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Budget Briefing 2019

More Debt
• Justin Trudeau promised that the budget would be balanced this year. Instead, the deficit will hit $19.8 billion.
• Justin Trudeau’s “Distraction” Budget 2019 spends an extra $41.3 billion over five years.
• Canada’s debt will soar to over $705 billion this year.
o In his first three years in power, Justin Trudeau added $60 billion to the national debt.
• According to Finance, the budget will not return to balance until 2040, by then racking up an additional $271 billion of debt.
o This year, Canada’s net debt reached an all-time high of $705 billion or $50,166 per Canadian family.
More Spending
• There is $41.3B over five years in new spending in today’s budget announcements alone.
• The Trudeau Government has increased spending by 20% from $270B to $323B in its first three years in power, and there is no evidence that it created any growth in the Canadian economy.
o Just 2% of additional spending over the five years to 2020 is on genuine efficiency-enhancing infrastructure that would increase productivity.
Fiscal Outlook
• The deficit for 2018/19 is slightly lower than expected, at $14.9 billion due to higher tax revenue.
• When we look at the coming year, the deficit in 2019/20 could be worse than expected. Budget 2019 assumes Canada GDP growth of 1.8% in 2019. Many private sector forecasters expect growth of 1% to 1.5% because of weakness in consumer spending and ;
• Furthermore, the Liberals have non-announced budgetary measures of $9.5 billion in the 2018 Fall
Economic Statement.
o They set aside almost $10 billion in the budget and didn’t tell Parliament what it is for.
o This is their campaign war chest.
Key Announcements of Budget
For your awareness, this section outlines some of the key budget announcements. We will examine the details before announcing our position, and we know that it’s impossible to take seriously any election-year promise from Justin Trudeau. For our messaging, please see the Budget talking points.
1. The Canada Training Benefit
o Cost $1.7 billion over 5 years.
o All Canadian workers aged 25-64 will accumulate $250 per year up to a lifetime limit of $5,000
o Canadians can spend their balance against up to half the cost of training fees at colleges, universities and other institutions.
o It is difficult to imagine what Canadians will do with the extra $250 per year that will make much difference.
o Justin Trudeau is massively increasing taxes, then giving Canadians back $250.
o The UK tried a similar program but cancelled it because money was wasted.
2. New program to help students study abroad
o $147.9 million over five years for international work and study opportunities.
o $314.8 million over 5 years for volunteer service programs with Canada Service Corps.
3. Increase to First-Time Homebuyers Plan
o Increased from $25,000 to $35,000.
o The money still has to be paid back into RRSPs.
4. Introduced CMHC First-time Homebuyer Incentives
o Under the new shared-equity mortgage, CMHC will provide matching funding of 5% for the downpayment on an existing home or 10% of the downpayment on a new home.
o It would be repaid to CMHC when the home is sold.
o However, Justin Trudeau’s tax hikes make it so much harder to save the downpayment.
5. Subsidies for Electric Vehicles
o $5,000 federal purchase subsidy for vehicles costing less than $45,000.
o Businesses will be able to write-off 100% of a zero-emissions vehicle in year 1 (up to $55,000 per vehicle)
o Studies show that subsidizing electric vehicles are the most costly, least efficient way to reduce carbon emissions
6. Seniors
o Increased clawback threshold of the Guaranteed Income Supplement
o The maximum Guaranteed Income Supplement payment will be increased by $947 per year for single seniors.
7. Federation of Canadian Municipalities
o $1 billion for energy efficiency in 2018-19
o This is new money that would have to be disbursed to FCM by March 31, 2019 (only one week away) in order to be allocated to 2018-2019.
8. Funding for Municipalities
o A one-time transfer of $2.2 billion in 2018-2019 (just one week away) to address “short-term priorities in municipalities and First Nation communities”
9. Pharmacare
o $35 million over 4 years for the Canadian drug agency, which is presented as the first step towards national pharmacare.
o $1 billion for Canadians with rare diseases but nothing until 2022-23
10. Compensation for Supply-managed Sectors
o The budget “proposes” making available “up to” $2.4 billion in compensation to affected supply managed sectors for CETA and CPTPP (no mention of USMCA). However, the money is not actually booked as an expenditure in the budget, so is more of a placeholder or statement of intention. The Finance official said that they did not have “specifics” at this time.
