right now our economy is actually doing well, even though inflation is quite high. But what are you hearing about how healthy our debt situation actually is? Look, compared to the rest of the G7, the government has a point. Our debt to GDP ratio is low. Our deficit size is not out of scope with what other G7 countries have pursued, especially during the pandemic. And there was a pandemic that required high levels of supports. But there is a more long-term question around the size of the debt in this country and, in particular, the decisions governments make to pay down that debt.

It's the same as you or I carrying a debt on our credit card, right? It costs a certain amount of money every month to pay the interest on that. And that amount right now is $20 billion a year in this country. It's going to go up to $40 billion by 2026. And that's if interest rates stay where they are, which because of inflation, ding, ding, ding, they're not, right? We expect next week, for example, you know, maybe a 0.5% increase in the key rate from the Bank of Canada. So that's not small. And it's probably going to keep going in that direction unless inflation can get reined in, which does have wider implications. Because

if you are paying billions of dollars to pay off the, you know, this is called debt servicing, but to pay off the interest on your credit card, that's money that you can't spend on your kid's birthday present. It's money you can't spend on certain groceries, or, you know, you will have to make opportunity cost decisions. And that's the same for a government. So 20 years, 30 years down the road, if tons of their money is going towards paying off debt that they accumulate now, well, what's left for program spending? And then what if the economy really contracts at some point and they lose a huge basis of their revenue. Well, what do they do then,

right? And how much less do they have to spend on programs going forward? It's not an emergency situation here. I want to be clear. I don't want to blow it out of proportion. Interest rates are really good and the cost of borrowing is not insane at this point, but that doesn't mean that you can't have an eye towards the future and realize it's a real risk for people down the road and a real risk for the government too. Okay. Vashi, thank you very much for this, for joining us late on Thursday night to talk budgets. My pleasure. Anytime. Okay. Always so All right, that's all for today. One thing I did want to mention, Vashi and I didn't get into it in the conversation, but I think it's really important to highlight. $11 billion was promised in this budget over six years to support Indigenous children,

families, and communities, with $4 billion of that directed to housing. That is all for this week. FrontBurner is brought to you by CBC News and CBC Podcasts. Our producers are Simi Bassi, Imogen Burchard, Lauren Donnelly, Ali Janes, Katie Toth and Derek Vanderwyk. Our sound design this week was by Mackenzie Cameron and Nooruddin Khurrani. Our sound design this week was by Mackenzie Cameron and Nooruddin Khurrani. Joseph Chabison wrote our music. The executive producers of Frontburner this week were Ali Janes and Imogen Burchard. I'm Jamie Poisson, and I'll talk to you again on Monday.

For more CBC Podcasts, go to cbc.ca slash podcasts.