Canada’s first federal budget in two years has now been released, and so much has happened over that two-year time gap.

Of course, there has been this ongoing pandemic. There was a recession and partial economic recovery. A great deal of money was spent by the government, absent a budget, of course, over the intervening period. Public debt levels are now much higher. Interest rates are now somewhat lower. There was even an election over that two-year gap. A new minority government. Same Liberal party, of course, but new finance minister. And so plenty of things have changed.

And so the question is, what does the government have as a vision for the future? And certainly, spending features centrally. There’s even more money put forward over the next few years; $101 billion of new spending over three years, on top of prior programs and prior spending commitments. Of course, a fair chunk of this focused on the pandemic itself, and so of a near-term nature. And so pandemic spending initiatives include extending unemployment payments out into 2022; extending wage and rent subsidies for businesses out through the fall of this year; a new hiring program designed to encourage businesses to hire people back and to increase their wages and to increase their hours as well; and then also, more money for beleaguered sectors like tourism, like the hospitality sector, and for small businesses more generally.

And indeed, there was also a commitment to spend even more, if it proves necessary, into the autumn. And so by no means is this certain to be the end of that spending wave.

The budget, though, wasn’t just a pandemic budget in the sense that there was quite a lot of a non-pandemic nature as well. And so, certainly, the key item was a new major childcare plan envisioned of $10-a-day childcare for all Canadians. And to the extent this is a provincial responsibility, this is a tricky thing, and it will take some time, presumably, to implement. And let the record show Quebec already has something like this.

But in the end, the federal government is proposing to pay something like half of the cost of this program. They’ve put together $30 billion for the first five years, and the provinces will be negotiating and ultimately expected to pick up the other half. And so we’ll see exactly how that plays out, but it’s the most credible step forward on this front in quite some time.

There was money, certainly, for other groups as well. And so, students now will enjoy interest-free federal student loans over the next few years. Seniors will receive a lump-sum cheque and a 10% increase in Old Age Security payments. There is a new program to encourage energy-efficient renovations, and so an interest-free loan for people engaging in that, and a variety of other programs. The list really did go on. This was a 700-and-some-page document and spending really was the key focus.

Maybe worth mentioning, though, what wasn’t there, which is, there has been talk in the past about universal pharmacare. There was still talk, there was one little entry there, but that hasn’t been a major push this year. That will have to wait, I suppose, for future years.

And then nothing really in the basic income department either. And it’s unclear whether the government even has real aspirations in that direction. You could argue, actually, the more generous unemployment insurance payments perhaps constitute something like a basic income, but that debate will have to wait for a future budget and a future year.

On the revenue side of things, there certainly was action as well, though not necessarily in a way that directly affects investors. And so going into this budget, investors were nervous. They were nervous there might be an increase in the capital gains inclusion rate; there was not. They were nervous there might be a higher top marginal personal tax rate; there was not. They were nervous that perhaps corporate tax rates or small business tax rates might rise, and again, that didn’t happen.

Many of these things did happen, I should say, earlier in the Liberal’s tenure but there was no additional movement here. I can say, beyond that, there was also no new capital gains tax on primary residences, and there had been some tongues wagging that there could be some look in that direction. So what tax increases did happen, then? Well, they were much more limited. And so, for instance, there is now a new tax on foreign-held homes. And so that foreign buyer’s tax that already existed in the Greater Toronto Area, the Greater Vancouver Area, will become a national tax. So that is certainly a change.

We can say there are new restrictions on deducting stock options. And this is not brand new in the sense this was proposed a few years ago. This was discussed at length last fall. But nevertheless, that appears to be implemented now as well.

There’s a new luxury tax on vehicles. It starts at a pretty high level. It’s $100,000-plus cars, for instance, [that] have a new tax imposed on them. Also on boats and airplanes. So that’s a new tax affecting a pretty small swath of the population.

And then lastly, there is a digital services tax of 3% that will be coming on. And so digital subscriptions and so on will experience this new tax.

So what can we say more generally about this budget? Well, the stimulus program is considerable; again, $100 billion plus over three years. Nevertheless, smaller than the U.S. equivalent and so not as generous as the Biden stimulus plan recently announced.

You could argue both are bigger than the economy strictly needs, by the way. The economic recovery has already been quite rapid and, indeed, it looks as though most of the economic slack in Canada will be gone by the end of 2022 at a minimum. So you might say some of this is excessive. But nevertheless, it’s been delivered, and it will add to growth, and it’s in fact part of the reason why we already forecast Canadian economic growth of nearly 6% for 2021. It’s because there is all this fiscal stimulus sloshing around.

What about deficits and debts and how does all that happen? Because, of course, all of this spending, or at least much of it, has to be financed via a bigger deficit.

And so the good news is the deficit for 2020 is now estimated to have been smaller than previously thought. So it’s still huge; it’s $354 billion just for 2020. But because the economy grew more quickly than the government had assumed, $28 billion were lopped off the initial estimate, and indeed, much of that ultimately has been sent out the door as new spending.

The deficit then shrinks by more than half in 2021 to $155 billion, which is still enormous, and would have been unfathomable prior to the pandemic. It shrinks again to about $60 billion in 2022. And I guess across all of that, the federal debt load goes from 31% of GDP to 51% of GDP, and then is expected to start inching a little bit lower in 2022 and beyond. But still, let the record show there’s a lot of debt servicing that’s going to have to happen in future years, and a fair chunk of this burden has been shifted on to future generations.

And so to conclude, as much as there is a minority government in place, it seems unlikely that this budget will trigger an election directly. But I must say, it does feel like an election budget in the sense of a government preparing itself for an election in the not-too-distant future. And so I would say the probability is high over the next few months that Canada does go into election mode.