The Liberal government is preparing to spend up to $100 billion to kick start the post-pandemic economy as it stares down a record-high deficit projection of more than $381 billion for this fiscal year.
In a long-awaited economic statement, tabled today, Finance Minister Chrystia Freeland said the government’s immediate priority is to do “whatever it takes” to help Canadians and businesses stay safe and solvent.
The short-term stimulus package is valued at $70 billion to $100 billion over roughly three years. The government says the stimulus spending — intended to build a greener, more inclusive, more innovative and competitive economy — will launch after a vaccine is distributed and life begins to return to normal.
“When the virus is under control and our economy is ready for new growth, we will deploy an ambitious stimulus package to jump-start our recovery,” Freeland said in a statement read in the House of Commons today.
“Spending roughly three to four per cent of GDP, over three years, our government will make carefully judged, targeted and meaningful investments to create jobs and boost growth.”
Freeland said the stimulus program will help guard against long-term damage to the economy. She said government debt is highly affordable now, due to Canada’s strong past economic performance and low interest rates.
‘Down-payments’ on child care, green measures
The minister said the risks associated with not providing enough economic support right now outweigh those involved in spending too much. Freeland said the government will not repeat the “mistakes” made following the 2008 recession, when the federal government introduced austerity measures to rein in spending.
After some initial stimulus spending, then-prime minister Stephen Harper’s Conservative government cut federal spending across the board with a deficit reduction action plan (DRAP) that downsized the budgets of most departments and agencies by five to 10 per cent.
Freeland said the government will track progress by monitoring economic indicators — such as the employment rate and total hours worked — to determine when to end the stimulus spending.
In the meantime, the government plans to make investments that will serve as what it calls a down-payment on “transformative initiatives,” such as Canada-wide early learning and child care, job training and green initiatives.
Today’s economic statement promises a $1-billion fund to help provinces and territories improve COVID-19 infection control in long-term care facilities. The pandemic exposed deadly gaps in infection control in nursing and long-term care homes across the country.
Noting that the pandemic has left many middle-class families struggling, the government is also proposing a temporary support in 2021 of up to $1,200 for each child under six for low and middle-income families eligible for the Canada child benefit (CCB).
Freeland said the government is laying the groundwork for a Canada-wide early learning and child care system, and that more details will come in next year’s federal budget.
For now, the government is promising $20 million over five years — beginning next year with a $4.3 million annual allotment for a federal secretariat on early learning and child care that will engage stakeholders and analyze child care policy.
The government also is proposing to spend $70 million over five years, starting next year, and $15 million per year to continue the federal Indigenous early learning and child care secretariat.
“I say this both as a working mother and as a minister of finance — Canada will not be truly competitive until all Canadian women have access to the affordable child care we need to support our participation in our country’s workforce,” she said.
Today’s fiscal update projects the deficit will reach $381.6 billion by the end of March 2021 and could climb even higher, depending on factors such as the severity of shutdowns and the rate of COVID-19 infections.
That’s up from the $343 billion deficit projected in the the July fiscal snapshot. The government says it is expecting the deficit to decline to $121.2 billion in 2021-22, to $50 billion 2022-23 and to $24.9 billion by 2025-26.
Calling the Liberal growth plan “far-reaching and transformative,” Freeland said that while there is light at the end of the tunnel, the most difficult days of the pandemic may come in the weeks and months ahead.
“We are all tired. But we also know vaccines, and a better day, are coming. To get to that day, we must first help each other get through the winter,” she said.
The economic statement also offers help for struggling students, promising to reduce debt by eliminating interest on the federal portion of Canada student loans and Canada apprentice loans for next fiscal year.
It also promises $1.5 billion to speed up the process of lifting all long-term drinking water advisories in First Nations communities.
The Liberal government has not released a full budget since March 2019, before the last election.
O’Toole calls statement ‘stealth budget’
Conservative Leader Erin O’Toole called today’s statement a “stealth budget” and accused the government of “burning money to hide its incompetence.”
He called the government’s response to the pandemic “erratic and confused.”
O’Toole said there can be no plan for rebuilding the economy until there is a solid plan to procure vaccines.
“Our government had the duty to learn from its errors in the first wave, but instead of that, it failed to provide vaccines for Canadians at the same time as our allies,” he said.
The Conservatives have been critical of the government’s efforts to secure rapid testing and vaccines, accusing the Liberals of leaving Canadians at the back of the line for vaccinations.
That claim has been disputed by the head of a U.S. biotechnology company developing one of the most promising COVID-19 vaccine candidates. Noubar Afeyan, co-founder and chairman of Moderna, told CBC’s chief political correspondent Rosemary Barton that Canada is not far behind other countries on receiving doses of its vaccine.
O’Toole said the government’s approach is to add to the national debtload rather than create the conditions that would get people back to work.
CTF says debt will hit $1 trillion soon
Canadian Taxpayers Federation federal director Aaron Wudrick said Canada’s debt will hit $1 trillion within weeks; he called it a “sadly historic milestone.” He said the government must present a credible plan to get spending under control in next year’s federal budget.
“Alarmingly, there are no fiscal targets, and the government actually pledged to add another $100 billion in debt after the pandemic ends, effectively committing to spend money before it even knows what to spend it on,” Wudrick said.
“There doesn’t seem to be any place where the Trudeau government has even tried to save money and there’s no tax relief. A pandemic isn’t a free pass to cynically increase spending on everything, especially when taxpayers are struggling.”
The economic statement also offers aid for the industries hit hardest by the pandemic — such as tourism, arts and culture and regional aviation — by offering low-interest loans of up to $1 million through a program called the “highly affected sectors credit availability.”
NDP Leader Jagmeet Singh said the Liberal plan helps those who are profiting during the pandemic and fails those who need help the most, including smaller businesses.
“We see a Liberal government that is not willing to ask the wealthiest to pay their fair share. They have not really taken any concrete steps to to look at revenue sources from the pandemic profiteers, the excess profits made during this pandemic, nor a tax on wealth,” he said.
“They’re, in fact, not even willing to put in place any real tax measure on on the web giants, those who are making massive, if not record profits off the backs of people in our country, [who] continue to pay virtually no tax in our country.”
The Business Council of Canada praised some elements of the plan, including the steps toward affordable child care, expanded skills training and help for some hard-hit sectors. But the organization said the economic statement promises billions in new spending but lacks a “substantive plan” to spur private sector investment.
“Business, not government, is the primary engine of job creation and sustainable economic growth,” said president and CEO Goldy Hyder.
“Right now, the top priority is to fight COVID-19. But we also need a credible plan to move the economy forward and ensure there will be good, well-paying jobs for Canadians when the health emergency ends.”