The high political cost of budgeting for Canada's long-term economic future: Don Pittis

Imagine if young Indigenous peoplein Saskatchewan werehighly educated intechnology, mathand sciences and had all the literacy and interpersonal skills Canadian employers were desperate to find.

The notion of creating such a future is by no means crazy.

But as we examine the reaction to this week's federal budget, the thought experimentoffers a useful example of the trade-off between the instant stimulus of short-term investments such as tax cuts and the long-term investments that will transform Canada's more distant future.

Well-meaning half measures

Liberal Finance Minister Bill Morneau's half measuresto make some ofthose long-term investments remindus how difficult it is for even well-meaning governments to bankroll essential projects that won't pay off until the current political actors have left the stage.

Training firefighters in the forested part of the Northwest Territories, I worked with smart young Indigenous people who were at leastas quick to catch on as anyone else.

It may have been reverse racism, but during my time farther north in the High Arctic, Inuitpeoplehad a reputation for being mechanical whizzes.

It seems pretty obvious that investing in that potential and helping ayoung and growing population develop into the engine of a world-beating economy would clearly be an advantage for all Canadians.

According to Statistics Canada calculations, within 18 years Aboriginal peoplewill account for 20 per cent of the population of Saskatchewan and Manitoba. In the NWT and Nunavut the numbers are much higher.

The most recent census figure describe a population that is young and vigorous. While other native-bornCanadiansare moving in the direction of the South Korean birth strike,Canada's Indigenous birth rate remains healthy.

"Since2006, the Aboriginal population has grown by42.5per cent more than four times the growth rate of the non-Aboriginal population over the same period," says a Statistics Canada analysis released in October.

Swedish model

But as withso many other strategies to boostCanada's long-term future, developing thepotential of the country's Indigenouspeople is no quick fix for the Canadian economy. As essential as it may be for improving lives and making us all richer, helping to cultivate the advantages of Indigenous youth is a project of decades and maybe generations.

And despite Morneau'splan being a nod in the right direction, it is easy to find critics who insist the latest round of spending on improving the lives of Indigenous peopleis just not enough.

"Funding shouldn't be staggered over fiscal years," respondedAssembly of Manitoba Chiefs Grand Chief Arlen Dumasfollowing the budget."We require a substantial investment to flow immediately."

The same applies to other federal initiatives to grow the economy for the long term. The government'sgender strategy is supposed to take us toward a Swedish modelthat willreleasehigh-quality female workersinto the future labour force while allowing women the freedom to have babies without destroying their careers.

But of course the plan falls short of the most obviousbut more expensiveSwedish solution, subsidized universal child care. Other federal long-term investments faced similar criticisms from those who hadlobbied for them.

Fiscal conservativevoices saw things differently. The Canadian Taxpayers Federation offeredgrudging approval that the budget largely held the line on spending.

"The bad news is the government has once again failed to tackle the structural deficits it created in the 2016 budget and which will add $80 billion in new federal debt by 2022," said Federation director Aaron Wudrick.

No 'sugar rush' for Canada

Others, of course, have complained that the lack of tax cuts in the budget will put Canadian business at a disadvantageto the U.S., where the Trump administration has pushed through corporate tax cuts while promising new infrastructure spending that will charge up the economy in the short term.

That short-term boost, recently described as a "sugar rush" byBank of America economists, has not yet proven that it will be of long-term benefit to the economy.

There are things that short-term stimulus, like the stimulus of interest rate cuts before them, just can't do.

According to U.S. analyst Rana Foroohar, writing in the Financial Times, by leaving the Federal Reserve to stimulate the economy with low interest rates and the insertion of new money through quantitative easing, Washington created "financialized" growth but failed to invest in many of the processes, such as education, that would create real long-term growth.

"The central bank cannot create real, underlying economicgrowth," reasoned Foroohar. "It can only raise asset prices in the hope that people feel richer and spend more."

Of course the classic criticism of the government'sinvolvement in the economy is that governments are bad at picking winning strategies.

However, as various sources, including the Bloomberg Billionaires Index, remind us,much of that "financialized" growth ended up in the pockets of the world's wealthiest. The richest 500 people became $1 trillionUSricher in 2017 alone, and three people are richer that the poorest 50 per cent.

And while it may or maynot contribute to Canada's long-term wealth,we have clear evidence that cutting taxes can also lead to long-term expenses.

It is a useful reminder that the Phoenix pay system fiasco, for which in this budget the government added more millions to a rescue fund that nowtotals nearly$1 billion, was created by the previous government eight years ago as a way of slashing the civil service and saving less than $100 milliona year.

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