They called us twins, although we weren’t even brothers. I guess playing the same sports, both being about the same height and hair colour, and repeatedly serving detention together put us in a category together. We stayed friends long after we both moved away from the North Shore, but promised each other that after high school that we would ride our bicycles across Canada in the journey of a lifetime. We sort of drifted apart toward the end of high school, and although we still stay in touch maybe once a year, we haven’t spoken much about the bike ride for decades. To protect the guilty, I’ll call him Bill.
Since our trip kind of fizzled, Bill took a ride with his younger brother Phil to Portland in the summer of 1979. Bill carried the bulk of his younger brother’s cash with him, because his bike had a top notch lock on it, and the tube of his quick-release seat had a perfect spot for a roll of cash, a great hiding place in the event they were ever mugged on their long journey. This was at a time when bank machines were not widely available, and intra-bank computer systems were not a given. Credit cards were unheard of for young adults, and probably wouldn’t work in a foreign country. Thus, cash was essential for two young men on such a journey. Bill gave Phil whatever he asked for along the way, but acted as the family banker for the whole trip.
Big brothers have a way of being jerks, and Bill was no exception. He rationalized that it was family money, and he spent his younger brother’s stash quite freely, even feigning brotherly generosity whenever they hit a restaurant, a convenience store, or stopped for some sight-seeing along the way.
The whole time, Phil kept thinking what a great older brother he had. Always so generous!
When the truth eventually spilled that Bill had no bills of his own, but was having his fill of thrills with Phil’s bills, Phil went shrill on Bill. As you can imagine.
The March 2019 Federal Budget Preview – Phil’s Bills Fill the Tills.
We are fortunate to have the analysis of RBC Economics in pre-evaluating the expected federal Liberal pre-budget later this month. We borrow heavily from those predictions here today. In short, we expect the March 19 federal budget to reflect this government’s penchant for spending. After all, it had no trouble boosting spending by an average of 6 ½% annually while the political and economic winds were blowing favourably. With storm clouds appearing, in the form of weaker-than-expected domestic economic growth, we doubt the finance minister will change course.
Our view is upheld by the fact that the final month of the government’s fiscal year is typically a large deficit month. Over the last 10 years, the March deficit has averaged $7.3 billion, and the average over the last three (under the current finance minister) was $10 billion. The most recent run includes 3 of the 4 largest monthly federal deficits on record. With that history in mind, we anticipate the March madness to continue in the form of substantial spending announcements.
But any spending initiatives need to be considered against a weakening revenue backdrop. The economic slowdown we saw in the fourth quarter is likely to continue in the first quarter. As a result, growth forecasts for nominal GDP (a key driver of government revenues) are being reduced. We currently expect nominal GDP to rise by 2.1% this year compared to an assumed growth rate of 4.1% in the government’s Fall Economic Statement. The slower growth suggests the finance minister should exercise spending caution if he is to avoid a miss on next fiscal year’s $19.6 billion deficit forecast and a reversal in the downward trend in the debt-to-GDP ratio. To be sure, the government will get a break from lower-than-anticipated interest rates, but this won’t be enough to offset the impact of slower economic growth.
So with all that fiscal space, a slowing economy and a keen interest in spending, what can we expect from this government, especially in an election year? Potential budget measures that have been discussed include support for child care, a national pharmacare program, and attempts to address the skills/labour challenges that plague many Canadian businesses and workers. Each could have substantial costs associated with them. We’re betting that each of these initiatives will get a downpayment in the current budget, with promises of more to come in future years.
We would welcome a focus on skills, since it could address a current business challenge while at the same time creating better conditions for stronger economic growth in the period ahead. A stronger economy would go a long way in supporting many of the government’s income redistribution goals.
Much of the budget speculation has focused on housing-market support, and particularly on efforts to improve access to home ownership for millennials. We worry that this policy would lead to a rise in the number of highly indebted, higher-risk households in Canada.