Why one former Bank of Canada governor thinks Freeland’s 2024 budget will be ‘the worst’ in decades

Without having seen it, former Bank of Canada governor David Dodge believes that Tuesday’s 2024 federal budget from Deputy Prime Minister and Finance Minister Chrystia Freeland is “likely to be the worst budget” in decades.

“I think this is likely to be the worst budget since the [then-finance minister Allan] MacEachen budget of 1982, in the sense of pointing us in the wrong direction as to how we go about raising the incomes of Canadians and actually making Canadians feel better over the medium term,” Dodge said in an interview on CTV News Channel’s Power Play with Vassy Kapelos.

In a time of high interest rates and inflation, the 1982-83 federal budget, under then-prime minister Pierre Elliott Trudeau, became the object of political fury over spending, taxation, and wage restraint measures within it. 

Dodge, who was governor from 2001 to 2008, was referencing the strong indications that in order to help finance the nearly $40 billion in pre-announced new spending without raising the deficit, the federal government may impose some form of individual wealth tax or excess profit tax on wealthy corporations.

Freeland will present the budget in the House of Commons on Tuesday afternoon, vowing a plan centred on “generational fairness.”

“Something doesn’t add up. I think there’s a big question of how much of all that promised spending is going to be booked into this year and next year, and how much is going to be deferred?” Dodge said.

“I think there is a very real possibility that they’ll do exactly the wrong thing and tax the very folks and the very corporations that are going to make the investments that will actually raise income over time.”

His concern is that wealth taxes would slow growth, and his preference would be for the federal government to “increase saving” rather than increase taxes.

In the interview, Dodge also expressed doubt about the efficacy of the Liberals’ plans aimed at addressing the supply side of Canada’s housing crisis.

On Monday, while addressing a largely business-centric crowd that’s calling on the government to spur economic growth and not impose new taxes that could deter investors, Prime Minister Justin Trudeau made no mention of any wealth-targeting plans that may be afoot.

The government’s position is that the country is at a “pivotal moment” that requires urgent investment, including in areas of affordability concerning millennial and Generation Z voters, such as housing and jobs.

“Millennials and Gen Z now make up the majority of Canada’s labour force. They are our economy … They now feel like middle class stability is out of reach. We need to meet this moment, because that can’t be allowed to happen,” Trudeau said. “The economy is only as strong as it is optimistic.”

You can watch the full interview with David Dodge in the video player at the top of this article