By Yaroslav Baran

April 18, 2024

This year’s federal budget was presented against a challenging background. The Liberals face a public opinion crisis, consistently lagging their Conservative challengers by 12-20 percent in opinion polls – a “new normal” for almost a year. The economy is just marginally in positive growth. Higher interest rates have plateaued. Inflation is coming down, but not sufficiently to rewind the cost-of-living crisis that has plagued households since the pandemic. Debt is at an all-time high, creating pressure for lower spending, all while NATO allies rightly demand we put on our big-kid pants with regard to our collective defence commitments.

Perhaps the greatest shadow behind the budget’s tabling has been an ongoing intergenerational anxiety by Millennials and “GenZ” Canadians that they will not be as well off as their parents. Young voters are abandoning the Liberals in droves, despairing at the elusive dream of ever owning their own home.

Make no mistake, “federal budgets” are not budgets. They are omnibus policy manifestos, filling the void left by our system abandoning the old tradition of a new throne speech each year, refreshing the government’s agenda. This is now the job of the so-called “budget”, while the actual budget work is accomplished through separate avenues: Ways and Means, budget implementation bills (called “BIAs” in the ‘hood), and the Supply process with its esoteric spending estimates and thrice-annual appropriations legislation.

So, what is in this new policy manifesto? The government clearly (and wisely) sought to move the needle on the biggest burning issue: housing. Hence the flood of spending and proliferation of new initiatives: from rental transparency to extra-constitutional forced zoning changes for municipalities, to an audit of surplus federal lands for development, to bags of cold, hard cash to build homes. The government also maximized the housing focus by dribbling out a separate home-related initiative almost daily for a fortnight before budget day.

The framing plan was bang on, with the document billed as the government’s “plan to build more homes, faster, help make life cost less, and grow the economy in a way that helps every generation get ahead.” In intention, they squarely hit the bullseye. But will it work?

The Opposition’s reaction was predictable. The Conservatives criticized the budget as a high-spending, out-of-touch manifesto that fails to bring down tax levels to address the affordability needs of Canadians. This response is consistent with leader Pierre Poilievre’s “Axe the Tax” and “Spike the Hike” mantras that have propelled him to high levels of voter resonance.

The Bloc Quebecois sharply criticized the budget as an assault on provincial jurisdiction, with leader Yves-François Blanchet mockingly positing that Prime Minister Justin Trudeau should just make a jump to provincial politics if it interests him so much.

The Opposition’s reaction was predictable. The Conservatives criticized the budget as a high-spending, out-of-touch manifesto that fails to bring down tax levels to address the affordability needs of Canadians.

The NDP’s response was perhaps the most significant, given the fourth party’s deal to prop up the Liberal government by, among other things, cough, passing its budgets. Leader Jagmeet Singh’s immediate response was that he saw some good elements but wasn’t sure if they go far enough, and he would need to study the budget more before deciding whether to support it. That said, political analysts collectively rolled their eyes at this posturing, with nobody seriously predicting the NDP would allow the budget to fail when voted on in the House of Commons.

But what about the non-partisan reaction? Housing-oriented stakeholders have welcomed the budget as an overdue basket of initiatives to kick-start home building and start to bring Canada’s supply/demand disequilibrium back into balance. While no-one has hailed it quite as a panacea that will “fix housing”, most concede these are steps in the right direction – even if it takes a generation to get there.

But what about regular voters – the Millennials and GenZeders at whom the budget was aimed? Liberal fortunes will hinge on whether these voters will be satisfied that their appeals have been heard, or whether they see it all as “too little too late”. The risk is exacerbated by the fact that most of the housing policy in the budget was re-appropriated and repackaged solutions floated first by Conservative Leader Pierre Poilievre, as far back as two years ago. It is always risky in politics to play the imitation game, as voters have the option of going for the real deal. Voters will likely be less inclined to deliberate over the minor details between housing plans, and more willing to follow their gut on who is more committed: the party playing panicked catch-up on the file, or the original creative proponent of the necessary policy solutions. On that score, advantage Pierre.

Governments traditionally withhold one major blockbuster for Budget Day itself – a “Gainsburger” that grabs the headlines on day-of, that wasn’t pre-leaked. Oddly, this budget skipped that tradition. The biggest budget-day surprise was the increase to capital gains tax (technically an “increased inclusion rate” for the pedants). Highlighting a tax increase as a major win for the people is not the right approach to a cost-of-living-weary public. And the fact this tax will likely be borne most by small- and medium-sized businesses means the government is adding burden to the very middle class it purports to be rescuing.

This one move has the potential to go down in history as one of the most significant lapses in policy judgment under this government. Mr. Trudeau’s own former Finance minister has publicly panned it as “negative to our long-term goal, which is growth in the economy, productive growth and investments.” But more simply, the idea of taxing SME owners more to save those same middle class Canadians from a high cost of living will seem to many a mind-blowing contradiction that could only have come from an ivory tower of aloof cluelessness. “Let them eat cake,” as Marie-Antoinette allegedly quipped before facing the Jacobin guillotine.

In the end, Budget 2024 will pass. The NDP will ensure it does, as an early election would mean a worse-than-status-quo outcome for them – likely around the same seat count, but with a fresh five or six million in new campaign debt. The “smart money” expectation should still be an October 2025 election.

But given the long-term horizons required for fixing the two dominant vote-driver issues – cost of living generally, and the cost of housing – it is quite unlikely this week’s measures will meaningfully reverse the voter intention trend of the last year. Which means the same smart money prediction should continue to be a Conservative majority taking office in eighteen months.

Yaroslav Baran is a partner and co-founder of Pendulum, a political analysis and communications consultancy. He served as communications director for Prime Minister Stephen Harper’s 2004 leadership campaign, and ran Conservative Party communications in the next three elections.