(Click here for the official Cardus press release on the 2009 Federal Budget) Jump to: Introduction A note on the charitable sector Analysis Conclusion Further Analysis Forthcoming Introduction This is Cardus' analysis of the Government of Canada's Budget for fiscal year 2009-2010, released by the Hon. James M. Flaherty, Minister of Finance, on Tuesday, January 27th, 2009. This budget provides only a short-term solution for a long-term problem, leaving the fundamental questions facing Canada's economy unanswered. It would appear that the government is responding to the public's exaggerated expectations of what federal spending can fix. The need to address our over-reliance on credit, our demographic challenges, and to renew our social architecture has been basically left untouched. Canadians continue to borrow from the future to maintain the ways of the past. In keeping with our analysis of previous budgets, we do not address all matters raised in the federal budget. Our analysis takes place in the context of Cardus' mission to promote the renewal of Canada's social architecture. The task of government is neither minimalist (that is, only a narrow focus on essential duties such as security, safety and core government services) nor expansionist (where government is prepared to jump in and solve every problem for which there is a political advantage in addressing.) The state should always be limited in its scope. The state is not responsible for everything. The state is the guardian of the public good but should defer to other institutions of civil society which are often better placed to deal with particular issues. It needs to be acknowledged that this federal budget cannot be properly analyzed without acknowledging the unusual political and economic context in which it is given. There has been extensive public debate in recent months whether it is preferable for government to attempt to stimulate the economy through infrastructure spending or to attempt to stimulate the economy through tax measures. It is clear that regardless of what position one might take philosophically, the fact that most of Canada's trading partners have opted for a Keynesian type of stimulus package combined with the fact that all of the opposition parties in a minority parliament favour this approach limited the options available to the government. The recession we are presently facing is unprecedented in its global reach. In the developed world, an increasing number of people are living leveraged financial lives, placing higher demand and reliability on credit. Credit presumes optimism on future capacity to earn and pay back. When credit structures fail, as some high-profile American banks did during 2008, the domino effect is felt throughout the system. This budget is premised on presumptions of average GDP growth of 3.88 over the next 5 years, which will provide the means to repay the $85 billion of additional debt the government proposes to take on during that period. It is impossible to know the reliability of these predictions, however in looking longer-term, there are at least three factors which neither the public debate nor this budget directly address: Canada's demographic challenge. Our reproductive rate of 1.7 children per female, while comparable with many of our trading partners, falls short of the required 2.1 rate necessary to maintain the population. We are just a few years from the time when the annual retirement rate will exceed the rate of young people entering the workforce. Presumptions of growth in the economy must factor in the workforce demographic effect. The limits of measurements. Spending on casinos is not the same as spending on bridges or power plants, even though in short-term GDP measures, one cannot distinguish between them. The real value of the measures contained in this budget will be determined more by qualitative than quantitative factors. There is some debate about the speed in which this money needs to be spent, and whether prudent choices will be made about the most effective long-term return on this infrastructure investment. The effects of social confidence and support. Much of economic activity has to do with attitude and confidence as much as ability. In the recession of the early eighties, consumers and businesses were willing to take on loans at very high interest rates. In the current recession, there is concern about their willingness to borrow money at historic low rates. Given recent changes in historic social structures (mobility, family breakdown, "bowling alone" factors, less volunteerism, weakened civic institutions), the economic challenges will exacerbate many personal issues. Dealing with these demands is a function of the healthy involvement of many social institutions in society; however when they fail or lack capacity, the cost is one that is borne by society as a whole. Our economy is undergoing fundamental structural changes, most of which are beyond the power of government. The government's tasks are to ensure the resizing is orderly, and to