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The Activist Budget—There Is No Problem This Government Cannot Fix

Jackson Middleton • Feb 27, 2018

Patting himself on the back, the Finance Minister opened his speech by reminding us that “a little over two years ago…Canadians had the opportunity to stay the course.

They could stick with a Government that favoured cuts and a set of failed policies that produced stubborn unemployment and the worst decade of economic growth since the depths of the Great Depression.” This, of course, was Stephen Harper’s Conservative Government. Never mind that the global financial crisis caused the recession, not the “failed policies” of the previous government. Throughout the budget documents, the message is that austerity was “needless” or “excessive.” Instead, Canadians chose, “a more confident and more ambitious approach…that gave Canadians the tools they needed to succeed. Starting with raising taxes on the wealthiest, so we could lower them for the middle class.”

The Liberals have forgotten their promise to run deficits no larger than $10 billion and to balance the budget by 2019. Instead, they now see sound fiscal management as a declining debt-to-GDP ratio—never mind that double-digit deficits remain as far as the eye can see—to a stunning $12.3 billion deficit at the end of the forecast horizon in fiscal year (FY) 2022-23.


The deficit figures have indeed improved—down more than $2.0 billion in FYs 2017 and 2018–thanks to the stronger-than-expected economy and rapidly reduced unemployment last year. But, initiatives in today’s federal budget add $6.3 billion to the current year’s (ending March 31, 2018 ) budget deficit, $5.4 billion to next year’s federal red ink and an additional $2.0-to-$3.0 billion annually over the forecast horizon ending in FY 2022-23 (see Table below).

Fortunately, Canada has by far the lowest debt-to-GDP ratios in the G7, reflective of the austerity programs of the past, beginning in the mid-1990s and continuing until the financial crisis in 2008-09 when counter-cyclical global fiscal policy was essential to assure financial stability and rebounding economic activity by late-2009. While the U.S. and much of the rest of the developed world suffered the longest and deepest recession since the Great Depression, Canada’s was the shortest and mildest recession in the postwar period—contrary to the impression left by the Finance Minister in his opening remarks.

Thanks to this backdrop, the debt-to-GDP ratio in Canada will continue to decline despite continued fiscal stimulus. The ratio is forecast to gradually edge downward from 30.4% this year to 28.4% in 2022-23, assuming the economy continues to grow. Clearly, all bets are off if we hit a pothole, such as the end of NAFTA or a recurrence of plunging oil prices.

Budget 2018 proposes to:

• Put more money in the pockets of those who need it the most, by improving access to the Canada Child Benefit and introducing the Canada Workers Benefit, a stronger and more accessible benefit that will replace the Working Income Tax Benefit.

• Make significant progress towards equality of opportunity, by taking leadership to address the gender wage gap, supporting equal parenting, tackling gender-based violence and sexual harassment, and introducing a new entrepreneurship strategy for women.

• Support the next generation of researchers, by providing historic funding to increase opportunities for young researchers and provide them the equipment they need, while strengthening support for entrepreneurs to innovate, scale up and reach global markets.

• Advance reconciliation with Indigenous Peoples, by helping to close the gap between the quality of life of Indigenous and non-Indigenous people, providing greater support to keep First Nations children safe and supported within their communities, accelerating progress on clean drinking water, housing, and employment, and supporting recognition of rights and self determination.

• Protect the environment for future generations, by making historic investments to preserve our natural heritage, ensuring a price is put on carbon pollution across Canada, and extending support for clean energy projects.

• Uphold Canada’s shared values and support the health and wellness of Canadians, by partnering with provinces and territories to address the opioid crisis, taking action to advance national pharmacare, and bolstering support for Canada’s official languages.

This list summarizes 367 pages of more than 100 relatively small government initiatives impacting everything from Workers Benefits payments to low-income families, improving access to the Canada Child Benefit to supporting opportunities for women, pay equity for federal workers, strengthening trade, improving worker skills, and cracking down on tax evasion—all of this among the roughly 25 government actions described in Chapter 1 under the heading of Growth. The details of changes in the rules regarding the holding of passive investments inside private corporations as well as closing tax loopholes fall under this Growth rubric.

Chapter 2, called Progress, includes more than 35 initiatives under the headings of Investing in Canadian scientists and researchers, Stronger and more collaborative Federal science, and Innovation and Skills Plan—a more client-focussed Federal partner for business.

Chapter 3, Reconciliation, largely deals with Indigenous Peoples, including roughly 20 actions.

And finally, Chapter 4, called Advancement, covers the environment under Canada’s Natural Legacy, Canada and the World, Upholding Shared Values, and Security and Access to Justice. I lost count here at over 40 initiatives.

