April 8, 2012

A budget that cuts jobs and services

"We're gonna cut by this much and then more!"

PV Vancouver Bureau

     Working people wanted the federal government to lay the basis for "a sustained and broadly shared economic recovery," said the Canadian Labour Congress in its analysis of the 2012 Federal Budget. Instead, "we got a budget that cuts jobs rather than creates jobs; which attacks needed public services and social programs; and undermines rather than enhances retirement security."

     While the corporate media praised the Budget as "moderate", the CLC points out that spending cuts rising to over $5 billion per year from 2014‑15 mean a 6.9% cut, with only "very modest" new initiatives.

     Each $1 billion of spending cuts represents about 10,000 lost jobs, says the CLC, divided between government jobs and private and not‑for‑profit sector jobs supported by government purchases of goods and services. The overall negative impact of the Budget on jobs will be about 50,000 when the measures are fully implemented.

     As well as cutting federal employment by 19,200 jobs over the next three years, the Budget makes a dramatic shift in overall priorities. Total federal spending on programs in 2015‑16 will be 12.9% of GDP, compared to 14.1% in 2011‑12. Net revenues will be almost unchanged, thanks to more cuts to corporate taxes.

     The CLC stresses that Canada has lost 500,000 manufacturing jobs since 2003. "Economic recovery has ground to a halt since last September," with official unemployment rates forecast to average well over 7% for the next two years. The "real" unemployment rate which includes discouraged job seekers and involuntary part‑time workers was 10.6% in 2011, and 19.7% for young workers.

     Wages are stagnant, household debts now average more than 150% of income, and inequality is on the rise. Ottawa has allowed foreign companies like Caterpillar to buy Canadian companies only to shut them down, and to get tax breaks while they were doing it.

     But the federal government could have explored other options. Canada has one of the lowest net public debt levels of the advanced industrial countries (34% of GDP compared to an average of 63%), the federal deficit is now just over 1% of GDP, and government borrowing costs are at an all‑time low.

     The CLC calls for a shift to public investments, which create jobs and bring more tax revenues and lower spending on programs like Employment Insurance (EI) and social assistance. Such investments, it says, could be financed by reversing the corporate tax cuts.

     Instead, the Conservatives borrow billions of dollars to spend on tax giveaways: "Corporations have used their tax cuts to buy up their own shares, to increase dividends, and to increase their cash holdings. Non-financial corporations are now sitting on close to $500 billion of surplus cash."

     The CLC has urged all levels of government to launch a major, multi‑year, public investment program which would create jobs now, promote our environmental goals, and build new "green" industries for the future.

     Such a comprehensive plan would include roads, sewers, and basic municipal infrastructure; health and educational facilities; mass transit; passenger rail; affordable housing; energy conservation through building retrofits; and renewable energy.

     The CLC says that government support for all infrastructure and environmental investments should be linked to "Made in Canada" procurement policies, so goods and services inputs are purchased in Canada. Infrastructure should have a mandated training component to help deal with looming skills shortages.

     Other policies supported by the CLC would include a Canada-wide, not‑for‑profit child care and early learning program, home care as part of the public health care system, and long‑term care for the elderly - programs which would create new jobs while promoting social goals.

     Instead, the limited investment measures in this Budget are "far eclipsed by the scale of spending cuts." For example, spending on the Youth Employment Strategy is boosted by only $50 million for two years, and an older worker program is increased by just $6 million over three years. The National Research Council's program to support innovation by small and medium-sized businesses got a $110 million spending boost, and the Budget announced $150 million over two years in small community infrastructure projects.

     These amounts are dwarfed by the tax breaks which the Harper Tories call "the best way to create jobs." Corporate tax cuts will cost $13 billion in lost revenues in the fiscal year 2012-13 alone. The CLC wants to raise the federal corporate tax rate from today's 15% to 19.5%, still one of the lowest in the G7 countries. This change would raise about $10 billion this year.

     Another major theme of the CLC's budget response has been the attack on public pensions, which fall well short of replacing the 50 to 70% of pre‑retirement income needed to maintain living standards. Only about one in four workers in the private sector now belongs to an employer pension plan, and others rely on RRSPs which generate low and uncertain returns.

     Fully one-half of "baby boomer" middle income earners born between 1945 and 1970 will face an income shortfall of at least 25% after retirement, says the CLC. One in three seniors already qualifies for the Guaranteed Income Supplement to Old Age Security. Effectively, taxpayers are picking up the cost of inadequate employer pensions.

     But as expected, the budget will increase the age of eligibility for OAS and GIS from age 65 to 67, phased in between 2023 and 2029. The CLC argues that "the increase in the retirement age seems mainly intended to force mainly lower income workers to stay in the workforce longer."

     Raising the retirement age will impact those who would qualify for the GIS supplement, especially older workers who already face very high rates of poverty. Future seniors with low incomes will be compelled to either "save more" (not a realistic option), work longer and more hours (difficult for many in poor health), or live in poverty.

     On another critical issue, fewer than 40% of the 1.4 million unemployed workers in Canada receive Employment Insurance benefits today. But the Budget announces that it will "strengthen and clarify what is required of (regular EI) claimants" taking into account their individual claims history. In other words, new job search requirements will further reduce the number of EI claimants.    The CLC analysis goes on to list some targets of the impending budget cuts, from the Katimavik program (eliminated), to the CBC (cuts rising to $115 million by 2014‑15), to the National Round Table on the Environment and the Economy, and the international assistance envelope at CIDA ($319 million in 2014‑15).

     The CLC's conclusion: "Given that growth is expected to remain modest and unemployment rates are projected to remain high over this period, Budget 2012 can scarcely be described as a jobs and growth budget."

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