provide stability for those impacted by these structural changes. The budget adopts a multi-faceted approach in its attempt to stimulate the economy. The key components include: Improving Access to Financing and Strengthening Canada's Financial System with $200 billion to improve access to financing for consumers and businesses; Action to Help Canadians and Stimulate Spending with $8.3 billion on various programs directed towards individuals directly affected by the economic downturn, and $20 billion of tax relief; Action to Stimulate Housing Construction with $7.8 billion to build social housing, encourage home renovations, provide low-cost loans to municipalities for housing related construction, and energy related incentives; Immediate Action to Build Infrastructure with $12 billion of new funding projects with a focus on projects that bolster Canada's long-run productive capacity; Action to Support Businesses and Communities with over $4 billion for a wide variety of sector-specific initiatives, including Forestry, Agriculture, and Automotive sectors. The budget proposes a $34 billion deficit for Canada's 09-10 fiscal year (April 1, 2009 - March 31, 2010) and a $30 billion deficit for the 2010-11 fiscal year. By a combination of time limits attached to various spending initiatives and the expectation of economic recovery increasing tax revenues, the government suggests that it will be once again be able to produce a balanced budget in 2013-14. The budget highlights the government's commitment to return to surplus by carefully managed spending, by reviewing departmental programs and corporate assets, and also by concentrating the bulk of the initiatives as time-limited "use it or lose it" programs. Charitable sector The economic importance of the non-profit sector is often overlooked. However with $112 billion per year of annual revenues employing 2.1 million Canadians, this sector makes up 8.6% of GDP and its economic health is of general significance. These numbers are somewhat misleading in that this data collection category includes universities, colleges and hospitals. (most of whom rely on revenues from charitable foundations for a portion of their revenues but receive the bulk of their revenues from government funded operating grants) However apart from this component, the charitable sector is an estimated 4% of GDP. There were various proposals submitted during the pre-budget consultation period recommending that the government include measures for this sector in its stimulus package. One of those submissions was from Cardus suggesting that charitable tax credit for individual donations in excess of $200 be increased from the present 29% to a proposed 42%. There were no measures in the budget relating to this sector. Analysis Rather than attempt to comprehensively summarize all of the budget measures, Cardus has reviewed the budget using the lens of three major questions: Is the overall budget a reflection of short-termism or longer-term economic thinking? Is there a broader view of infrastructure beyond physical infrastructure? Is the budget fair and equitable for Canadians across our diverse landscape? 1. Is the overall budget a reflection of short-termism or longer-term economic thinking? This budget attempts to do both. With a $30 billion stimulus spending package (which when reflected as a percentage of GDP, is one of the smaller stimulus packages globally), the government has responded to international (G-20) pressure, political pressure, and a general belief that government spending will have beneficial outcomes. The expectation of the budget is that this stimulus package will assist the economy coming through this downturn, and in a few years time, will position Canada to continue on a road of steady growth. The budget emphasizes that "measures to support the economy must begin within the next 120 days to be most effective." While the stimulus reasons for this are understandable, it undermines the planning and considered choice of strategic projects (including building community support and fundraising for community centers, recreational facilities, etc.), and also will result in a less efficient competitive process. On the other hand, the proposed tax changes do represent a longer-term approach. By reducing the tax burden for individuals and families in Canada as well as for the business community, Canada's tax regime will become more competitive and provide us with comparative advantages with our trading partners. It must also be acknowledged that a considerable investment is proposed in the skills and training programs which do increase Canada's knowledge base, as well as in green technologies. Fundamental longer term issues such as Canada's demographic challenges, and measures that would strengthen and increase the capacity for institutions between government and the individual to thrive (such as increasing charitable tax credits), are conspicuous by their absence. 