And, that’s not all! A bonus section called Equality, goes into detail regarding Canada’s commitment to gender budgeting, which includes $6.7 million over five years for “Statistics Canada to create a new Centre for Gender, Diversity and Inclusion Statistics, a Centre that will act as a Gender Budget Accounting data hub to support future, evidenced-based policy development and decision-making”.

I kid you not. At my rough count, I have been to 34 budget lock-ups, but I can’t remember ever seeing anything like this for sheer magnitude of the number of relatively tiny initiatives, nor can I ever remember leaving a lock-up with such a screaming headache.


This article was written by DLC Chief Economist Dr. Sherry Cooper and was originally sent out as part of her newsletter correspondence.

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RRSP As A Downpayment

By DLC Canadian Mortgage Experts • 28 Dec, 2022
Did you know there’s a program that allows you to use your RRSP to help come up with your downpayment to buy a home? It’s called the Home Buyer’s Plan (or HBP for short), and it’s made possible by the government of Canada. While the program is pretty straightforward, there are a few things you need to know. Your first home (with some exceptions) To qualify, you need to be buying your first home. However, when you look into the fine print, you find that technically, you must not have owned a home in the last four years or have lived in a house that your spouse owned in the previous four years. Another exception is for those with a disability or those helping someone with a disability. In this case, you can withdraw from an RRSP for a home purchase at any time. You have to pay back the RRSP You have 15 years to pay back the RRSP, and you start the second year after the withdrawal. While you won’t pay any tax on this particular withdrawal, it does come with some conditions. You’ll have to pay back the total amount you withdrew over 15 years. The CRA will send you an HBP Statement of Account every year to advise how much you owe the RRSP that year. Your repayments will not count as contributions as you’ve already received the tax break from those funds. Access to funds The funds you withdraw from the RRSP must have been there for at least 90 days. You can still technically withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. You can access up to $35,000 individually or $70,00 per couple through the HBP. Please connect anytime if you’d like to know more about the HBP and how it could work for you as you plan your downpayment. It would be a pleasure to work with you.

Is There A Difference Between A Deposit And Downpayment

By DLC Canadian Mortgage Experts • 21 Dec, 2022
If you’re new to the home buying process, it’s easy to get confused by some of the terms used. The purpose of this article is to clear up any confusion between the deposit and downpayment. What is a deposit? The deposit is the money included with a purchase contract as a sign of good faith when you offer to purchase a property. It’s the “consideration” that helps make up the contract and binds you to the agreement. Typically, you include a certified cheque or a bank draft that your real estate brokerage holds while negotiations are finalized when you offer to purchase a property. If your offer is accepted, your deposit is held in your Realtor’s trust account. If your offer is accepted and you commit to buying the property, your deposit is transferred to the lawyer’s trust account and included in your downpayment. If you aren’t able to reach an agreement, the deposit is refunded to you. However, if you commit to buying the property and don’t complete the transaction, your deposit could be forfeit to the seller. Your deposit goes ahead of the downpayment but makes up part of the downpayment. The amount you put forward as a deposit when negotiating the terms of a purchase contract is arbitrary, meaning there is no predefined or standard amount. Instead, it’s best to discuss this with your real estate professional as your deposit can be a negotiating factor in and of itself. A larger deposit may give you a better chance of having your offer accepted in a competitive situation. It also puts you on the hook for more if something changes down the line and you cannot complete the purchase. What is a downpayment? Your downpayment refers to the initial payment you make when buying a property through mortgage financing. In Canada, the minimum downpayment amount is 5%, as lenders can only lend up to 95% of the property’s value. Securing mortgage financing with anything less than 20% down is only made possible through mortgage default insurance. You can source your downpayment from your resources, the sale of a property, an RRSP, a gift from a family member, or borrowed funds. Example scenario Let’s say that you are looking to purchase a property worth $400k. You’re planning on making a downpayment of 10% or $40k. When you make the initial offer to buy the property, you put forward $10k as a deposit your real estate brokerage holds in their trust account. If everything checks out with the home inspection and you’re satisfied with financing, you can remove all conditions. Your $10k deposit is transferred to the lawyer’s trust account, where will add the remaining $30k for the downpayment. With your $40k downpayment made, once you sign the mortgage documents and cover the legal and closing costs, the lender will forward the remaining 90% in the form of a mortgage registered to your title, and you have officially purchased the property! If you have any questions about the difference between the deposit and the downpayment or any other mortgage terms, please connect anytime. It would be a pleasure to work with you.
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