Finance Minister Chrystia Freeland has been getting advice from all sides — the 145 recommendations from the Commons finance committee, the solid endorsement Canada received this week from the International Monetary Fund (IMF) for its response to the COVID-19 pandemic, and the input she’s been getting during her own pre-budget consultations.
But all boils down to this: pay now … and pay later.
At least that’s the sentiment expressed by three members of the Commons finance committee who took part in a panel discussion airing Saturday on CBC’s The House.
“I think we’ve got no choice but to spend and to basically target the spending into areas that’s going to certainly make a difference in terms of growth of the economy,” says Wayne Easter, the Liberal MP who chairs the committee.
“I think that’s essential.”
NDP finance critic Peter Julian agrees that Freeland needs to use this budget, the first in two years, to help Canadians laid flat by the pandemic.
“Canadians are struggling to make ends meet. Small businesses are closing. Families are trying to find the wherewithal to put food on the table, keep a roof over their head,” Julian said. “And so the issue is, not whether to invest or not. The issue is how do we do that?”
Lingering pandemic means future is uncertain
The “how” is the tough part.
Prime Minister Trudeau announced Friday that the government is extending the number of weeks that Canadians can claim benefits under a number of income support programs, including the Canada Recovery Benefit and the Canada Recovery Sickness Benefit.
But the one thing Freeland doesn’t know — and can’t be told with any certainty as she works on the budget — is whether the pandemic will have run its course sufficiently this spring to allow her to begin investing to stimulate an economic recovery.
Conservative finance critic Ed Fast argues the spending priority must remain on getting through the pandemic, rolling out vaccines and ensuring Canadians have the financial supports they need.
“And then thirdly, and this is really important, we need to understand what the future holds for us because there is an immense fiscal challenge facing Canada,” he said.
Fiscal anchor needed, opposition says
The last year has taken a toll on public finances. The forecasted budget deficit now stands close to $400 billion. And Freeland promised in her fall economic update to spend up to $100 billion to stimulate an economic recovery.
Fast said there needs to be some sort of fiscal anchor to constrain federal spending in this period of economic lockdowns caused by COVID-19 outbreaks — whether it’s the size of the deficit or the country’s debt-to-GDP ratio.
But the government has argued that these are unprecedented times and the normal benchmarks don’t apply.
When questioned this week in the Commons about the country’s high unemployment rate compared to the U.K. and the U.S., Freeland was quick to note that the IMF gave Canada high marks for its response to the pandemic.
“The report shows that Canada’s strong and decisive measures provided essential support to the economy and the functioning of financial markets and helped protect lives and people’s livelihoods,” she said.
Another report released this week said Freeland must ensure that any new spending is limited, both in amount and duration.
That report from the CD Howe Institute’s fiscal and tax working group said “any further, debt-financed stimulus should be temporary, essential and targeted” at improving productivity.
Avoiding permanent spending
Conservative MPs on the finance committee issued their own report from the pre-budget consultations. Fast said there is a decree against permanent new spending in Prime Minister Justin Trudeau’s January mandate letter to Freeland.
“Yet the first thing out of the chute that happened is the government announced a $3 billion-per-year transit program ad infinitum, well into the future,” he said.
Julian said investing in child care, affordable housing and the environment are critical not only to getting people back to work but to long-term economic sustainability.
“These are all things that are also job creators and help to take us through the pandemic and in the rebuilding after,” he said. “And we can’t forget the elephant in the corner, which is climate change, which costs our economy already $5 billion dollars a year.”
Those issues also happen to be on the Liberals’ radar as the budget approaches.
“This will clearly be a targeted budget, making investments to create growth in the economy and support people and businesses and communities while we find our way through to the end of this pandemic,” Easter told The House when asked whether Freeland’s budget might also be crafted with an eye to a spring election.
“We don’t need to go to an election road map. There’s not supposed to be an election until 2023. So this will be targeted investments for the future, not for an election.”
Put that down as another piece of free advice for Freeland.