Trudeau Election Budget Seeks to Convert Remaining Prosperity into A Renewed Liberal Mandate

“Liberal times are good times,” the Grits are fond of saying, and Trudeau’s government has indeed been blessed with quarter after quarter of economic good fortune. Now, in the economic cycle’s waning days, Finance Minister Morneau is seeking to leverage Canadians’ remaining sense of prosperous times into a forward-offer that promises to distribute this prosperity into a second Liberal mandate.

Gaining electoral credit for generalized global success is harder today than back when voters believed governments controlled the levers of growth. To do so, contemporary governments must concretize any sense of economic momentum into very clear, tangible deliverables that affect families’ lives. This Budget seeks to do so in spades.

Moreover, Minister Morneau’s fourth spending plan targets these deliverables to groups defined by two characteristics: i) an insecure position in a rapidly-shifting economy; and, ii) importance to Liberal electoral aspirations.

Taking the Budget at its word, signature investments speak to those battling to fight their way in to, or to retain, a foothold in the middle class. Young families who need help buying a first home, transitioning workers needing retraining, and those facing the high cost of prescription drugs are all invited to feel the strength of the Canadian government behind them in their struggles.

At the same time, however, it is critical to note that these groups – and a few others – are precisely those that the Liberals must reassemble to recreate their majority voting coalition of 2015. That imperative, and changing the channel on the corrosive SNC-Lavalin matter, are the two critical components of the Budget Day strategy.

Accordingly, while the Fall Economic Statement focused on initiatives for business and the economy, the spring Budget is more classic Liberal election-year budgeting: consumer- and citizen-focused, with targeted initiatives to specific groups.

The 2019 Budget is structured around four key themes:

• Investing in the Middle Class – An upgraded First-Time Home Buyer Incentive and the new Canada Training Benefit – the Budget takes steps toward a national Pharmacare plan.
• Building a Better Canada – To jump-start local infrastructure programs, the government is doubling the transfer to municipalities and providing a further $1 billion to community level energy efficiency programs. They are also committing to bringing high-speed internet to every Canadian home and business while making zero-emission vehicles cheaper. The government also has plans to jump-start rental home construction.
• Advancing Reconciliation – The Budget touts significant progress in improving services in First Nations communities, including boil water advisories falling from 105 to 59 and on track to get to zero by 2021. There are also significant investments in Indigenous education.
• Delivering “Real Change” – This is red meat for the Liberal base with investments that contrast against perceived weak points in the Conservative record, including support for artists, pharmacare, and fairness initiatives like combating aggressive international tax avoidance.

For the Liberals to replicate their 2015 victory, they will need to appeal once again to the three distinct groups that make up their voting coalition:

1. Liberal Core – These are the approximately 3 million voters who are the bedrock of the party. They skew urban, tend to be visible or linguistic minorities, and stayed with the Liberals in 2011 when Michael Ignatieff led the party to its historic low showing.
2. Progressive Swing Voters – There are approximately 1 million voters who left the Liberals for Jack Layton in 2011, then voted for Trudeau in 2015. They dislike the Conservatives – and Stephen Harper in particular – and the Liberals’ “Real Change” message was about harnessing the potential of this block to engage in strategic voting to remove Harper.
3. New Voters – The 2015 Trudeau campaign capitalized on their leader’s star quality to appeal to potential voters who rarely or never cast a ballot. Using big data and social media, the Liberals were able to find, persuade, and mobilize another 1 million Canadians to vote, and vote Liberal.

Each of the measures above is designed to appeal to a number of these Liberal voting blocks.

