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Alternative Federal Budget 2012 5 Their Statement Urged Countries to “Manage Fiscal Consolidation to Pro- Mote Rather Than Reduce Prospects for Growth and Employment

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Alternative Federal Budget 2012 5 Their Statement Urged Countries to “Manage Fiscal Consolidation to Pro- Mote Rather Than Reduce Prospects for Growth and Employment ISBN 978-1-77125-001-6 This report is available free of charge at www. policyalternatives.ca. Printed copies may be or- dered through the CCPA National Office for a $10 fee. Plea Se make a doNatIoN... Help us to continue to offer our publications free online. With your support we can continue to produce high quality research — and make sure it gets into the hands of citizens, journalists, policy makers and progres- sive organizations. Visit www.policyalternatives.ca or call 613-563-1341 for more information. The opinions and recommendations in this report, and any errors, are those of the authors, and do not necessarily reflect the views of the publishers or funders of this report. 5 Introduction 8 Macroeconomic and Fiscal Framework 23 Fair and Progressive Taxation 3 3 Securing Our Common Wealth 35 Aboriginal Peoples 41 Aboriginal Women 47 Cities and Communities 56 Communications 64 Culture and the Arts 71 Early Childhood Education and Care 82 Health Care 91 Housing 100 Immigration 108 Post-Secondary Education 114 Poverty Action and Income Inequality 123 Seniors and Retirement Security 131 Women’s Equality 139 Protecting our Climate, Nature, and Water 141 Environment 147 Water 157 Canada and the World 159 Defence and Security 167 Foreign Policy 173 The Changing Nature of Work and the Economy 175 Strengthening Public Services 185 Employment Insurance 189 Sector Development Policy 198 Acknowledgements Introduction The firsT majoriTy Harper Conservative government is about to bring down a watershed budget. The government has signaled it will be a fiscal austerity budget, claiming that cuts to public sector jobs, services, and social programs are necessary to pave the way for jobs and growth — the government’s alleged top priority. This budget will reveal in greater detail what Prime Minister Harper has called a plan for transformative change for a generation. In 17 years of producing the Alternative Federal Budget (AFB), never has the contrast been so stark. Never have the values, priorities and visions that underlie the afB and the choices that flow from them, been so at odds with those of a government in power. The logic of “expansionary austerity” is that a cuts-led deficit reduc- tion will restore business and consumer confidence to invest and spend, a pre-condition for growth and job creation. The trouble is, it doesn’t work. Its failure is clearly demonstrated in the recent experience of many Euro- pean countries — including the U.K., Spain, Italy and others — whose aus- terity programs have tipped the EU back into recession, fueled unemploy- ment, and increased their debt and deficit burdens. While Prime Minister Harper was at Davos signaling major cuts to Old Age Security in the forthcoming budget, the leaders of 11 international or- ganizations — including the International Monetary Fund, the World Bank and the World Trade Organization — issued a joint statement warning about the economic and social risks of austerity programs.1 A Budget for the Rest of Us: Alternative Federal Budget 2012 5 Their statement urged countries to “manage fiscal consolidation to pro- mote rather than reduce prospects for growth and employment. It should be applied in a socially responsible manner.” To combat rising inequality, it called for, “heightened consideration of more inclusive models of growth.” International Monetary Fund researchers, in an exhaustive study of gov- ernment austerity programs in 17 countries over the last 30 years, concluded that there was a clear tendency for austerity programs to weaken the econ- omy. In other words, hard times are the inescapable consequence of gov- ernment austerity.2 The imf has singled out Canada as a country with fiscal room — relative- ly low deficit and debt — to pursue expansionary policies. It appears that the Prime Minister is turning a blind eye to the evidence and a deaf ear to the advice of these world leaders. Despite government claims, the performance of the Canadian economy has been mediocre, and is becoming more so. The recovery, which was ex- pected to gather strength in 2011, has faltered. The economy has slowed in the final quarter of 2011. Official unemployment has shot back up to 7.6%, and 50,000 net full-time jobs have disappeared since September. Few of the hundreds of thousands of discouraged workers who left the workforce when jobs disappeared during the recession have returned.3 Most Canadians believe we are still in a recession, though it officially ended 18 months ago.4 This is hardly surprising in an environment where high unemployment and falling incomes are the new normal, where the gap between the rich and the rest continues to widen, where obscene levels of Ceo pay escalate, where