There’s only so many times that 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 and now it’s time for the feds to set a concrete end date to all this spending before our fiscal house falls to pieces.
Taxpayers don’t know when Prime Minister Justin Trudeau will put an end to all the COVID-19 cash. But we do know that we can’t afford a repeat of last year.
Budget 2021 will nearly double the pre-pandemic federal debt within a few years. The debt is now more than $1 trillion and is increasing by $424 million every day. That debt tab is quickly approaching $30,000 per Canadian.
When looking at total indebtedness, Canada’s gross debt to GDP is about 118 per cent, which is the fifth-highest among 29 industrialized countries examined by the International Monetary Fund.
Then there are debt interest charges. 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 going to the bond fund managers.
The debt picture isn’t bright, no matter how you slice it. And what happens if Canada stumbles into another downturn or interest rate spikes?
The 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-19 spending at $271 billion. That would make up 75 per cent of the total spending from the year before. The PBO thinks we can get our deficit back to pre-pandemic levels. But, for that to happen, the temporary COVID-19 spending must remain temporary.
Despite the pile-up of debt, Finance Minister Chrystia Freeland has made it clear that 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,” said Freeland during her budget speech.
At best, the Trudeau government has made a vague commitment to wrap up the COVID-19 subsidies eventually. But Trudeau also told taxpayers that he would run a few “modest” deficits and that the “budget will balance itself.” Liberal Party members also voted in favour of an annual guaranteed income at the party’s last policy convention. 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 a new issue arises, Ottawa can develop new responses. And, with the benefit of hindsight, 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 unique circumstances. That way, provincial politicians would be forced to weigh both the pros and cons of each decision 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 PhD in economics to understand that if you pay people not to work, businesses are going to have fewer people working. A survey from the Canadian Federation of Independent Business found that 43 per cent of small businesses had difficulty hiring because some workers “would rather collect EI or other COVID-related benefits.” Nearly two-thirds of hospitality businesses experienced this challenge, according to the survey.
The temporary COVID-19 subsidies must remain temporary. We can’t keep having temporary programs rolling along because something bad might happen. The reality is something bad is already happening right now: the massive pile-up of government debt.
Franco Terrazzano is the Federal Director of the Canadian Taxpayers Federation.
Franco is a Troy Media Thought Leader. For interview requests, click here.
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