Editorial

Finance Minister Chrystia Freeland introduced the 2024 federal budget on Tuesday. A major part of her remarks spoke of providing a fair chance to build a good middle-class life. She spoke of “lifting up every generation” and “economic Growth for every generation” with particular reference to the young generation. 

We do understand that budgets are both an economic and a political document intended to speak to every class of the country, and so, try to drop some economic goodies into everybody’s swag bag. So, typically, the breath of Ms Freedland’s budget was as expansive as such documents are. It ranged from affordable homes, food and rentals, to expanded health care, tax fairness, to protecting Canadians, defending democracy, and everything else in between.

Keeping in mind that despite a government’s best effort, budgets never affect everyone in the same way, here are what we see as the pros and cons of Ms. Freedland’s 2024 offering:

Pros:

Housing initiatives: One of the standout features of the latest budget is the ambitious plan to address the housing crisis by unlocking nearly 3.9 million homes by 2031. This includes innovative measures like leasing federal public lands for as low as one dollar to encourage construction of affordable housing units on underutilized government properties. These initiatives demonstrate a significant commitment to solving the long-standing issue of housing affordability in Canada.

Fiscal responsibility: The government aims to show fiscal restraint by keeping the deficit within the $40 billion target. This demonstrates a balance between managing the country’s finances and investing in critical areas to address immediate public concerns.

Targeted tax measures: The introduction of a targeted capital gains tax hike on the wealthy and companies shows an intent to make taxation more equitable. This move is expected to resonate with progressives and those who advocate for economic equality, potentially increasing government revenues without broadly increasing taxes across all income brackets.

Support for young Canadians: With specific measures aimed at younger demographics, such as cracking down on online ticket scalping to improve access to cultural events, the budget attempts to alleviate some of the financial pressures faced by young adults and students.

Cons:

Long-term promises: Many of the budget’s promises, such as the extensive housing plans, have long timelines that extend beyond current political and economic cycles. This could foster skepticism among younger voters who may feel that the benefits are too distant to relieve their immediate concerns.

Economic impact of new taxes: While the capital gains tax is intended to target the wealthy, there is a risk that these measures could discourage investment and economic growth. Critics argue that it might drive capital and talent away from Canada, potentially stalling innovation and economic expansion.

Dependency on future budgets: The effectiveness of the budget’s initiatives largely depends on future financial planning and political stability. With an election looming, there is uncertainty about whether these plans will be fully realized or adjusted by future administrations.

Potential inflationary pressures: Despite intentions to manage inflation, the high spending outlined in the budget could contribute to ongoing inflationary pressures. This is a concern especially if the economic context changes, potentially requiring adjustments to interest rates that could impact the overall economic stability of the country.

Political calculations: The timing and focus of the budget suggest that it may be heavily influenced by electoral strategies rather than purely by economic necessities. This perception could undermine trust in the motives behind the budgetary decisions, particularly among cynical or politically savvy constituents.

We are optimistic that the budget will serve as a building block for the future of the economy. The ambitious housing initiatives aimed at creating nearly 3.9 million new homes is about providing shelter, job creation, improving the supply chain for building materials, and enhancing overall economic stability. The targeted approach to taxation, specifically the increase in capital gains tax for the wealthy, is about equitable redistribution of financial resources more equitably, fostering a sense of fairness while supporting middle and lower-income Canadians.

These measures, combined with a commitment to fiscal responsibility, underscore a strategic effort to lay down a robust economic framework that, if implemented effectively, could lead to sustained growth and prosperity, benefiting generations to come.