So what is Erin O’Toole’s economic plan?
She is the country’s first female in charge of fiscal policy, and she is thinking big — big deficits, big spending, big government.
The description fits Canadian Finance Minister Chrystia Freeland, but it also describes Janet Yellen.
Yellen won the overwhelming support of the U.S. Senate to become President Joe Biden’s treasury secretary, and she’s gearing up to use a powerful and heavy-handed approach to fiscal policy as the motor for economic recovery.
“Right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen told the Senate finance committee last week. “In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.”
What’s notable for Canada is that Yellen’s pitch during her confirmation hearing was remarkably similar to Freeland’s approach to the next budget: generous government programs to keep people safe and then get them back to work, especially vulnerable groups hurt by the pandemic.
But Yellen was far better received, even in a country that has become so notorious for its divisive politics. Here, it’s a different story. The federal Liberals have signalled clearly that they, too, intend to act big, and for many of the same reasons Yellen stated.
“We are not simply aiming to get back to where we were before COVID-19,” Freeland said last week as she launched a round of public consultation for what she said would be one of the most significant budgets in a generation.
“The pandemic has exposed critical gaps in our social safety net and the virus has hit certain sectors, certain groups of people, harder than others — seniors, women, low wage workers, young people, people of colour, Indigenous people.”
It means that when Freeland asks the public to weigh in about what they want in the budget, they can choose among options like child care, skills training, a low-carbon economy and technology, all along the lines of the “build back better” slogan that has taken hold on both sides of the border. But the choices notably don’t include reining in spending, tax cuts or deficit control any time soon.
The goal, Freeland says, is to spend “whatever it takes” to soldier through the pandemic, and then put up to $100 billion in a three-year stimulus package aimed squarely at bolstering the job market and enhancing growth — preferably equitable growth that also helps heal some of the inequalities of the past that were exacerbated by the pandemic. Only after that will the government start to figure out how to control spending and set out a sustainable fiscal path for the long term.
It’s an approach that reflects a growing consensus pushed by the International Monetary Fund, the World Bank and many of the world’s leading economic thinkers.
The Conservatives’ response to all this is perplexing.
Of course, the Official Oppositions job is to oppose, and there are many contentious elements to the “build back better” track that both Freeland and Yellen are laying down. Can funding for a low-carbon economy do double-duty and resolve injustices in the labour market? Does child-care funding get to work fast enough to help in the recovery? Should infrastructure, the traditional stimulus tool, still be front and centre if it employs more men than women?
But Conservative Leader Erin O’Toole seems to reject the approach wholesale as a radical experiment in reckless budgeting that will detract from returning the economy to its previous state.
“It’s not the time to experiment with our economy. It’s not the time to push an ideology,” O’Toole has said.
“My Conservative team will relentlessly focus on the COVID-19 recovery, jobs, pushing wages up, and getting Canada’s economy and finances back on track,” he explained.
“The Liberals, by contrast, view this pandemic as an opportunity to experiment on risky, ideologically driven and unproven schemes involving the Canadian economy. They want to reimagine the economy, which means they decide which Canadians get jobs and which sectors are targeted for recovery. That reimagining exercise is a massive distraction from getting vaccines into the arms of Canadians and getting all Canadians back to work.”
O’Toole’s officials aren’t very forthcoming about what the reference to “risky, ideologically driven and unproven” means, saying we need to wait for the Conservative election platform to find out. But they do argue that a push for a green economy in Ontario didn’t create jobs.
They also say that when they talk about their intention to drive up wages, they mean they’ll bring good jobs to Canada — presumably a reference to mentions O’Toole has made in the past about repatriating production of key supplies back to Canada. He has also spoken about whittling down the deficit gradually, over the course of a decade, and flattening out the tax system.
But clearly, both Freeland and O’Toole recognize the immediate need for fiscal policy to deal swiftly with COVID-19, and then focus hard on repairing the job market. In the U.S., senators found enough common ground to give Yellen some scope to act. Canadian job-seekers should be able to hope for that, too.