2. Is there a broader view of infrastructure than just physical? The government has rightly focused on the development of the workforce in an attempt to build a "knowledge economy." A variety of measures are proposed including: Wage earner protection program for eligible workers; Strategic training and transition fund for workers who have been out of work for a longer period of time; A $2000 tax credit for workers who complete their apprenticeship program; Various initiatives with universities and research agencies to develop Canada's knowledge advantage. All of the proposed initiatives are commendable, but it should be noted that most of them focus on individual benefits. There should be more focus on developing capacity for community groups, labour groups, and industry associations - groups which are often closer to the front lines and able to provide niche services and programs. In short, these initiatives reflect an over-reliance on government, rather than sound strategies for Canada's social architecture. 3. Is the budget fair and equitable for Canadians across our diverse landscape? Economic hard times produce pain and the government has taken significant steps in an attempt to ameliorate the suffering that many Canadians will experience. While recognizing that these will continue to be difficult times, the budget has numerous specifically-targeted tax measures, employment transition measures, and industry-specific funds which are intended to help those most affected. Targeting tax relief measures for those in lower and middle income brackets are also an appropriate response. Conclusion In the period leading up to the federal budget, there has been a disturbing public appetite expecting governments to solve problems that are beyond their capacity to solve. Many aspects of the present economic crisis are not related to government causes. The public has not come to grips with the global economic restructuring that is taking place. It is not just our environmental frameworks that require adjustment. Our social (Who cares for whom? Who is my neighbour?), family (Do I have kids? Does it matter what I pass on to them?) and moral frameworks require adjustments too. The moral dimensions of this crisis are illustrated by consumer greed, a willingness to live beyond our means and irresponsible risk-taking by business leaders. It is difficult and even unfair to criticize our political leaders for responding in limited ways to a crisis that has much deeper roots than politics or even economics. The challenges facing Canada and most of its trading partners are fundamentally about how we organize society and what we expect from life. This budget has bought us a few more years to think about these questions while we borrow from the future to maintain the ways of the past. The success of this budget will be determined by how well we all steward this opportunity. Further Analysis Forthcoming Cardus will be conducting a review of the various budget analyses that are released immediately following the budget. A special budget issue of our policy journal, Cardus Policy in Public will be published on-line by 8 a.m. EST on Thursday January 29, 2009. Please check the Cardus website at that time for this further analysis. (Click here for the official Cardus press release on the 2009 Federal Budget)

OTTAWA, January 27, 2009—Ray Pennings, Director of Research for Cardus, expressed concern that Canada's federal budget provides a short-term solution to a long-term problem, leaving the fundamental questions facing Canada's economy unanswered. Said Mr. Pennings, "The government is responding to the public's exaggerated expectations of what federal spending can fix. This budget does not adequately address our over-reliance on credit, our demographic challenges, and the overall need to renew our social architecture." Cardus' analysis, by Pennings and President Michael Van Pelt, reviewed the budget with three questions in mind: Is the overall budget a reflection of short-term or long-term economic thinking? Is there a broader view of infrastructure beyond physical infrastructure? Is the budget fair and equitable for Canadians across our diverse landscape? Cardus concludes that although the budget buys Canada time to deal with fundamental economic questions, the strategy is not without risk. "We are borrowing from the future to maintain the ways of the past," said Pennings. "The success of this budget will be determined by how well we use this time to develop sound, long-term strategies, including answers to fundamental questions about how we organize society, and what we expect from life." Cardus is a North American public policy think tank, equipping change agents with best theories and practices of public life to renew North American social architecture. Cardus launched in October 2008 to expand on the work of its precursor, the Work Research Foundation. It has an annual operating budget of approximately $1 million and is a registered charity. -30- Media Contact: Ray Pennings (403)479-4590 rpennings@cardus.ca A copy of the proposal and background paper is available at http://go.cardus.ca/budgetanalysis.

