Single budget can’t — or shouldn’t — deliver promised ’generational change’

The world, it seems, is disappointed in Prime Minister Mark Carney’s first budget, which promised “generational” change but delivered what appears to be something entirely more modest.

What does Carney’s first budget do, and not do?

It does not abandon efforts to combat climate change, but does not really advance them. It delivers a dose of austerity, particularly when it comes to the size and scope of government, but does not ruthlessly reduce the federal civil service or spending. It ramps up spending on housing, infrastructure and defence, but without a credible plan to eliminate the deficit. It provides incentives to the private sector to invest more of its money in Canada, but in a way that may not prove to be that enticing.

Put it all together and Carney is currently being hoisted on his own hyperbole.

Prior to the tabling of this budget, Carney warned of sacrifices and pledged generational change, suggesting this spending plan would lead to a seismic, foundational shift. Before we fully decide whether he failed, perhaps it’s time we talk about what meaningful, long-term change in government actually looks like.

Lasting or generational transformation is difficult to deliver because it needs to be cultivated over a very long time. Government could drastically reduce spending and cut tens of thousands of jobs in one year, but the impact on services and on the economy would be significant and not necessarily positive in net terms. And change like this is rarely lasting; administrations that cut quickly rarely re-invent government, they just shrink it.

What happens if you change too much, too soon? The best example is the 1995 federal budget tabled by prime minister Jean Chretien and finance minister Paul Martin.

Chretien and Martin delivered fast, deep and profound cuts to government. That budget, and those that followed in 1996 and 1997, helped erase a crushing federal deficit and set the stage for years of balanced budgets and tens of billions of dollars in tax cuts.

Chretien and Martin slashed the federal bureaucracy and departmental spending by 20 per cent. The budget also cut funding across a broad array of important, if non-core programs, including support for Indigenous communities, scientific research and development, housing and infrastructure, climate change mitigation and disaster relief.

Most importantly, however, Chretien and Martin brought down the cleaver on supposedly untouchable programs, including Employment Insurance and transfer payments to the provinces for health care, social programs and post-secondary education. The cuts stretched into the tens of billions of dollars.

Yes, the budget dramatically reduced spending, but the elimination of the deficit had as much, if not more, to do with the fact it coincided with a period of robust economic growth and — combined with a red-hot U.S. economy and a very low Canadian dollar — record increases in government revenues. The federal deficit was erased two years ahead of schedule, and future surpluses were used quickly to reduce taxes.

Although conservative think tanks and business lobbyists have celebrated the 1995 budget as the “Maple Leaf Miracle, it was not the unmitigated success that the private-sector claims it to be.

Health care in Canada was badly damaged by the cutbacks. In fact, many of the problems we see today — wait lists for surgeries and diagnostic tests — can be traced back to the decision to cut transfer payments and the subsequent decisions by provinces to cut their own health-care expenditures and slow the training of doctors and nurses.

If you’re wondering how a relatively wealthy nation such as Canada could have such a dire shortage of health-care professionals, or be suffering under the crippling effects of a housing shortage, you might want to at least consider the “generational” impact of the 1995 federal budget.

Can Carney’s slower and steadier approach deliver lasting change? It’s impossible to say, given that he will continue to govern on the razor’s edge of a minority parliament and he must carry the burden of U.S. tariffs that are constraining economic growth.

If there isn’t an election in the next year, then we’ll get to see Carney’s plan in action. There are a lot of metrics you could look for to judge the relative success or failure of the budget — federal government program spending, for example — but the one that might be the most important is private-sector investment.

The Carney government wants to unearth $1 trillion in private investment to help Canada build capacity to feed new trade routes that do not go through the United States. And you would think that businesses hurt by U.S. President Donald Trump’s tariffs would be keen to do that.

Unfortunately, there are concerns the enhanced tax deductions around private investments in priority sectors such as manufacturing and clean energy are not nearly attractive enough to draw large amounts of private money. And, as the Canadian Centre for Policy Alternatives pointed out in a pre-budget analysis, Canadian businesses have never rallied to Ottawa’s call for more domestic investment, even with robust credits and deductions.

Carney’s budget may turn out to be the flop that a lot of commentators think it is. However, it may have to be judged by how much change it delivers over a period of years, rather than the next 12 months.

dan.lett@winnipegfreepress.com