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    The Morning Brief - 04.29.19

    Posted by Bruce Carson on Apr 29, 2019 10:05:39 AM


    Economy—Surplus Reported in The Fiscal Monitor—Trans Mountain Pipeline and National Unity


    Surplus Reported in the Fiscal Monitor 

    There have been three related fiscal announcements made since the middle of March and they should be taken into consideration by the Trudeau government as it plans spending in the run-up to the fall election.

    On Friday, The Department of Finance’s Fiscal Monitor reported a surplus of $3.1 billion with only one month left in fiscal 2018-19. With this number there is speculation that the deficit for that fiscal year and perhaps the one we are currently in could be much smaller than previously forecast. In this same period in fiscal 2017-2018 there was a shortfall of $6 billion.

    The Monitor reported that revenues are up $23.5 billion or 8.5% compared with last year due to higher than expected tax revenues and EI premiums. Program expenses are up, but only about half as much as revenues. Expenses are up 4.8% or $12.7 billion.

    The March budget predicted deficits of $19.8 billion for 2019-20, $19.7 billion for 2020-21 and then down to $14.8 billion in 2021-22.

    The federal government in response to Friday’s numbers said not to worry as this surplus will be wiped out by government spending. That is, measures booked in 2018 -19 will be the subject of spending now such infrastructure and energy efficiency measures.

    The question that needs to be asked is whether it is wise to spend whatever surplus moneys may be on hand at the end of the fiscal year rather than use them to get the budget closer to balance, reducing the deficit.

    One reason for doing this was contained in the numbers revealed by the Bank of Canada last Wednesday. The Bank has revised its estimate for economic growth in 2019 down from 1.7% in January to 1.2% in its April Monetary Policy Report. The Bank dealt with the reasons for this revision in its Monetary Policy Report and in the media availability. While the Bank was able to predict and factor into its January numbers the downturn in oil and gas and investment in this sector, it did not see a similar downturn in Canada’s non-energy sector.

    The result of having this new number is that it contradicts the growth number in the March budget which had growth pegged at 1.8% for this year and next. While the Bank is not predicting a recession but slow growth, and has stated that may not last long, there is an argument that given the new growth numbers, the government should exercise some measure of prudence and at least prepare for a possible downturn.

    It had an opportunity to do this in the March budget as it was faced with increased revenues, but the decision was to spend. Perhaps a different decision is warranted now, even with a federal election in the fall and the desire to spend as a means of shoring up weakening poll numbers.

    Trans Mountain Pipeline

    Late last week the National Post’s John Ivison added more fuel to the speculation that the Trudeau government may pick a fight with the Kenney government in Alberta and refuse to approve the pipeline unless the Notley climate plan is kept in place. Ivison writes that the government is “actively considering blocking the expansion of the Trans Mountain pipeline.”

    As suggested by both Chantal Hebert and Althia Raj writing in the last couple of weeks, blocking the pipeline would be undertaken to enhance Trudeau’s environmental credentials, particularly for those who believe that approving an oil pipeline does not make sense in the fight against climate change.

    In Alberta the issue seems to center on the oil sands emissions cap and its possible removal by the Kenney government. While the UCP platform is silent on removal of the cap, it was discussed in the election campaign.

    The message from the Trudeau government would be no climate change plan, no pipeline.

    Chris Varcoe of the Calgary Herald in his interview with Steve Williams, the retiring CEO of Suncor asked about the emissions cap. Williams responded that the cap was there to reassure people that the oil sands wouldn’t grow in emissions. He said “it’s not a production cap, it’s an emissions cap” and with technology we can stay under the cap “comfortably.” It could be said that the cap is more symbolic than real.

    The theory that Trudeau is hoping to pick a fight over Trans Mountain was given added credence by Natural Resources Minister Sohi when he said during an announcement in Calgary last Thursday that basically the decision on the pipeline would be made by June 18 or perhaps it wouldn’t, as he couldn’t guarantee a decision by that date as “it’s a decision of cabinet.”

    Sohi added that “I’m very confident that by June 18, cabinet will be able to make a decision on the pipeline.” But also said “we will follow the process, we will continue to engage Indigenous communities in a meaningful two way dialogue to ensure our constitutional obligation is met.”

    Regardless of whether the decision is made on June 18 or later, it is neatly timed so it is announced after the House of Commons has risen for the summer and it would not be subjected to scrutiny in question period.

    Ivison notes that rejecting the pipeline on environmental grounds plays into the Liberal’s electoral math but “would also poke the bear of western alienation” and “could spark a national unity crisis.”

    It could be that electoral considerations trump all others and the Liberals believe that they can mend whatever unity issues arise, after the fall election.

    Other National Issues


    Question Period

    It begins again today and will continue for three weeks straight, take a week off and then return on May 27 and continue until the House rises for the summer and the fall general election.

    It begins against an ever changing electoral backdrop as two more provincial governments, Alberta and PEI may be coloured blue, perhaps Alberta with a darker shade than PEI, but blue nevertheless. There is also polling that shows the Conservatives with a comfortable lead over the Liberals but with the caution that Conservative support is soft. If experience is any guide, a poll this far out before an election at best indicates in a snapshot what parties may be doing that is right or wrong, but not electoral results.

    For the Conservatives, it is important to keep the ethical challenges of the Trudeau Liberals alive and the best place to do that is question period. So the first question has to be where is the lawsuit for libel threatened by the prime minister dealing with SNC Lavalin and deferred prosecution agreements. The fact that the court decision that would refer the Christmas trip to the Aga Khan’s island back to the Ethics Commissioner has been appealed could be explored with the prime minister on the basis of what is he afraid of.

    There could also be questions as to whether the RCMP or the Ethics Commissioner has contacted the prime minister or any of his staff on the SNC matter and this is a question that should be asked almost daily in order to keep the issue alive.

    On the Trans Mountain pipeline the government should be pinned down regarding a decision date and it should be soon enough so as not to miss this construction season.

    There is no shortage of Indigenous issues to explore including the situation at Grassy Narrows and Kashechewan and whether the promised youth recreation center at Attawapiskat has been completed.

    One of the most important economic issues for the agricultural community in western Canada deals with canola and the refusal of China to import it. While it can be appreciated that this refusal is linked to the detention of Huawei’s Meng Wanzhou, prairie farmers want to know whether they can proceed with planting.

    And then there is the continuing issue of the steel and aluminum tariffs and whether they will be removed by President Trump or will Prime Minister Trudeau be forced to go into the fall election with the tariffs in place and the new trade agreement still waiting to be ratified?

    The Conservatives should be aware that every question asked will be met by an answer which criticizes the Conservatives lack of a climate change plan.

    NDP leader Jagmeet Singh has indicated the NDP will be concentrating on pharmacare, housing and the environment.

    There is no shortage of issues for QP and this list will be refreshed as we go through the next three weeks.

    To Come

    --April 30, Kenney government sworn in in Alberta

    --April 30, GDP numbers for February to be released

    --April 30, Senate Transport committee holds hearings in Edmonton on Bill C-48—the tanker ban bill and on May 1, holds hearings in Regina

    --April 30, Bank of Canada Governor Poloz and Senior Deputy Governor Wilkins appear before the House of Commons Finance committee

    --April 30-May 1, US Fed meets—speculation is that there will be no change in interest rates

    --May 1, Poloz and Wilkins appear before the Senate Banking Committee

    --May 6, Governor Poloz delivers a speech in Winnipeg  

    --May 10, job numbers for April to be released


    The Morning Brief will take a break for a few days for travel and may reappear later this week or next Monday, May 6 at the latest--bc

    Topics: Morning Brief

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