In the midst of auto sector bailouts, forestry relief, banking assistance and stimulus spending on roads, bridges and other buildings, it's easy to forget about the economic importance of the non-profit sector. Yet it is a $112 billion industry employing 2.1 million Canadians and comprises 8.6 per cent of the nation's GDP. Its health is a matter of national interest and would be considerably enhanced through a simple increase of the charitable tax credit for individual donations in excess of $200 from the present 29 per cent to Cardus's proposed 42 per cent. What gets rewarded, after all, is what gets done and while bricks, mortar, timber, roads and metal are all important, nothing is as vital to a nation in the long run as its social architecture. Imagine Canada, representing dozens of charities across Canada, recommended three broad themes in its May 2008 position papers. These included "Tax Incentives to Stimulate Giving" and concluded that tax incentives are an important stimulus for giving. While the results (and consequently the exact costs) of this tax reduction measure are difficult to project, we know that charitable donations in British Columbia increased by 5 per cent in three years following an increase in the charitable donation credit. In the state of Arizona, a combination of tax credit and tax deduction in certain sectors saw charitable contributions triple in three years. That charities need and deserve help in these troubled times is a point few would dispute. In mid December, it was reported that the Salvation Army's donations were down 30 per cent. Even as challenging times place a greater demand on their services, many charities are struggling to pay the bills. Of Canada's 161,000 charities and non-profits, two-thirds report annual revenues of less than $100,000. Yet, they all combine to provide services, many of them essential, which enrich the social, physical, and spiritual lives of Canadians. And, if and when charities can no longer fail to attend to those among us who need their services, the burden of their care falls to governments, typically at higher costs in the long term. Some large charities urged Finance Minister Jim Flaherty to exempt charitable gifts of private company shares and real estate donated to charity from capital gains taxes. The benefits of that approach will primarily advantage large charities and large donors. The benefits of changing the tax credit, on the other hand, are most likely to be experienced by charities across the board. It also provides encouragement to many more of the 25 per cent of Canadian taxpayers who in combination contribute $8.5 billion (2006 data) annually to charities. A consensus has emerged among political leaders of all parties that economic stimulus is a current necessity. There are many more ideas being proposed than can be responsibly implemented, so there is an onus on advocates to outline the return on investment that the taxpayer will receive. Without more detailed government data, it is impossible to accurately project the cost of foregone tax revenue for this proposal. Back of the envelope guesstimates suggest $400-$600 million is required, a reasonable amount placed in context of a $30 billion stimulus package. But this loss of federal revenue is not money lost to the economy. Increasing the charitable credit ensures continued and increased spending by charities and protects the treasury from increased demands on social programs. There is no reason to fear additional support to this component of society will go to fatten executive bonuses or be frittered away on chartered jets, after all. People support different charities, depending on their religious, cultural, or aesthetic appetites. That diversity is also the strength of this approach as giving reflects our commitments to organizations that relieve poverty, promote education and advance faith-based or other benevolent motivations. A strong charitable sector including universities, hospitals and hospices, arts and sports groups, poverty and publishing programs, synagogues and churches, provides ways for Canadians to be their best and show compassion to the least. Charities are not vehicles for greed, excess or profit. They are the products of our generosity, kindness and creativity - vital components of a healthy society without which financial economies cannot thrive. This forthcoming budget is an opportunity for all sectors to reconsider their fundamentals. It would be a shame if we went through this collective exercise as a country and neglected those important organizations whose very existence defines and gives expression to who we are. Ray Pennings is Director of Research for Cardus, www.cardus.ca.

The Toronto Star covers the Cardus pre-budget submission on increasing the charitable tax credit. Stuart Laidlaw writes, "Ottawa should boost the tax credit for charitable donations in its upcoming budget as a way to stimulate the economy while helping those most hurt by its downturn". Read Toronto Star coverage here .