corporations and governments demand wage roll- backs from their workers, and where the middle class continues to shrink even as they incur ever larger debt trying to stave off decline. Finance Minister Flaherty claims that austerity is fiscally prudent. But this government has drained the federal treasury of tens of billions of dollars per year in unnecessary tax cuts that disproportionately benefit the most af- fluent Canadians and wealthy corporations — all the while increasing spend- ing on a National Security Establishment that now costs $12 billion more a year than it did in 2001. These expenditures have diverted much-needed money from health care, education, pensions, and other public services on which Canadians rely. This year’s Alternative Federal Budget is A Budget for the Rest of Us. It is a prudent, economically responsible, and socially just plan, for now and for the future. 6 Canadian Centre for Policy Alternatives A Budget for the Rest of Us recognizes and confronts the two inconvenient truths of our time: the looming disaster of climate change, and the scourge of deep and widening inequality and poverty in Canada and around the world. A Budget for the Rest of Us addresses the structural weaknesses in our economy and puts in place the building blocks to assure our long-term shared prosperity. A Budget for the Rest of Us is a blueprint to help Canada avoid a lost dec- ade of high unemployment, depressed incomes, chronic insecurity, and shattered dreams for a generation of youth. A Budget for the Rest of Us decisively injects demand into the economy with a major public investment initiative focused on infrastructure, R&D, health, education, child care, public transit, housing, building retrofits, and renewable energy. The afB is a carefully targeted plan that will yield high returns, boost- ing productivity, stimulating private investment, and creating high value- added jobs in activities that improve living standards and reduce inequality. We offer it to Canadians as an alternative to the direction the government wants to take the country. We believe our approach responds to the deep- est concerns and aspirations of the vast majority of Canadians. If adopted, we believe it would begin to restore Canadians’ trust in the power of gov- ernment to improve their lives — a trust which has been profoundly shaken over the last three decades. Notes 1 Cited in Elliott, Larry: “imf warns of threat to global economies posed by austerity drives,” The Guardian, January 20, 2012. http://www.guardian.co.uk/business/2012/jan/20/austerity- warning-international-monetary-fund 2 Guajardo, J. et. al. (2011). “Expansionary Austerity: New International Evidence,” imf Work- ing Paper, International Monetary Fund. 3 Stanford, Jim. (2012). “Canada’s Incomplete, Mediocre Recovery,” Alternative Federal Budget Technical Paper. Ottawa: CCPa. 4 CTV News, Canadians still think country is in recession: poll, http://www.ctv.ca/CTVNews/ Canada/20110304/recession-poll-110304/ A Budget for the Rest of Us: Alternative Federal Budget 2012 7 Macroeconomic and Fiscal Framework Implementing a Structural Change The Year in Review Worldwide economic stagnation is now entering its fourth year. The po- tential for imminent bank collapse has been replaced by the potential for sovereign debt default by the same governments that bailed out the banks. The risk of Greek default is now so high that long-term interest rates have peaked over a prohibitive 20%. European banks are negotiating to take 70% or more “haircuts” on their Greek bonds by trading their current bonds for new ones worth half or less. In order to roll over debt, Greece is relying on the European Financial Stability Facility, a fund guaranteed by Germany and France in order to ob- tain sustainable long-term interest rates. The quid pro quo is that Greece must make massive cuts to government expenditures by slashing social programs and laying off public workers or drastically reducing their pay to balance the books. Germany and France are forcing Greece into an auster- ity recession. It is unclear how long Greeks will suffer soaring unemploy- ment and the prospect of years of recession. Even without a repeat of the 2008 financial crisis, coordinated auster- ity across the EU in an attempt to shrink large deficits will continue to drive down economic growth and, paradoxically, prolong the debt crisis. Given the lack of individual currencies and central banks in each of these coun- tries and the unwillingness of the European Central Bank to dramatically expand its balance sheet, or of the core EU countries to stimulate growth through income transfer programs to periphery countries, it is likely that the European debt crisis will drag on through 2012. 8 Canadian Centre for Policy Alternatives In Canada the order of the day for 2011 was high unemployment. Mid-year gains almost managed to bring unemployment below 7%. However, the gains were short-lived as full-time employment fell back and the unemployment rate by December 2011 remained unchanged at 7.6% compared to December 2010 at 7.6%.
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