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A fiscal update for hard times: Is it enough?

November 30, 2020

9-minute read

If anyone doubts that we are living through a grave global pandemic, all they need to do is read the federal government’s newest fiscal update.

It’s a fiscal update like no other. It’s designed to get Canada through a challenging COVID-19 winter, dropping money on long-term care, safer school conditions, rolling out a major vaccination program, and extending supports such as the wage subsidy program.

This will save lives and is a necessary minimum.
The fiscal update also plants new seeds of hope, laying out a three-year $70-100 billion stimulus package. This represents 3-4% of GDP, clearly indicating that the federal government is prepared to stickhandle a public-led recovery once the vaccination program has proven to be efficacious. 

And let us be clear: we need federal leadership to extend far beyond this moment of crisis.

Below, see analysis from:

  • David Macdonald’s fiscal overview
  • Katherine Scott’s feminist analysis
  • Lindsay McLaren’s assessment of public health initiatives
  • Hadrian Mertins-Kirkwood’s take on climate change 
Part of that stimulus plan appears to include, at long last, the roll out of a national child care plan, starting with the creation of a national child care secretariat. This has been a long time coming and it’s not lost on us that Canada’s first ever federal female finance minister, Chrystia Freeland, was the person to announce the news. Look at this long lineup of male finance ministers for context.

The finance minister called this “a feminist agenda”, but it will have to work with great speed to avoid the collapse of Canada’s child care system in the face of COVID-19. 

And that’s part of the challenge in this fiscal moment. Major federal investments will be required to get through the winter, but a broader vision to address the long-term and pressing challenges of our time—income inequality, climate emergencies, for instance—is equally necessary. 

COVID-19 can’t be the excuse to delay critically needed investments and policy to address these challenges once we’re on the other side of this pandemic. There can be no room for the austerity hawks once hope springs eternal. 

To that end, the finance minister promises to overhaul Canada’s tax system and this is critically important over the long term. There’s a section in the fiscal update called Lessons Learned from the Great Recession, pointing out that: “Premature withdrawal of fiscal support would risk allowing recessionary dynamics to become entrenched, holding back employment, increasing scarring from persistent unemployment–particularly for young people whose future career paths would be significantly affected.”

It’s a lesson that can’t be lost post-pandemic.

This was a fiscal update for hard times, and much more will be required to set Canada on a sustainable path. We laid out a recovery plan in our summertime Alternative Federal Budget. You can count on the CCPA to continue to push for this vision. Meanwhile, here’s our rapid response assessment of the fiscal update.

Fiscal update? Yes. Mini-budget? No.

Despite all of the hype, there actually isn’t much that’s legitimately new in this update.  

Revisions have been made to various programs’ costing, both up and down, but there are precious few actual new programs on child care, long-term care, pharmacare, infrastructure and so on (there is a new $1 billion LTC fund for continued emergency use). When it comes to new spending, the can has been kicked to the full budget, which we won’t see until March or April 2021.

The July fiscal snapshot had a deficit of $343 billion for this year driven by support for those who lost jobs, through CERB, and those who would have lost their jobs, through the wage subsidy. There have also been massive supports to the provinces to help cover their increased health care, school and child care needs. The deficit ended up being $382 billion with this update. 

What happened, generally, since the July “snapshot” is that revenue estimates were too pessimistic and several business support programs were very under-subscribed. These unforeseen gains largely paid for the new programs that have been announced since July, which include the EI/CRB changes, the new commercial rent program for small businesses, and the safe return to class fund.  

Generally speaking, what pushed the deficit up to $382 billion was updates to those business programs as they were extended into the first quarter of next year.  Generally, there aren’t really any particularly large new programs. What is new is the commitment to invest “$70-100 billion over 3 years”. That’s the sort of thing that Ontario has done when large unallocated funds are created. The deficit goes up now, but it could just as easily go down later if these funds aren’t needed.  

We should expect to see regular new billion-dollar programs announced every week or two in the coming months and years.

What’s incredible is that, despite a big increase in debt, the federal government is actually paying lower interest cost, thanks to historically low interest rates. It's as if you moved into a much better house, but you managed to refinance your mortgage so your mortgage payments dropped by 20%.

In other words, the investments announced in this fiscal update are sustainable—especially if the tax reform promised in this update comes to fruition.

But let’s pause on the deficit, because there’s a lot of misinformation about it: broadly speaking, a deficit in any sector of the economy means that another sector is in surplus by the exact same amount, that’s the nature of accounting. So that $382 billion federal deficit will create a surplus in other sectors of exactly $382 billion.  

The data, so far, shows that it is mostly households, and to some degree cities, that will get that surplus. It could have gone to corporate or banks profits, or even to non-residents if we spent it on imports.  

Thankfully, so far it’s Canadians who lost their jobs or would have lost them who received the surplus—exactly where the federal government’s deficit should have ended up. 

Where future surpluses are created will depend on where these new unannounced stimulus funds are eventually spent.

We appear to be on the cusp of beating COVID-19, with vaccine distribution likely starting next year.  Next year’s deficit and public health are inextricably interlinked. The more effectively we can slow COVID-19 through public health measures and end it with mass vaccination, the smaller the deficit...period.  

David Macdonald

Public health: an intersectoral vision?

