Let’s write the recovery plan.

Jack M. Mintz

With the head- thumping announcement that the federal deficit is predicted to be $343 billion in 2020-21, Canadians are wondering what lies ahead. As a friend wrote recently, the Liberals seem to be pursuing “let’s make Canada broke again!” — referring to our 1994 public debt crisis.

Right now, the federal government looks almost rudderless. Will it spend vastly more? Where will economic growth come from? Are tax increases on the way and, if so, how big? Or are we going to inflate our way out of debt?

Finance Minister Bill Morneau has not provided answers yet about how economic recovery will be shaped. So maybe it’s time to help him develop a plan!

Let’s first recognize that, with so much uncertainty ahead, we don’t know the final deficit figure for this year. With 953,000 jobs created in June, maybe it won’t be nearly as bad as predicted. We also have low interest rates that should keep our borrowing costs down for years.

On the other hand, we don’t know how the pandemic or the economy will evolve for the balance of this 2020-21 fiscal year, never mind afterwards. Billions of dollars in deferred utility, mortgage, rent and tax payments come due this fall and some of it won’t be repaid. If people are not back at work, demands for more temporary spending will grow. Most economists do not expect the economy to return to pre- COVID days until sometime after 2021. Deficits likely won’t disappear for years.

A second important point is that the pandemic’s economic impact is uneven. Those on fixed government transfers or working for the public sector were little affected financially. Neither were workers in sectors like finance, professional services and telecommunications. On the other hand, severe impacts were felt in retail and wholesale trade, accommodation and travel and entertainment, with some jobs likely never to return. Unskilled workers were harder hit than skilled workers. What the hardest hit need most is new job opportunities.

We should recognize that economic planning in an uncertain world is not about making firm commitments. It is about risk management. How do we get the best leverage from our spending without blowing up the budget? As Bar

CLEAR PLANS WILL HELP THOSE CANADIANS WHOSE JOBS WERE LOST FOR GOOD TO FIND NEW JOBS.

ack Obama once said, “how do we make sure we don’t do the stupid stuff” that can make recovery more difficult?

To begin with, we should be asking ourselves what principles to follow in developing a federal recovery plan. The most obvious is to give top priority to getting people back to work. That means an uncompromising focus on economic growth, which in turn means getting the government out of the way, not promoting politically-favoured sectors.

A second objective is to make sure any plan we have is fiscally sustainable. Governments should adopt a fiscal anchor that convinces the public that debt financing will have a limit. The anchor might be a maximum debt/gdp ratio based on an estimate of Canada’s capacity for public debt. Or a deficit/ GDP target similar to the EU’S. Or a rule that spending grow only at the rate of growth of GDP as recovery takes hold. The key point is that the government needs to assure financial markets its finances are under control and taxes won’t rise so much as to sap growth.

The plan should also focus on do-able recovery measures. We should make sure both medicare and long- term care work as advertised.

We should accelerate infrastructure spending — but not waste any of it on virtue- signalling projects. Money should support, not just jobs, but private sector expansion. Why not bring in a temporary tax credit for home and office renovation, including helping small businesses comply with health measures?

Clear plans will help those Canadians whose jobs were lost for good to find new jobs, including by learning new skills. We need to reform CERB and student support to make sure they don’t reward people for not working.

Ottawa should deregulate, which will be win-win for governments and the private sector. For example, we should stop navel- gazing over spectrum allocation for 5G development, in which Canada is already lagging countries like Australia. Deregulation should aim to promote private investment, innovation and export-driven growth while protecting the public interest.

The recovery plan should encourage entrepreneurship and competition in all markets. It should make certain that key industries vital for growth, like airlines, do not go out of business. And it should eliminate incentives that keep already weak companies in operation.

Finance Minister Morneau was on the button when he said now is not the time to increase taxes. But gargantuan deficits are hurting confidence as investors and businesses worry about when the other shoe will eventually drop. The government should make clear how it will trade off tax increases with the objective of growing the economy. Instead of just raising taxes, it should lower the cost of public services.

I have no monopoly over ideas. I’m sure many readers have better ones. Why not send me your thoughts for “Morneau’s economic recovery plan” at policy@ucalgary.ca.

What should be our objectives? What actions will get people back to work? How do we make the government’s plan fiscally sustainable? What can we do to make sure Canada doesn’t go broke!