Focus of fall economic statement was where Morneau wanted it: on the middle class

Increases to the Canada Child Benefit and the Working Income Tax Benefit announced Tuesday by Finance Minister Bill Morneau are the proverbial shiny objects intended to get Canadians to focus on some good news.

Liberal government has shown 'no willingness' to curb spending, critic says

Finance Minister Bill Morneau talks to reporters after he delivered his fall economic update on Tuesday. (Fred Chartrand/Canadian Press)

April may be the cruellest month to a poet, but October has been anything but kind to the Liberal government — particularly Finance Minister Bill Morneau.

Whether it was allegations of conflict of interest over his continued multimillion-dollar stake in the family business, or his heavily panned efforts at small business tax reform, the Liberals suddenly found themselves fending off suggestions that they weren't at all the party of the middle class.

That's where Tuesday's fall economic update fits in. Announcing that the Canada Child Benefit will be indexed to inflation next July — a full two years ahead of schedule — and the decision to increase the Working Income Tax Benefit are the proverbial shiny objects intended to get Canadians to focus on some good news.

"This is about having trust in Canadians," Morneau told reporters following the release of the 74-page document called Progress for the Middle Class. "Investing in Canadians was the right thing to do."

'Take the punch bowl away'

Just in case you missed all the good news, let's sum it up here.

Economic growth: up! Employment: up! Wages: up! Revenues: up!

At any other time, these strong economic indicators would be the most prominent feature in news coverage. 

But this last period hasn't been just business as usual for the Liberals. The focus has been on how Morneau handled his personal finances, not on his handling of the country's finances.

This update, at the very least, gave Morneau a chance to change the topic. The Canadian economy is in good shape. It is outperforming other G7 countries. Even with the new spending, which adds up to about $15 billion over the next five years, the ratio of government debt to the size of the economy will continue to decline to levels not seen in this country since 1977.

Still, critics insist that the decision to spend even more now, rather than making a substantial payment on the deficit, is more of a prescription for what ails the government than what's good for the economy.

Spending continues to rise. Interest rates are going up. And the country's accumulated debt, well, it's going up, too — to the tune of about $100 billion over the next seven years.

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"This government has shown no willingness to put a lid on program spending," said former parliamentary budget officer Kevin Page, who now heads the Institute  of Fiscal Studies and Democracy at the University of Ottawa.

"The economy is growing. Most economists would say this is when we take the punch bowl away," he said.

But the Liberals are betting that those middle-class voters will be happy about having more money in their own pockets. That they're more likely to see that extra money making a real difference in their everyday lives than they are to worry about the size of the federal deficit or, if truth be told, that the economy is running on bust.

No plan to return to balanced budgets

At the Liberal cabinet retreat last month, Prime Minister Justin Trudeau told reporters that the Liberals didn't get elected two years ago by going door to door promising to improve Canada's macroeconomic indicators. It was a good line, and elicited chuckles from his assembled cabinet ministers.

Morneau, as is his practice, refers to all these things as "investing" in Canadians. Investments that will have a positive impact even if, for example, the current round of NAFTA talks fails. Even though consumer spending has already led to historically high levels of household debt.

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But it also strikes at the heart of Liberal promises in 2015 to increase taxes on the wealthiest one per cent of Canadians in order to lower taxes on the rest, and to replace the Conservatives' child benefit given to everyone with a tax-free version targeted at those the Liberals say really need it.

This update is a continuation of the Liberal efforts to strip away the voting base of the New Democrats. It represents a continued abandonment of fiscal hawks who remember that former finance minister Paul Martin took Canada from an economic basket case to a string of budget surpluses by reducing spending.

There's no plan to return to balanced budgets. No sign that it's even a concern. But the Canadian economy shows no sign of weakening. Revenues will continue to flow in.

Still, the focus was where Morneau wanted it: on the Liberals' plan, on their commitments to the middle class. Even the critics had to talk about that for a change. It was a decent day for the finance minister, and we're still in October.

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Chris Hall

Former National Affairs Editor

Now retired, Chris Hall was the CBC's national affairs editor and host of The House on CBC Radio, based in the Parliamentary Bureau in Ottawa. He began his reporting career with the Ottawa Citizen before moving to CBC Radio in 1992, where he worked as a national radio reporter in Toronto, Halifax and St. John's. He returned to Ottawa and the Hill in 1998.