The COVID-19 pandemic has shown us in no uncertain terms that health cannot be separated from the economy, nor from any other aspects of our lives, identities, and contexts. As Minister Freeland noted, the COVID-19 pandemic has prompted Canada’s most significant economic response since WWII; it represents the worst recession since the Great Depression of the 1930s, and the largest disease outbreak since the 1918 influenza pandemic. 

Indeed, by wrapping all of these up into one, the COVID-19 pandemic offers a once-in-a-lifetime opportunity for the federal government to advance a coherent vision for the future of public health: one that embraces the connections between health and the rest of our lives. 

Does the fiscal update deliver? Maybe. In terms of getting through this pandemic, Minister Freeland appropriately identifies the continued urgency for adequate personal protective equipment, as well as infrastructure for testing and contact tracing, and the immense upcoming challenges around expedient vaccine deployment. 

Furthermore, and in line with what we know about the social determinants of health, attention to these “core” public health system activities will be accompanied by significant ongoing efforts to protect and promote peoples’ livelihoods and community well-being, via income support for individuals and businesses. In some cases, these supports will be enhanced. 

The federal government’s pandemic response, to date, has shown elements of an intersectoral approach, which recognizes that primary determinants of health and well-being are not situated within the health-care system; rather, they reflect policy decisions outside of the health sector, that influence the environments in which we live, work, play, and age.

The crux? An intersectoral–and intersectional–vision must continue, beyond the emergency response phase.

The much anticipated vaccine, even with perfect efficacy and deployment, will not solve this public health crisis.

An intersectoral approach is essential, not only to get through this pandemic, but to be better equipped for the next one. It is also essential for addressing the significant, and in some cases, widening social and economic inequities in health that already exist in Canada but which, for many of us, remain hidden from conscience. 

Minister Freeland delivered some hints of an appealing, and generous, stimulus package that will get us back up and running (and perhaps even better than before) once the pandemic is over. There were some promising comments around actually taking action on safe drinking water in First Nations communities, setting foundations for affordable, universal child care, initial steps towards overhauling the tax systems to be more just, and some modest initiatives around a green transition. If implemented in their fullest sense, these initiatives would contribute significantly to health and well being. As expected in a fiscal update, details on these initiatives are limited. Does the fiscal update suggest a coherent vision for public health? Time will tell. 

Lindsay McLaren

GBA+ Analysis? Check. Feminist Recovery Plan? TBA.

This past September the federal government promised an Action Plan for Women in the Economy that would apply an intersectional feminist response to economic recovery from the pandemic. Today’s fall economic update describes how the COVID-19 pandemic has upended women’s lives and magnified pre-existing economic inequalities. The scale and the scope of the response, however, is limited. 

The question is: can women wait?

The biggest ticket item is the extension of relief to families with young children. Families receiving the Canada Child Benefit will receive four tax-free payments of $300 for each child next year. This temporary assistance will benefit roughly 1.6 million families and about 2.1 million children. 

Will other support be forthcoming for people with disabilities or seniors? No word as yet on the new Canada Disability Benefit.  

On the child care front, stay tuned. The government is creating a Federal Secretariat on Early Learning and Child Care to coordinate efforts in building a Canada-wide system. It is also making permanent child care transfers to the provinces and territories, from 2028 onward. Additional funding is being allocated to support the Indigenous Early Learning and Child Care as well. The plan to build an “affordable, accessible and high-quality child care from ocean to ocean to ocean” will be released in Budget 2021.

Additional monies will flow to support Canada’s fragile long-term care system and to assist with the recruitment and retention of care workers. This new fund, worth $1 billion, will help support provinces and territories to carry out infection prevention and control, hire additional staff, and top up wages. National standards for the sector, however, are still under negotiation. 

New monies are targeted for training: $274.2 million over two years, starting in 2021-22. This funding will support the Indigenous Skills and Employment Training Program, the Foreign Credential Recognition Program, the Opportunities Fund for Persons with Disabilities, and the Women’s Employment Readiness Canada pilot project. Given the scale of the disruption to the labour market, especially among low-wage earners, targeted investments in training will be essential to a successful recovery. 

Minister Freeland states that the federal government is laying the groundwork for a solid recovery, that the modest stimulus announced thus far—including these measures targeting diverse women—will provide the fiscal support for the economy to come “roaring back” next year. In the meantime, we wait for the federal budget—and the promised vaccine—even as disparities continue to widen and pressures on women mount.  

Katherine Scott

Real test for climate policy will come later

The federal government has promised to publish a comprehensive new climate action plan before the end of 2020, which will map out Canada’s path to net-zero emissions by 2050. Since that plan is still under wraps, the fiscal update was understandably thin on climate policy, but there were a few noteworthy announcements.

The biggest new spending commitment is a $4 billion package (over ten years) for various nature-based climate solutions, of which more than $3 billion will go towards meeting the Liberals’ election promise of planting 2 billion trees. 

Homeowners can look forward to a new $5,000 rebate for energy efficiency improvements as part of a $2.6 billion package (over 7 years). 

And the government is putting an additional $150 million (over 3 years) into charging infrastructure for zero-emission vehicles (ZEVs).

These are all worthwhile investments in their own right, but how they fit into the government’s broader climate plan remains to be seen.

Planting trees, retrofitting buildings and increasing ZEV uptake doesn’t go far enough without a clear timeline for winding down oil and gas production. 

The new climate plan will be critical. And we may not see funding for that plan until the spring budget.

Hadrian Mertins-Kirkwood

Follow @ccpa for more analysis of the fall fiscal update as it is released.

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