Justin Trudeau’s Liberals Are Returning to the Miserable Status Quo

In spite of some concessions wrangled by the NDP, Canada’s new budget reveals Trudeau's Liberals are returning to free-market orthodoxy. The lessons of the pandemic have apparently taught the party nothing.

Justin Trudeau, Canada’s prime minister, speaks during an event announcing Budget 2022 investments in housing in Hamilton, Ontario, Canada, on Friday, April 8, 2022. (Galit Rodan / Bloomberg via Getty Images)

In Canada, the Liberal government has tabled its 2022 budget, the second by Finance Minister Chrystia Freeland. Presented as a responsible, prudent plan, the budget does little to stray from market orthodoxy, offering policies focused on a handful of priorities including dental care, housing, climate, and military spending.

In her address to the House of Commons, Freeland cited a job boom, a drop in unemployment, and real GDP growth as evidence that “Canada has come roaring back.” In a remark reminiscent of Bill Clinton’s 1996 State of the Union pronouncement that “the era of big government is over,” Freeland noted, “Our ability to spend is not infinite. The time for extraordinary COVID support is over.”

Declaring her party’s intention to return to business as usual, Freeland affirmed that “we will review and reduce government spending, because that is the responsible thing to do.” That means the Liberals are focused on a declining debt-to-GDP ratio and shrinking deficits, with an eye to paying down the debt. Understanding the budget as a faithful restoration of fiscal thrift provides a useful frame through which to unpack its details.

In Essence, a Conservative Plan

The budget contains a handful of progressive measures, including a signature policy for public dental care. The New Democratic Party, which has entered a supply-and-confidence arrangement with the government, fought for the program. It will do good for millions of Canadians despite its significant limitations, including a gradual phase-in for segments of the population, means-testing, and copays for those making over $70,000.

Even with dentalcare in the offing, the budget is fundamentally a conservative plan. It’s rooted in the market orthodoxy of fiscal responsibility and corporate handouts. It’s also committed to operating within the structural status quo of a market system struggling to meet major policy challenges across the country.

On housing, the budget promises to boost stock with a Rapid Housing Initiative and a Housing Accelerator Fund. It also promises to double the First-time Buyers’ Tax Credit as well as implement a tax-free First Home Savings Account — a regressive tax-deductible (“tax-free in, tax-free out”) vehicle that will disproportionately help wealthy buyers. In a populist, scapegoating gesture, the Liberals will “prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada for a period of two years.” Of course, domestic speculative capital will no doubt scoop up any opportunities lost to foreign real estate investors.

The budget fails to touch the financialization of housing in any meaningful way — even while it juices demand. It doesn’t include an end to tax exemption on the sale of one’s principal property or a plan to end speculation. It doesn’t support the decommodification of housing or the mass building of public housing. It does promise a “federal review of housing as an asset class, in order to better understand the role of large corporate players in the market and the impact on Canadian renters and homeowners.” In other words, the Liberals are committed to kicking the can down the road.

However, there will be money provided to fund co-op housing and build six thousand units. That’s welcome, but it’s not nearly enough to move the dial appreciably on nonmarket housing. Meanwhile, housing prices across the continue to soar to an average of nearly $800,000 —up 17 percent year-over-year in late 2021. The provision of six thousand units of co-op housing is thin gruel in a country where, in the last two decades, housing costs have risen by 375 percent.

Climate change remains an existential threat to humankind. The recent report from the Intergovernmental Panel on Climate Change found countries lagging on their climate commitments, with the globe on track to blow past the 1.5 degree of warming target, speeding along toward a devastating, destabilizing 3 degrees. The budget is peppered with climate initiatives of various promise, but it remains firmly rooted in a capitalist, production-consumption cycle of extraction and waste.

The Liberals have promised to extend incentives for zero-emissions vehicles and to feed cash into the private sector to secure the supply of critical minerals for, among other things, the batteries needed to manufacture these vehicles. The plan is rooted in maintaining an unsustainable car culture, bound up with a mining industry that will contribute to more climate change.

The budget also pours money into dubious carbon-capture and sequestration schemes — the missile-defense shield of climate technology. It’s worth noting that the budget was delivered the day after the government approved the Bay du Nord deepwater oil project, which is expected to yield roughly 300 million barrels of oil while in operation.

Status Quo Restoration

The 2022 budget is firmly a status quo budget with a handful of welcome, insufficient offerings that fail to sufficiently grow public spending. Writing for the Broadbent Institute, senior policy adviser Andrew Jackson points out:

Federal program spending will be just above 15 percent of GDP after the special pandemic programs have expired and recovery takes hold. That compares to about 14 percent in the last year of the [Stephen] Harper government. Federal revenues have increased by just 0.5 percent of GDP over the same period.

The Liberals are fond of using the debt-to-GDP ratio as a fiscal anchor to justify spending. That’s perfectly fine. But it follows that using social program spending as a percentage of GDP is an equally reasonable way of assessing spending — and, on that measure, the Liberals are little better than the Conservatives they replaced.

While social program spending is stagnant, military spending is up. The budget commits to $8 billion in new money for the armed forces. More military spending may be in the works, as the country trends toward the NATO benchmark of 2 percent of GDP. Currently, military spending sits at 1.4 percent of GDP, heading toward 1.5 percent.

Recent spending includes $19 billion for sixty-five new fighter jets. With Canada’s focus on Arctic and cyber operations, the dislocations caused by Russia’s invasion of Ukraine, and rising securitization talk, this is unlikely to be the last increase the armed forces see in the years to come.

Canada’s 2022 budget mobilizes familiar priority areas and familiar ways of navigating the policy challenges within them: the same mode of production, the same corporate handouts, the same modest social program spending. Deficit hawks may decry the bottom-line spending total — tens of billions in new money — but as a percentage of GDP, the budget plan is modest, its methods orthodox. Moreover, with a promise of restraint, prudence, and a focus on reining in the deficit and debt, the specter of retrenchment is never far off.

The budget is unlikely to solve any of the major policy challenges the country faces. Of course, few budgets can on their own. But this budget evinces no interest in putting the country on a course to upending the economic and social institutions that produce these challenges in the first place — challenges that were brought into sharp focus by COVID. The lessons of the pandemic have apparently had no effect on Liberal policy. The party has tabled a status-quo budget despite the persistence of problems that beg for something new.