OPINION: Canada Needs a Debt Plan After the COVID-19 Crisis

Canada’s COVID-19 crisis response has been timely and robust, but Conservatives are right to call on the government to address the rising debt.

By Uzodinma Ukagwu

COVID-19 has brought on perhaps one of the biggest economic crises since the Great Depression, and Canada may have a hard time keeping up.

To reduce the spread of the virus, the Canadian government encouraged provinces to shutter or alter operations within most businesses, as did the majority of the world. This resulted in a national and international slowing of economic activity, accompanied by huge losses of revenue for many struggling businesses, and a biblical amount of job losses.

This economic crisis required swift action, and the federal government has largely delivered in this hour of need by funneling relief money into the pockets of Canadians most affected. 

The Canadian Emergency Response Benefit (CERB) has supported unemployed Canadians with $2,000 a month, and the wage subsidy which reimburses employers up to 75 per cent of an employee’s wage, enabling employers to keep employees on the payroll. 

Other support measures for individuals include money for students and seniors, as well as a wage top-up for essential workers. For businesses, the federal government has introduced a rent relief program, several sectoral assistance programs, and facilitated access to loans to help businesses survive the crisis.

While appreciated by Canadians receiving them, all these emergency relief measures have and continue to cost the government a lot of money. 

“Canada’s federal debt could hit $1 trillion during this fiscal year […] and the overall federal debt could top $3.2 trillion.”

Only a week after the wage subsidy program opened, almost 100,000 Canadian businesses had applied and 1.7 million Canadians were already receiving money through the program.

By the start of May 2020, over 500,000 small businesses and non-profits in Canada had already been approved to receive interest-free loans of up to $40,000, with only $30,000 required to pay back. As of mid-May over eight million Canadians had applied for the CERB and over $35 billion had been disbursed. 

Indeed, the Parliamentary Budget Officer has estimated that the total cost of all the federal government’s direct support will cost $145 billion.

There is no doubt Canada’s emergency response has been top-notch and robust with providing timely assistance to millions of Canadians in this difficult time. But the federal government needs to demonstrate that it understands the legitimate concerns raised by the Conservative opposition about the growing debt, and take steps to assure worried Canadians that Canada’s debt remains under control. 

The Parliamentary Budget Officer, Yves Giroux, recently commented that it was possible that Canada’s federal debt could hit $1 trillion during this fiscal year. Since then, Financial Post has reported the overall federal debt could top $3.2 trillion. Approaching this significant debt mark should give policymakers pause. 

Canada paid a huge price with hard-hitting spending cuts in the 1990s to get the debt under control and we should be wary of undoing all that good work.

Consider our neighbours to the south, who have been fumbling and bumbling from one crisis or war to another, and have failed to tackle their growing debt which now tops $24 trillion

“Canada can’t afford to be unprepared.”

The Republicans have prioritized tax cuts and military spending, while the Democrats have prioritized domestic program spending. The United States congress continually reaches compromises to fully fund both parties’ priorities at the expense of their rising debt.

Canada can’t afford to dwindle into debt at the same pace as the United States, who have the economic and currency muscle to back up their profligate spending. Our fate would be more akin to that of Italy’s, still struggling under a political and economic crisis because of their level of debt. 

Canada may be a little ways off but we’ve been there before, and we need a debt plan to ensure that our debt remains under control. 

It is all well and good to spend in order to stimulate the economy in this time of crisis, and Canadians can understand and forgive that. However, the government must be prepared to tighten their belt after the crisis is over, so that Canada can lessen its debt and be fiscally prepared for when the next crisis hits. 

I’ll say it one more time: Canada can’t afford to be unprepared.

Copyright© 2020 by Uzodinma Ukagwu

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