In the midst of auto sector bailouts, forestry relief, banking assistance and stimulus spending on roads, bridges and other buildings, it's easy to forget about the economic importance of the non-profit sector. Yet it is a $112 billion industry employing 2.1 million Canadians and comprises 8.6 per cent of the nation's GDP. Its health is a matter of national interest and would be considerably enhanced through a simple increase of the charitable tax credit for individual donations over $200 from the present 29 per cent to Cardus's proposed 42 per cent. What gets rewarded, after all, is what gets done and while bricks, mortar, timber, roads and metal are all important, nothing is as vital to a nation in the long run as its social architecture. Imagine Canada, representing dozens of charities across Canada, recommended three broad themes in its May 2008 position papers. These included "Tax Incentives to Stimulate Giving" and concluded that tax incentives are an important stimulus for giving. While the results (and consequently the exact costs) of this tax reduction measure are difficult to project, we know that charitable donations in British Columbia increased by five per cent in three years following an increase in the charitable donation credit. In the state of Arizona, a combination of tax credit and tax deduction in certain sectors saw charitable contributions triple in three years. That charities need and deserve help in these troubled times is a point few would dispute. In mid December, it was reported that the Salvation Army's donations were down 30 per cent. Even as challenging times place a greater demand on their services, many charities are struggling to pay the bills. Of Canada's 161,000 charities and non-profits, two-thirds report annual revenues of less than $100,000. Yet, they all combine to provide services, many of them essential, which enrich the social, physical, and spiritual lives of Canadians. And, if and when charities can no longer attend to those among us who need their services, the burden of their care falls to governments, typically at higher costs in the long term. Some large charities urged Finance Minister Jim Flaherty to exempt charitable gifts of private company shares and real estate donated to charity from capital gains taxes. The benefits of that approach will primarily advantage large charities and large donors. The benefits of changing the tax credit, on the other hand, are most likely to be experienced by charities across the board. It also provides encouragement to many more of the 25 per cent of Canadian taxpayers who in combination contribute $8.5 billion (2006 data) annually to charities. A consensus has emerged among political leaders of all parties that economic stimulus is a current necessity. There are many more ideas being proposed than can be responsibly implemented, so there is an onus on advocates to outline the return on investment that the taxpayer will receive. Without more detailed government data, it is impossible to accurately project the cost of foregone tax revenue for this proposal. Back of the envelope guesstimates suggest $400-$600 million is required, a reasonable amount placed in context of a $30-billion stimulus package. But this loss of federal revenue is not money lost to the economy. Increasing the charitable credit ensures continued and increased spending by charities and protects the treasury from increased demands on social programs. There is no reason to fear additional support to this component of society will go to fatten executive bonuses or be frittered away on chartered jets, after all. People support different charities, depending on their religious, cultural, or aesthetic appetites. That diversity is also the strength of this approach as giving reflects our commitments to organizations that relieve poverty, promote education and advance faith-based or other benevolent motivations. A strong charitable sector including universities, hospitals and hospices, arts and sports groups, poverty and publishing programs, synagogues and churches, provides ways for Canadians to be their best and show compassion to the least. Charities are not vehicles for greed, excess, or profit. They are the products of our generosity, kindness and creativity-- vital components of a healthy society without which financial economies cannot thrive. This forthcoming budget is an opportunity for all sectors to reconsider their fundamentals. It would be a shame if we went through this collective exercise as a country and neglected those important organizations whose very existence defines and gives expression to who we are.

On January 15 Cardus released a backgrounder paper on its recommendation to increase charitable tax credits in the 2009 federal budget. "This proposal provides incentive to ordinary taxpayers to support causes which reflect their passions and priorities, and produces a diversity of social institutions enriching the lives of Canadians," said Ray Pennings, Director of Research at Cardus. "This is good economic policy, and this is good social policy. It provides short-term economic stimulus and long-term benefits." Read the backgrounder and enter the pre-budget debate today. View it online here or download it now.

HAMILTON, January 15, 2009—Cardus, a think tank dedicated to the renewal of Canada's social architecture, is recommending that the federal government increase charitable tax credits from 29% to 42% as part of its stimulus package (Click here for News Wire Release). "Adopting this proposal will be a sound investment in Canada's social architecture," said Ray Pennings, Cardus' Director of Research. "The charitable sector is critical to the rich fabric of Canadian society, and provides taxpayers exceptional return on investment." Canada's 161,000 charities and not-for-profits (NFP) employ over 2.1 million Canadians and provide 8.6% of Canada's GDP. The services they provide—many of them essential—impact the physical, social, and spiritual lives of virtually every Canadian. Although approximately one third of the $112 billion in the NFP sector is spent by hospitals, universities, and colleges, more than half of the total funding in this sector comes from non-taxpayer sources. In 2006, more than 25% of Canadian taxpayers claimed charitable contributions totalling $8.5 billion. "The not-for-profit sector is struggling in these