Canada’s New Budget: A Paradigm Shift – Although a Small One

The following post is by staff writer Teacher Man, who writes at My University Money.

While the budget that was announced last week wasn’t exactly revolutionary (despite what political spinsters on either side might have you believe) I believe that it was a small step in an overall paradigm shift that is subtly taking shape in Canada. As a Manitoban I would describe our political culture as “West-light.” We like to think we are as individualistic and as independent as our tough-guy big brothers in Alberta, and Saskatchewan (even though we don’t like to admit the latter has grown bigger and stronger than us). In reality, this might describe our rural population to some degree, but the provincial government has been NDP for three terms now due to strong popularity in the mega-centre of the province (Winnipeg).

All this to say, that we are in the grey area that exists between the east and west poles in Canadian politics, and in many ways perfectly positioned to be an impartial observer in this whole democratic tug-of-war.

A Less Taxing Agenda

When the Conservatives entered government several years ago, their ability to enact the finer points of their agenda was hampered by their minority status. Nonetheless, they have successfully won the battle for the time being and have used their new-found mandate to push the role of the federal government toward their preferred position on the political spectrum. I would argue that as Conservative strongholds in Alberta and Saskatchewan continue to gain population, this shift is becoming more and more noticeable.

[Kevin] I’m not too crazy about the fascist bill C-30 — this is not smaller government.

As the manufacturing core of Ontario weakens, and Quebec realizes that their social services-heavy model is not sustainable with decreased federal government handouts, the Western idea of how Canada should be run is undeniably pulling the balance of power towards them. The relative economic prosperity in the West has only aided in this process. If you don’t believe me, take a drive through formerly economically-depressed small towns in Alberta and Saskatchewan, as well as parts of BC and Manitoba. These geographical shifts can’t help but have an influence on the national stage. The dominant ideologies that Western Canadians have historically espoused, and from which the current Conservative party derives its current budget, will become the driving force in Canadian politics for the foreseeable future.

[Kevin] This is a great point by Teacher Man. It also helps that the western provinces from B.C. to Manitoba have policies that are much friendlier to small business, and significantly lower debt as compared to the big two eastern provinces. At Financial God, I go into more detail of the numbers of Canada’s Economic Action Plan 2012.

Teach a Man To Fish

The idea that at the end of the day you are responsible for your own path in life and your own decisions is paramount in the west and this is what this most recent budget is hinting at as well (some might say it shouts it, while I would reply it gently whispers it). The government has decided that the OAS age will gradually increase, government programs need to be scaled down or eliminated altogether, EI regulations will be more stringent, and support for small businesses has been emphasized.

[Kevin] Support for small businesses is great, and the changes to EI will help encourage people to get back into the work force. We must also keep in mind the overall picture here: government spending will still continue to increase year over year; the government is NOT cutting overall spending. It’s just that revenues are projected to increase even faster, turning the deficit into a surplus.

Along with recent changes such as lower corporate tax rates and the cut to the GST rate, there is clearly a substantial level of support for a scaling back of the bigger government model that Canadians have formerly endorsed. I don’t think too many people will argue that this change has been fuelled by Western policies, people, and money. This represents a clear historical change from the former precedent that seen Quebec and urban Ontario’s interests dominate the political scene.

[Kevin] A rise in the TFSA exemption to $10,000 once the budget has been balanced will also be interesting.

What This Means For Your Personal Finances

If the current government is allowed to play out their vision of Canada (and I would argue that it appears they will) it will ultimately mean that each of us will have to take on more of a responsibility to plan our own financial lives. If you’ve detected a hint of bias, that’s probably because there is one. I can’t deny that I am partial to the idea that people should have to better educate themselves and plan for their own future as opposed to having others do it for them. The OAS shift will be gradual and will exempt the almighty Boomers (yes, you caught a whiff of derisiveness there). It will not affect CPP payments, and is easily able to be planned for if you have the will and foresight to be able to do so.

[Kevin] Also, keep in mind that people making nearly six figures in income are still eligible for OAS welfare! I wonder if it wouldn’t have made more sense to lower the income brackets. It’s hard to argue that someone making $80,000 needs social assistance from the government.

The EI changes will encourage labour mobility, and this is a reality we must face in a Canadian labour landscape that is rapidly changing. The cuts to taxes mean that we bear the responsibility of using that money productively, and not digging ourselves into bigger financial pits before asking the government to bail us out (the Canadian way?). Planning and working towards your own financial independence is a positive thing, and any government should provide incentives for this instead of disincentives and reliance on inefficient government decision-makers. This is the reality that we are slowly, but definitely moving towards. It is a pretty good deal when you see where other paths have lead our developed world brethren around the world (*cough cough* Europe).

[Kevin] Based on overall spending and heavy regulations, I would say that heavy bailouts and subsidies are the American way, not the Canadian way. Canada, today, has more economic freedom than our friends to the south, and this is a big reason why we have done comparatively better in this crisis. 

The Center Is Still the Centre

With a new controlling constituency comes a new paradigm; however, those of you who believe that this slight tilt back to the right will turn into an extreme slide I wouldn’t worry too much. We do still live in Canada, and no matter how well the oil sands and the vaunted “Calgary School” of politicians do, I highly doubt we will ever present a red and white mirror image of our neighbours to the south.

[Kevin] I have no personal interest in moving the political spectrum toward the “right”. Economic and personal freedom are basic human values which we all deserve to enjoy, and belongs on the spectrum of “voluntary social cooperation”. It has nothing to do with the left-right spectrum, regardless of how the media likes to paint things. Remember that the next time someone accuses you of being right-wing. 🙂

For now, my advice would be to try and see the bright side to encouraging people to rely on their own merits, and to help each other on a personal level as opposed to waiting for the inefficient bureaucratic machine of big government to come to the rescue. Take pride in the fact that Canada is enjoying unparalleled status on the international stage, and that our global competitiveness hasn’t been this strong in decades.

[Kevin] Agreed! Thanks for the great staff post, Teacher Man!