Opinion: The hidden federal budget assumption that most commentary missed

financialpost.com:

By Niels Veldhuis and Jake Fuss

The federal budget has swollen to a staggering half-trillion dollars in annual spending — yes, a whopping $538 billion this year, roughly $13,233 per Canadian — and the document presenting it now stretches to over 430 pages. Big initiatives (e.g., the economically damaging capital gains tax increase) are easy to spot and comment on, but the budget’s scale and complexity make it very hard to properly evaluate within a single news cycle. Not surprisingly, most post-budget analysts missed a critically important assumption that underlies every number in the budget — the Liberals’ assumption of productivity growth.

Canada is in the midst of a productivity crisis. “Canada has seen no productivity growth in recent years,” said Carolyn Rogers, senior deputy governor at the Bank of Canada, in a recent speech in Halifax. “You’ve seen those signs that say, ‘In emergency, break glass.’ Well, it’s time to break the glass.”

Normally, the word “productivity” puts most people, die-hard economists excepted, to sleep. Or worse, it prompts a reaction of “You want us to work harder?” As Rogers noted, however, “Increasing productivity means finding ways for people to create more value during the time they’re at work. This is a goal to aim for, not something to fear. When a company increases productivity, that means more revenue, which allows the company to pay higher wages to its workers.”

The media gave Rogers’ stark warning wide coverage. It should have served as a wake-up call, spurring the government to immediate action. At the very least, this budget’s ability (or more accurately, inability) to increase productivity growth should have been a core focus of every budget analysis. But it wasn’t.

The