difficult economic times, even as their services are needed even more," said Pennings. The proposal by Cardus argues that given charities' success in providing social services, there are compelling arguments to be made for increasing the charitable tax credit as an effective economic stimulus. Every dollar forgone by the taxpayer is leveraged with more dollars spent in the economy by charitable organizations. There is inadequate public data available to accurately project the cost of the proposal, however Pennings indicated that his best "back of the envelope guesstimate" based on current donation levels is between $400 and $600 million. "This proposal provides incentive to ordinary taxpayers to support causes which reflect their passions and priorities, and produces a diversity of social institutions enriching the lives of Canadians," said Pennings. "This is good economic policy, and this is good social policy. It provides short-term economic stimulus and long-term benefits." Cardus is a North American public policy think tank, equipping change agents with best theories and practices of public life to renew North American social architecture. Cardus launched in October 2008 to expand on the work of its precursor, the Work Research Foundation. It has an annual operating budget of approximately $1 million and is a registered charity. -30- Media Contact: Ray Pennings (403)479-4590 rpennings@cardus.ca A copy of the proposal and background paper is available at http://go.cardus.ca/budget. See official News Wire Release

My grandfather George Jones of Harrington, PEI, and Rouleau, Sask., was the first to tell me about how, even at the heights of the Great War, the killing would stop for Christmas. I can no longer recall all of his exact words, but the phrase 'the German boys' was never spoken in the tone you would expect from a man who spent part of his youth avoiding death at their hands and who had taken one of their bullets in his thigh. He would only tell us happy stories about learning to speak French with pretty girls and how at Christmas the artillery and the sniper fire fell silent and you could hear 'the German boys' entrenched nearby singing carols in their language. The Canadian boys would sing back in theirs. When Christmas was over and the next day dawned, the slaughter would resume. You can, if you wish, decide that this is the height of hypocrisy. It is intellectually and morally bizarre after all that people could mutually understand that the day which celebrates the birth of Jesus was too holy for killing but that the next day and one before were not. I doubt that thought was lost on 'the boys' in the trenches. An alternative view, perhaps more hopeful, was put forward in the early 20th century by novelist and journalist G.K. Chesterton when he said 'Christianity has not been tried and found wanting; it has been found difficult, and not tried.' No matter one's take, Christmas was a cultural symbol powerful enough to make people in the midst of an all out war the likes of which the world had never seen lay down their weapons at the behest of 2,000-year-old words attributed to an angel: 'Peace on earth, goodwill toward men.' Almost 100 years later, the most noticeable feature of Christmas Day remains the unique nature of its quiet. It is very clearly not the calm of Labour Day or Thanksgiving. Canada Day is really not quiet at all, but everything stops at Christmas; its quiet is as metaphysical as it is auditory. It is as if we are meant to be still and know something. When I was small and only people in emergency and vital public services had to work on Sundays, before we were 'free' - we were more used to quiet, more 'stillness.' It gave us time and it gave us space. At night it was dark and even in most cities we could see the stars and wonder or tremble depending on our predispositions. In the day, we did not have to peer through the yellow soup of smog to see the sun. Most of our lives now are dominated by noises of which we are no longer even concious - the whir of computers, the roar of 'white noise' that you can only hear when it stops: at Christmas. Few are so hideous as the battles my grandfather's and father's generations fought and are played out today by my children's generation in Afghanistan, but we are all fighting battles. Some are for power or for the ascendancy of our ideas. Some are for financial survival. Some are for emotional contentment. Some are fighting to mend that which within and around us is broken and, try as we might, we just can't seem to put back together again. Some of us are fighting to get what we want and believe it is actually what we need. Some of us are fighting just to hold back the tears. For Christians, Christmas is the alpha of the alpha, the moment when the Greek 'logos', the source of the principle governing the cosmos and human reasoning, became flesh and brought the promise of light and redemption. For others, it may have evolved to be about the generosity of sharing gifts as expressions of love with family and friends. All of these are socially virtuous activities that enhance our culture through a shared sense of the need to call a truce, even if for just one day each year, and acknowledge a shared appreciation for peace, for hope and for goodwill. To paraphrase C.S. Lewis, Christmas is, if false, of no importance. If true, it is of infinite importance. The only thing it cannot be is moderately important. We should make sure we treat it that way.

Journal of Commerce covers Senior Fellow Ray Pennings' speech at the Economic Club on construction in Ontario. Read the coverage here, and contribute to the emerging conversation on provincial competitive labour pools.