Next few weeks in U.S. are crucial for Canadian recovery

When former U.S. president Barack Obama appeared with Joe Biden at a drive-in rally in Miami just before election day last week, he held out hope that a Biden administration would be a whole lot less exhausting.

“You’ll be able to (go) about your lives knowing that the president’s doing his job instead of suggesting we inject bleach,” Obama said.

We’re not there yet, and not just because Donald Trump hasn’t accepted defeat.

The stimulus package that is in flux in the United States, and that means so much to the stability of markets and economies including next door in Canada, will still toss and turn with the upheaval of U.S. politics for the next couple of months - and perhaps even longer, depending on the balance of power in the Senate.

And the coronavirus is raging, here and there, pushing many areas to increase restrictions.

These next few weeks in the

U.S. are crucial for Canada’s economic recovery.

For sure, the sigh of relief that many Canadians breathed upon learning the presidency would go to Biden is warranted on many fronts over the long run.

With a predictable president and a stable administration that negotiates in traditional ways, Canada can hope for a calmer, more rational ongoing conversation with its closest trading partner. There will be the perennial concerns about softwood lumber, “Buy American” and the Canadian exemption, and security at the border. There will be relentless lobbying on the Keystone XL pipeline.

Those conversations will be important for Canada’s economy, but, as Obama suggested, they will require less constant and creative diplomacy as Trump’s approach to trade demanded. It will certainly be far less exhausting than having to instantly mobilize allies on both sides of the border to fight off an aluminum tariff that pops out of nowhere.

But long before we get to sitting down and discussing the finer points of stumpage fees and countervailing duty tariffs, the politics around the U.S. stimulus package are a daily reminder of how Biden winning the presidency is one thing, but stability throughout the U.S. political landscape is quite another.

Democrats and Republicans have been bickering about the size and shape of the next stimulus package for months.

The Democrats in the House of Representatives and the Senate are pushing for measures worth about $2.4 trillion (U.S.). Republicans, who control the Senate, want to see $500 billion in aid, a package that would not include stimulus cheques for individuals or transfers to state or local governments. There was another showdown on Monday and compromise seems a long way off.

The size of the package matters to Canada, of course, and so does the design. The bigger the package, the more money washes over the border to buy our goods and services. The more money that goes to lower-income Americans, the more likely it is to be spent rather than saved, and Canada once again benefits.

Both countries were generous with their support packages during the early stages of the pandemic, but the animosity between the Democrats and the Republicans has meant that there is no predictability to that support in the U.S. right now.

The election results probably won’t change that dynamic. The Democrats have maintained control of Congress, but the Senate is evenly divided, awaiting run-off elections in January.

That’s exhausting for Canadians looking for all the help we can get to boost our economic growth.

Mixed into all this is each country’s ability to deal with the spread of COVID, which is tightly linked to the ability of the economy to recover on both sides of the border.

“By far the greatest risk (for growth) right now is COVID spread,” says Nathan Janzen, a Canada-U.S. specialist at Royal Bank of Canada.

While the U.S. tends to shun pandemic restraints more than Canada, both countries are seeing a steep rise in localized new restrictions as COVID-19 caseloads grow, hurting consumption and productivity on both sides of the border.

That throws economic momentum into question in the United States and Canada. The CanadaU.S. border remains closed, of course, hurting tourism and some forms of trade. And the wait for a Biden plan and a vaccine that works feels very, very long, for businesses and workers alike.

There’s a connection between government relief packages and the spread of COVID-19. In Canada, the fiscal response has been proportionately larger than in other countries, and the spread of the virus has been less deadly than in the United States and Europe, economists at CIBC point out.

Canada can hope that, for the sake of humanity and for the economy, American lawmakers can figure out a balance that will juice their growth, grapple with the pandemic, and agree on a stable plan that will set us all on the right track.

But even just hoping is downright exhausting.

Heather Scoffield is the Ottawa bureau chief and an economics columnist for the Toronto Star