The 2009 Budget — Where’s My Shinkansen?

January 31st, 2009 by Potato

Well the opposition coalition seems to have lost its will to run the country, which is unfortunate because then it makes Stephen Harper’s whining to the GG and setting the country adrift work. The new version of the budget is out, and it doesn’t wow me.

I reluctantly agree that a monumental stimulus package is probably needed to keep this recession from snowballing into a depression, and that going into deficit, temporarily, is probably needed. However, I can’t wrap my head around the amount of money we’re forecasted to miss out on. A lot of it is due to lack of tax revenue (you don’t pay taxes if you don’t make any money) rather than spending, but still, where’s the grand stimulus?

Where’s the reintroduction of the green car feebate to stimulate auto sales? Instead we get some vague restructuring of car loans. Where’s the grand vision, the infrastructure spending to not only get bodies working, but also to lay the roots of a better society when we come out of this? In short, where’s my Windsor-Quebec Shinkansen???

Universities, never exactly rolling in the dough even in good times, are finding things are seriously tight as their endowments have been decimated by the stock market (and real estate) crash. PhD comics pointed out that academia is often a refuge for those who would otherwise go into engineering or business or the real world in general: spend a few years in grad school below the poverty line (but at least with some kind of income) and wait the recession out. However, this time there doesn’t look to be the capacity there. I’m pretty sure our department is shrinking, and will shrink more next year as many supervisors seem to not have the funds to take on students. The US is throwing more money at this, specifically towards graduate fellowships, so why nothing from our government?

I did like seeing the duration of EI benefits increase. To my thinking, EI should be automatically scaled to the unemployment rate: as the job market gets tougher EI should automatically extend a few weeks/months to reflect the fact that people need the extra support and that finding a new job is just plain harder; likewise in a hot market EI benefits should be scaled back slightly. Another step I’d like to see is flexibility added to RRSPs: they can continue to tax withdrawls, but the contribution room should be given back, though I don’t think many people in the situation of both having RRSPs and needing to tap them in hard times are terribly worried about losing their tax shelter for future years.

There’s a small rejigging of income tax brackets, leading to a small savings for most Canadians (most of which was already planned to account for inflation), arguably where the previous frittering of the surplus (yes, there was a surplus just a year ago) should have gone, rather than to cutting the GST, though I would have argued it should have all gone to paying the debt from the last recession. The problem with broad-based stimulus packages like this is that the dollars very quickly become diluted: $40 billion spread out amongst 30 million-some Canadians comes out to something like $1300 each. That’s not something I’d sneeze at… but it is easy enough to have that disappear in a family budget, especially after a summer of record high gas and food prices, or to vanish into savings*. To get the economy rolling again a big kick is needed to specific areas that will, hopefully, get those going and lead the way for the economy as a whole, rather than spreading a small amount of love around everywhere. Of course, this isn’t a video game and the recession monster’s weak point isn’t flashing neon orange telling us where to hit it. The banking and auto sectors might be good ones to try to prop up/nationalize — banks in particular are needed to supply credit to grease the wheels of the recovery. However the budget also contains a lot of measures targetting home ownership: renovation credits (which might be as much about getting contractors to issue receipts and file taxes), and changes to help get first-time homebuyers into the market with a modest increase to the HBP and a tax savings of up to $750 for a purchase. I don’t think trying to prop up the housing bubble here is going to help the economy. In fact, more money sunk into houses/mortgages by first-time buyers is less money out there circulating in the economy. These are also poor measures because they can’t even focus spending in one area in a focused way: there are at least 3 different ways of trying to stimulate housing rather than that one big kick.

I’m also a fan of the targetted big kick for infrastructure because then the country gets something it might need/want anyway at rock-bottom recession make-work prices. Take $40B, heck raise the GST back to 7% while at it and make it $60B or whatever, and build a shinkansen in Ontario, a few hospitals in BC, some nuclear plants in Alberta, some wind farms in Saskatchewan, carve a whole new riverbed and hydro project through Manitoba, create a shinkansen network in Ontario and Quebec, covered bridges for NB, some tidal energy projects for NS, and a teaching hospital for NFL, then have PEI build a 50-storey phallic fucking tower just because they can. You know, at least that way you get something to show for your stimulus money.

* – Savings are great things to have on an individual level. However, as a country as a whole we should be doing our saving during the boom years, and then tapping the savings during downturns to help stabilize everything — stimulus packages that just go straight to savings just make recessions worse. I’ve seen some recommendations that stimulus gift cards be sent out: something that you have to spend (though that wouldn’t necessarily stop people from then saving the equivalent amount somewhere else).

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