The federal Liberal government last week tabled its much-anticipated fiscal update – dubbed the Economic and Fiscal Snapshot 2020. Like many summertime photos, it was a bit blurry and unfocused. But what it lacked in definition it made up for with shock value. The federal deficit for this year is now estimated at $343 billion, pushing the country’s net debt well above a trillion dollars – $1.060 trillion to be exact.
Both numbers are considerably larger than those estimated by the Parliamentary Budget Office in a scenario presented last month. The PBO estimated the deficit for this year at $256 billion. As noted here, the PBO’s June 18 estimate
“does not include the cost of the two-month extension of the $500 per week Canada Emergency Response Benefit (CERB) approved last week, or the modest cost of the proposed one-time disability benefit. When those costs are added, the national debt may crack the $1 trillion mark, up from the PBO’s currently projected $962 billion.”
And crack through it did, with $32 billion less in projected revenue and $56 billion more in spending producing the $343 billion deficit predicted by Finance minister Bill Morneau instead of the PBO’s more modest estimate. The CERB extension, referenced in the PBO report, increased spending by about $20 billion. But the main reason for the increase is extension of the Canada Emergency Wage Subsidy (CEWS). The program currently subsidizes 75 per cent of an employee’s wages up to $847 a week for companies experiencing revenue declines of 30 percent or more.
CEWS has been championed by both big labour and big business, but companies have been slow to apply for the handout, prompting the government to extend it to at least December and consider changes to eligibility. Those steps will push the estimated cost to $82 billion, $27 billion higher than estimated in last month’s report from the budget office.
Although the increase alone amounts to $7 billion more than Ottawa spends on the much contested and debated equalization program, the hefty addition to the deficit created barely a ripple as it was presented to an afternoon sitting of a physically-distanced House of Commons. But such political consensus for efforts to preserve the economic status quo – the old normal – is not matched by unanimity on fixing some of the chronic problems highlighted by the pandemic.
Opposition members pressed for action addressing the national disgrace that is our long-term care system and the urgent need for a national childcare plan. Government ministers responded with bromides, praise of past – clearly inadequate – measures and pointed to its federal-provincial Safe Restart program as a short-term fix.
Under Restart, announced in early June and factored into the PBO scenario, the provinces have been promised $14 billion. On a per-capita basis that would mean about $375 million for Nova Scotia. But the money is subject to agreements to be negotiated over the next six to eight months and covers many areas – procurement of personal protective equipment for health care workers, testing and contact tracing capacity, paid sick leave, gaps in mental health services and assistance to municipalities. Support for childcare is limited to ensuring a “safe and adapted supply” for returning workers and aid for long-term care will focus on “immediate needs and gaps.”And provincial governments will be expected to take the lead.
As for Canadians with disabilities, their modest benefit was included in the Snapshot numbers, but the government is still trying to work out how to deliver it after enabling legislation became the victim of partisan wrangling, as described here.
Awaiting a vision
Overall, aside from breaking the unsettling news that this year’s federal deficit could be 34 percent higher than the PBO predicted last month, the Snapshot – despite running to 168 pages – did not tell Canadians very much worth knowing. The picture presented could be even worse a few months from now if COVID-19 returns with a vengeance. On the other hand, numbers may improve if the restart is a success and the virus is contained. As for any vision for the future, the Liberals were, as usual, longer on rhetoric than on detail. In tabling the document Morneau promised a reset, dealing with gaps identified by the pandemic. He spoke about a greener, more diverse economy, one that creates opportunity for women, youth, low income people, Canadians with disabilities and “LGBTQ2 communities, indigenous peoples, black Canadians and other racialized groups.”And like so many are doing these days, he looked to history for inspiration.
“Eighty years ago, Canada faced some of the worst days of the Second World War, and the government faced monumental and difficult choices. In this House, like today, there were those who criticized the government for not doing enough, and others who said it went too far…Today, as we evaluate the details of our measures and the scale of their reach, I want to tell this House that…every decision we made was guided by our belief that the well-being of Canadians had to come above all else.
“We have worked to lay out an economic response plan that is comprehensive, that is ambitious, and that serves those who need help the most. We have done so in the belief that Canadians would be able to fight the spread of this virus and come roaring back. We have done this to build a bridge to a safer place, from which we can build a stronger and more resilient future, just like in the Second World War”.
Morneau has promised a budget in the fall. Hopefully, unlike the Snapshot the budget will contain specifics on that “stronger and more resilient future” and how to achieve it. And now that even right wingers and the business community have accepted the virtue of large deficits, tabling of the budget would be a good time to start a wide-ranging national conversation on how best to finance the country we want.
Note: An earlier version of this post had the CEWS extending only to the end of August.