Where do we go from here?
We knew it would be big and it is: $343.2 billion.
That’s Canada’s new deficit given the emergency pandemic measures, lost revenue and all the direct financial supports and tax deferrals provided to individuals and businesses.
It’s more than 12 times the $28.1-billion deficit the government projected before the pandemic, and it’s likely to grow further still.
It’s also entirely understandable given the extent of the economic crisis brought on by COVID-19 and the need for an unprecedented government response. And, with historically low borrowing costs, it’s not cause for panic.
Millions of Canadians lost their jobs practically overnight as governments sought to contain the virus by shutting down vast swaths of the economy. Millions more saw their hours and pay severely curtailed. Because of the low-paid and precarious nature of far too many jobs, many of those Canadians had little to no savings to fall back on. The government had to step in with massive investments. Through new programs — the Canada Emergency Response Benefit (CERB) and the wage subsidy — the federal government has supported more than 11 million Canadians. It has topped up a myriad of existing federal benefits to provide additional support to the most vulnerable.
Getting so much money out the door quickly — direct aid since March totals $212 billion — certainly prevented Canada’s economy from contracting as much as it would have and kept unemployment numbers (still expected to hover just under 10 per cent this year) from being even worse.
Ottawa — not provincial governments and certainly not families — is best placed to borrow on this scale.
Wednesday’s “fiscal snapshot” tells us where Canada stands now, four months in. What we really need to know is what happens next. On that front, the snapshot was far less illuminating
Finance Minister Bill Morneau is clearly banking on the wage subsidy as the key measure to support and encourage the economic recovery. It looks like the government is budgeting an additional $52 billion, bringing the program total to $82 billion this year.
Morneau called this evidence that the government will “continue to support our Canadians, to support jobs to get us to the next step.” But how will Ottawa manage to get that money out the door? To date, take up of that program, which pays some 75 per cent of payroll for qualifying companies, has been far lower than the government hoped.
As of the end of June, the CERB, which directly pays individuals $2,000 month, has supported more than eight million people. The wage subsidy, by contrast, reached just three million. Morneau indicated he would have more to say “in the next short while” on changes to the wage subsidy so it better meets its aims. The sooner the better. Employers and employees need to know there’s a path back for them before they abandon hope. And what of the CERB? That emergency benefit is slated to wind down long before the economy gets back to anything approaching normal. Indeed, there’s no indication that public health officials are even prepared to allow many jobs to bounce back given the need to prevent a second wave of the coronavirus.
That leaves employment insurance for those who can’t find work. But the reason the emergency benefit was created — and take up has been so substantial — is because employment insurance (EI) is decades out of date. It hasn’t adjusted to the massive expansion of contract and self-employed workers and it seems unlikely it will be overhauled in the next few weeks.
Ottawa can’t continue the CERB indefinitely. Yet, given how inadequate EI is, it can’t simply turn it off overnight.
It needs to create a more flexible support system tailored to the emerging reality: for months, at least, many will continue to struggle finding regular employment.
Canadians need to hear more about how the government plans to navigate this difficult path. And far more about what broad economic path exactly we want to be on.
“The government is committed to ensuring that no Canadian is left behind as it works to create a more sustainable and resilient economy in the wake of the pandemic, and for the generations to come,” states the fiscal snapshot.
Will Canada forge ahead with a greener economy? Will the government accelerate the growth of technology and efforts to make Canadians companies more productive? Or push for a fairer economy that provides better jobs and a stronger social safety net that properly supports those in need?
We all know the pandemic has revealed Canada’s many economic and social inequalities.
As Prime Minister Justin Trudeau said, “there are going to be really important discussions and indeed political debate about that and what our economy looks like in the coming years.”
But he’s wrong to suggest those discussions should wait until after the crisis passes. The investments that the government makes now set the direction our economy will take.
If we’re truly going to “build back better,” as Trudeau says, the time for decisions is now.
Employers and employees need to know there’s a path back for them before they abandon hope