11. Indigenous communities
o $1.4 billion over 7 years to forgive all outstanding claim negotiation loans and to reimburse indigenous groups that have repaid those loans.
• Canada’s debt will soar to over $705 billion this year.
o According to PBO, Justin Trudeau will spend an additional $74B over the next five years.
o This will cost Canadians even more money down the road because Justin Trudeau’s deficits today are his tax increases after the election.
o The only way he can pay for his spending is to raise your taxes. You will pay for Justin Trudeau’s mistakes.
• Justin Trudeau is failing regular Canadians.
o Trudeau has been very fortunate, inheriting budgetary surpluses, a healthy economy at the peak of the business cycle and a booming real estate sector. He has blown it.
o He has added $60 billion to the deficit during his first three years in power and has nothing to show for it.
o All that spending did nothing to grow the economy. PBO estimates infrastructure spending contributed barely 0.1% to GDP growth, not the 0.5% to 1% the government promised.
o He has raised taxes on 81% of middle income Canadians (the average income tax increase for these families is $840) and he is raising the cost-of-living for everyone.
• The latest data show Canada’s economy slowed to a halt.
o GDP grew by just 0.1% in Q4 (an annualized rate of 0.4%) the worst quarterly performance in two and a half years, down from annualized 2% in Q3.
o Consumption spending grew just 0.2%, the slowest in almost four years.
o Housing fell by an annualized 14.7%, the biggest drop since 2009.
o Business investment fell an annualized 10.9% -- the third straight quarterly decline and the second consecutive drop of more than 10 per cent.
o GDP growth would have been negative if not for a huge increase in inventories as companies stockpiled goods. Inventories were the largest contributor to growth in Q4.
• Justin Trudeau’s reckless spending has left us more vulnerable, because when a recession hits or the crisis comes, the cupboard will be bare.
o Back in 2017, with the economy growing at 3%, a responsible government would have paid down debt so that we have more fiscal room in case there is a downturn.
o When a recession hits, deficits soar as the economy's automatic stabilizers kick in. Government revenues fall because people are earning less and pay less taxes, while spending surges on Employment Insurance and other social programs.
o The Finance Department estimates that a 1% reduction in real GDP growth for one year will lower the budgetary balance by $5 billion.
o So if you start with a $19 billion deficit and Canada goes into a significant recession like what we saw in 2009, then the deficit can easily grow to $35 or $40 billion. That is before the government has spent a penny to stimulate the economy and get us out of recession.
o In the lead-up to the global recession, from 2006 to 2008, the Conservative government paid down $37 billion in debt. This gave Canada more financial resources to navigate the storm. Canada came out of the crisis faster and with stronger growth than any other country in the G-7.
Rising Cost of Living – Many Canadians are Struggling
• The Bank of Canada has raised interest rates 5 times since the summer of 2017. The average Canadian household is spending an additional $1715 annually on interest payments annually compared to pre-July 2017.
• 48% of Canadians are within $200 of not being able to pay their bills and debt obligations. 10% of Canadians are within $100.
• 33% have no money left at the end of the month and are unable to cover their payments. They are falling further into debt.
• 44% of Canadians say it would be difficult to meet their obligations if their pay was delayed by one week.
• 40% of Canadians say they feel somewhat overwhelmed by their debt.
• Canadians’ biggest economic concern is unforeseen expenses. With so little wiggle room, any kind of unanticipated hardship, such as a car repair, could send an already struggling family into financial distress. Justin Trudeau is making it worse with higher taxes.
12. Since the Liberals came to power, 81% of middle-income Canadians are seeing higher taxes.
13. The average income tax increase for middle income families is $840.
o Higher Canada Pension Plan premiums – up to $2,200 per household
o National carbon tax – up to $1,000 per household
o Cancelled Family Tax Cut – up to $2,000 per household
o Cancelled Arts and Fitness tax credits – up to $225 per child
o Cancelled Education and Textbook tax credits – up to $560 per student
o Higher Employment Insurance premiums – up to $85 per worker

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