There’s only so many times you can superglue the same broken mug back together and there’s only so much debt a country can pile up before there are serious consequences. COVID-19 subsidies were always supposed to be temporary. It’s now time for the feds to set an end date to all this spending before our fiscal house falls to pieces. We cannot afford a repeat of the last fiscal year.
Budget 2021 will nearly double the pre-pandemic federal debt within just a few years. The debt is now more than $1 trillion and is increasing by $424 million every day. The overall debt tab is quickly approaching $30,000 per Canadian – man, woman, child, baby. Canada’s gross debt is almost 118 per cent of our GDP, the fifth highest ratio among 29 industrialized countries examined by the International Monetary Fund.
Then there’s debt interest. Over the next five years interest charges will cost taxpayers more than $150 billion. That money can’t go to health care or back into your pockets because it’s flowing to the owners and managers of bond funds.
The debt picture is grim no matter how you slice it. And what happens if Canada stumbles into another downturn or interest rates spike?
COVID-19 spending has a lot to do with this new layer of red ink. In March, the Parliamentary Budget Officer pegged the feds’ 2020 COVID spending at $271 billion – a 75 per cent add-on to federal spending. The PBO thinks we can get our deficit back to pre-pandemic levels. But for that to happen temporary COVID-19 spending must actually be temporary.
Despite the pile-up of debt, Finance Minister Chrystia Freeland has made it clear there is no concrete end date to the spending binge. “Our government is prepared to extend support measures, as long as the fight against this virus requires,” she said in her budget speech.
At best, the government has made a vague commitment to wrap up the COVID-19 subsidies eventually. But before the 2015 election candidate Trudeau told taxpayers he would run a few “modest” deficits. Trudeau also said the “budget will balance itself.” And at their party’s last policy convention, the federal Liberals voted in favour of a guaranteed annual income that would turn the temporary and costly COVID-19 subsidies into permanent red ink.
Trudeau and Freeland need to set a firm end date. If new COVID issues arise, Ottawa can develop new responses. This time round any new programs could be better targeted, avoid dishing out money to thousands of dead Canadians and ensure companies aren’t taking tax dollars while fattening their c-suite.
Or better yet, individual provinces can react to their own unique circumstances. That way provincial politicians would be forced to weigh both the pros and cons of every decision they make and would be forced to finds savings in other areas of their bloated budgets. A firm commitment to ending all the COVID-19 subsidies would also give our economy and small businesses more certainty.
It doesn’t take a Ph.D. in economics to understand that if you pay people not to work, fewer of them will work. A survey from the Canadian Federation of Independent Business found that 43 per cent of small businesses have had difficulty hiring because some workers “would rather collect EI or other COVID-related benefits.” Nearly two thirds of hospitality businesses have experienced this challenge, according to the survey.
Temporary subsidies need to be truly temporary. We can’t afford temporary programs that roll along simply because something bad might happen. Something bad is already happening right now: the massive pile-up of government debt.
This column was originally published in the Financial Post on July 2, 2021.