Financing the Canada Child Benefit

This essay examines the extent to which current versus future taxes (i.e., borrowing) are being used to finance the expanded Canada Child Benefit (CCB).
Prior to the Liberals’ introduction of the CCB in 2016, in 2015 the previous federal government had planned a major expansion of the predecessor programs to the CCB, increasing their collective cost from $14.3 billion to $18.0 billion in 2015-16, an increase of 25.9 percent.
The CCB replaced existing programs with a single, tax-free payment to eligible parents with children under the age of 18. The benefits were increased for most families, particularly those with middle-income.
In 2016-17 (the first full year of the CCB), the program cost $22.1 billion, 22.8 percent higher than the expected costs for the previous programs (post expansion). Between 2016-17 and 2019-20, the CCB has cost a cumulative $20.0 billion more than its predecessor programs.
Using the 2015 budget as a baseline for federal finances, there was a transition from an expected cumulative $11.7 billion surplus over the 2016-17 to 2019-20 period to an actual cumulative deficit of $77.1 billion.
The transition to deficits (borrowing) cannot be explained by lower revenues during the 2016-17 to 2019-20 period. The revenues collected during this period are almost exactly the same as in Budget 2015: $1.274 trillion versus $1.281 trillion. Put differently, the cumulative revenues collected by the Trudeau government are only $7.0 billion lower (0.6 percent) than were budgeted in 2015.
The federal government has also benefitted from lower interest costs of $26.2 billion over this time.
Simply put, the federal government financed the expansion of the CCB by deferring taxes (i.e., borrowing). Given the pre-recession expectation that the federal budget would not be balanced until at least 2040—which has worsened post-recession—future generations will bear the costs of the current CCB expansion.
This effectively means that the children of the parents receiving the CCB transfer will bear the costs of the current transfer.