• The investments in the middle-class, particularly the First-Time Home Buyer Incentive, improved student financial assistance measures, and the new Canada Training Benefit, are focused on working-age millennials struggling to afford a home and concerned about improving their skills for a better job. Recent polls suggest millennials are less and less inclined to support the Liberals to the extent they did in 2015.
• The national Pharmacare action plan is designed to remove a powerful appeal to progressive swing voters who switched from the NDP to the Liberals in 2015.
• Infrastructure investments – particularly the community-level investments enhanced in this Budget – are designed to appeal to middle-class urban and suburban homeowners that form part of the Liberal core.
• Advancing reconciliation is an important social value for Liberals, particularly progressive swing voters and new voters.
• The “Real Change” sections of the Budget are a clear call-back to the themes of the 2015 election and designed to either highlight wedge issues against the Conservatives (support for veterans, immigration, and tax fairness) or as a defense against potential weaknesses (like irregular asylum seekers).

One clear issue that Liberals do not address in this Budget is the issue of a path to balance. In 2015, Justin Trudeau promised “modest, short-term deficits” of around $10 billion a year, returning to balance this year. Instead, Liberals will aim to run a deficit of almost $20 billion in this year alone. In December, the Department of Finance forecasted that the books would not be balanced until the year 2040.

Liberals are clearly betting that the issue of balanced Budgets will not be a vote-changer in October. Expect Andrew Scheer and his Conservatives to use this as a major point of attack in their counter-narrative. And importantly, is the government’s economic growth projection of 1.8% realistic moving into the election year and beyond?

When it comes to the political landscape, there are five major questions for Budget 2019:

• Will today’s Budget change the channel on the SNC-Lavalin matter?

  While the Budget includes focused elements that will appeal to key Liberal vote segments, it is unclear if any one element will be controversial enough to move SNC off talk radio and twitter debates. One topic that may have been purposefully introduced to “change the channel” is the one-time doubling of the gas tax to pay for municipal infrastructure projects.

• Will the core elements offered in today’s Budget reverse the recent decline in Liberal polling?

  The Budget is hyper-focused on activating key Liberal vote segments – including millennial renters and NDP-Liberal switchers – and will allow tightly focused outreach through the Liberal big data machine and social media. It remains to be seen if these efforts are successful in reinforcing the voting choices reflected in polling.

• How will today’s Budget appeal to key vote blocks like millennials and seniors?

  Liberals clearly recognize the possibilities these two groups can bring them in the 2019 election. The First-Time Home Buyer Incentive is clearly focused on millennials, while Guaranteed Income Supplement (GIS) and Canada Pension Plan (CPP) improvements are targeted to seniors.

• In terms of the deficit, is the number better than the recent forecast of $18.1B?

  The Budget sticks with an $18.1 billion deficit number for 2018-19 with the deficit rising for 2019-2020 to $19.9 billion, before falling to $11.1 billion in 2023-24. The government appears to be calculating that deficit reduction is only a priority for Conservative voters and not one for the three elements of their voting coalition.

• What was the opposition reaction to the Budget?

  Conservatives are largely ignoring the Budget (except for the Liberals’ broken promise on deficits and a return to balance) and trying to maintain a focus on the SNC-Lavalin matter by actively trying to prevent Finance Minister Morneau from speaking, including chants of “Let Her Speak” (in reference to Jody Wilson-Raybould).

  New Democrats are accusing the Liberals of handing out “favours” of “corporate handouts” while leaving nothing for everyday Canadians. This will be an angle that the NDP will certainly wish to keep pushing – that Liberals are centrists in progressive clothing, with little interest in the progressive agenda (except for votes).

The Budget’s ultimate success or failure will be proven in October, at the polls. The critical first battle will be, however, the fight to get it noticed in a capital where the conversation has been dominated entirely by SNC-Lavalin and cabinet woes. For Trudeau’s team, the hope is that the Budget’s forward offers are sufficiently compelling to break through Opposition attempts to keep the national attention focused on controversy. For the Opposition parties, the challenge leading up to the election will be to make sure that they also provide voters with something to vote for and not just something to vote against.

Either way, this consummately election-minded Budget marks the belated starting gun, at least for the Liberals, of an election race that may have really begun when the Wilson-Raybould story broke on February 7. How much ground was lost in February, and how much can be regained with the Budget, will be central to the election’s ultimate outcome.