January 29, 2009

On the Jan. 27 Federal Budget - People's Voice commentary

January 28, 2009

The political mindset has changed in Ottawa since last fall, but not nearly as much as most analysts of the Jan. 27 federal budget suggest.

This is not surprising, since Finance Minister Jim Flaherty's "budget consultations" were conducted almost exclusively with big business and right-wing think tanks. As the global economic crisis deepens, this budget prioritizes bail-outs for the banks and other lenders, and tax hand-outs to business, while ignoring the urgent needs of workers and the unemployed – further proof that the Harper minority government remains a trusted tool of the ruling class and a bitter enemy of working people across Canada. More than ever, a massive struggle by the working class and other democratic forces is needed to drive the Tories out of office.

Stephen Harper, Jim Flaherty and the Tory cabinet remain diehard advocates of neo-con ideology. The ruling Conservatives have been compelled by events to bring in a 'stimulus package' which combined with falling government revenues will result in a $64 billion deficit for the next two years. But the far-right Tory agenda remains in place, thinly disguised by smoke and mirrors such as minor announcements of infrastructure spending, designed to maintain Harper's grip on power.

The current crisis proves that reality trumps the abstractions of bourgeois economic theory. For more than two decades, all the major capitalist governments have a strategy of deregulation, privatization, social cuts, massive tax breaks for the rich and corporations and increased military spending, and have imposed these neoliberal policies on so-called 'less developed' states. Surely, if this "Washington consensus" truly possessed the powers its acolytes claim, capitalism would have entered a higher realm of crisis-free expansion, with benefits flowing from the top of the pile down to the lowest sections of the working class.


But suddenly – as predicted by more objective economists and by the Communist Party (see People's Voice, January 1-15, 2008) – the edifice has collapsed. Not only are neo-con policies unable to tame the inherent "boom-bust" cycle of capitalism, they actually make the crash far more severe when it does arrive. The huge profits and asset growth of recent years stand revealed as mere spectres, projected by financial manipulation, over-heated housing and real estate markets,
and the "bubbles" of speculation and unprecedented debt.

Even before last September, the real impact of neo-con policies in North America was evident to any careful observer. The gap between rich and poor has reached staggering levels, tens of millions of working people were swamped by huge debt loads, the manufacturing sector was devastated. Similar trends were witnessed in Europe. Now, as millions of jobs vanish, parties which preached the neo-con gospel are bending the knee to the formerly reviled tenets of Keynesianism.

This shift does reflect a powerful consensus among voters that an economic boost is desperately needed. In virtually every major capitalist country, governments are adopting policies to avert complete collapse, spending trillions of dollars on infrastructure and bailouts. To some extent, this is simply playing catch-up after years of cutbacks to schools and hospitals, of neglecting everything from sewage systems to crumbling bridges. Governments which poured billions into military expansion while cutting tax rates – such as the Harper Tories (and the Liberals before them) – are now responding to public pressures by going into deficit to pay for some urgent priorities.

But the devil lurks in the details. Sixty-four billion dollars over two years sounds like a lot, but Harper's "stimulus" is less than 1.5% of Canada's Gross Domestic Product, far below the 2.5% planned in the US, and well short of what will be required to 'jump-start' the sputtering domestic economy. Over half of the Tory deficit is simply a shortfall of revenue projections caused by the economic downturn and Harper's $12 billion in tax cuts implemented last year.

Not content with this cut to future government revenues, the Tories are accelerating their corporate tax reductions. Their "across-the-board" tax cuts are actually a shift towards a "flat tax" system, benefitting those in high-income brackets far more than low and lower-middle income earners.

Despite the rhetoric, the real needs of working people are not addressed by this budget. Half of the $2 billion promised for social housing will go towards renovations, not new homes. This allocation is feeble compared to the amount budgeted for home sales/renovations, the bulk of which is really a hidden subsidy to the real estate and construction industry. Nor is there anything for those who do not own homes, or protection for families facing foreclosures.

There is nothing in the budget for a Canada-wide child care program, to improve healthcare, or to reduce the debt burdens faced by post-secondary students. The budget also carries over some of the worst provisions of Flaherty's disastrous "economic statement" from last November, including the attack of pay equity rights for women, an imposed wage ceiling for federal workers and the sell-off of $2 billion in public assets to corporate interests.

Far from assisting the unemployed, this budget continues the Tory war on the poor. The extension of EI benefits by five weeks is minimal, the waiting period remains in place, and access to miserly benefits (still pegged at only 55% of former earnings) remains limited to about one-third of the growing ranks of unemployed. The $2 billion for retraining jobless workers is a tiny fraction of the $54 billion stolen from the unemployed over the years through Liberal and Tory cuts to EI benefits. The federal minimum wage is unchanged, and the budget does nothing to protect and raise pensions, or to improve social assistance.

The infrastructure spending is spread thinly across the country.

Instead of a new financial deal for cities, the budget contains "poison pill" provisions compelling provinces and municipalities to cough up matching funds. As a result, many so-called "shovel-ready" projects will remain sidelined, since cash-starved local governments lack necessary taxation powers or sufficient support from higher levels of government.

The budget does nothing to stem the loss of manufacturing and to protect industrial jobs - no plant closure legislation, nothing to make government financial support conditional on keeping plants open without lay-offs or wage cuts. Despite the enormous deficit, there are no cuts to the bloated military budget and the discredited and disastrous mission in Afghanistan.

After all Harper's claims to be "listening" to the Canadian people and to understand the need for new policies, the Jan. 27 budget does nothing to tackle the very serious structural problems plaguing social and economic life in Canada: growing unemployment and homelessness, an ever-widening income gap, deindustrialisation, completely inadequate social programs, racist oppression of Aboriginal peoples, environmental destruction, the sell-out of Canadian sovereignty. In essence, the budget is simply a political effort to salvage the fortunes of the Conservative party.

The Liberals under their new leader Michael Ignatieff have decided to support the budget, hoping to regain their position as the "favoured party" of big capital. This decision finishes the Liberal-NDP
coalition which millions of working people had hoped would defeat the most reactionary, pro-business, militaristic, sell-out government in Canadian history.

But as Canada faces the deepest economic crisis in generations, the labour and democratic movements cannot accept this outcome quietly. We urge an escalated struggle to unite the working class and its allies into mass actions to drive the Harper Tories out of office, and to win the pro-people policies so desperately needed at this crucial moment.

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