The Fall Economic Statement released yesterday is necessarily shaped by a high degree of uncertainty. Despite promising reports that we may have an effective vaccine against Covid-19 within months, the pandemic is very much with us and economic recovery is far from certain as quarantines and lockdowns continue.
The statement's 200 odd pages provide a detailed report on what has been done to date in terms of new program spending, announce a few new measures, and set out a medium term fiscal and economic strategy.
In terms of macro economic and fiscal policy the government says, as it should, that it will spend what it takes to deal with the immediate health and jobs crisis and will not withdraw support prematurely. Indeed, it is promised that there will be no turn to austerity before employment “guardrails” are achieved, and that recovery will be followed by a fiscal stimulus of about 1% of GDP per year for three years.
The finance minister notes, correctly, that interest rates are very low, and that the government can lock in new debt at very low cost by selling long-term bonds. Indeed, they are considering introducing fifty year bonds. The deficit scolds have no case, though the Conservatives deplore the scale of new spending without telling us what they would cut.
In terms of immediate new measures, there are to be improvements to the Canada Emergency Wage Subsidy (back to a 75% maximum wage subsidy), more supports for heavily impacted sectors and small businesses, and some new spending on pandemic related health programs.
The provinces will claim, with reason, that they are being forced to pay for large increases in health spending as hospital admissions ramp up, and that this is not sustainable for those in very weak fiscal positions. The cities deplore the lack of support as municipal budgets collapse, not least due to falling use of public transit.
After the pandemic, the government is promising a significant but not huge stimulus program, with a focus on green jobs ( a major housing retrofit program; building stations for charging electric vehicles, tree planting and reforestation.) This is all to the good, but we should be making these investments and many more irrespective of the strength of the recovery. It is also unclear how much new money is being spent, and when projects will begin.
There are, yet again, promises of a national child care and early learning program, and even some funding for a national secretariat. More details are expected in the spring budget, but the government seems to be thinking of an incremental roll out rather than a big new program.
The government plans to spend $1 billion on improvements to the quality of long-term care for seniors and speaks to the need for national standards. But, as is the case with pharmacare, the focus seems to be on incremental support for the provinces rather than a bold plan to expand medicare beyond physician and hospital care.
A relative lack of ambition post-pandemic is also suggested by the government's lack of interest in fair tax reform. Stock options for employees of public companies are to be limited to $200,000 per year, but are untouched for private companies. CRA audits to counter tax evasion are to be expanded, and digital giants will pay some more tax down the road.
But there is no mention of wealth taxes, taxes on excess corporate profits, or closing personal income tax loopholes such as the capital gains exemption, all of which are needed to fund a serious reform of social programs to fix the gaping holes in our safety net exposed by the pandemic.
To end on a positive note, the statement pays far more attention to equity issues than has been the case in the past, paying more than lip service to the need for systemic reforms to fight discrimination.
Andrew Jackson is the former Chief Economist of the Canadian Labour Congress and the Senior Policy Advisor to the Broadbent Institute.