Hyping stimulus plans, PM says Harper-era cuts not the way out of COVID-19 recession
OTTAWA -- Hyping his government’s coming stimulus plans—as announced in the fall economic statement presented on Monday—Prime Minister Justin Trudeau says that the Liberal approach to lifting the country out of the COVID-19 economic recession won’t be achieved through cuts.
“We all remember what happened when the previous government cut support too quickly during the 2008-2009 recession. That will not be our approach,” Trudeau said, during his Rideau Cottage address on Tuesday, referencing the funding cuts made by former prime minister Stephen Harper more than a decade ago.
“We’ve seen in recommendations from the International Monetary Fund, from the World Bank, from global financial institutions who have said: ‘do not make the same mistakes that were made by many countries’ including by this country and under the previous government, of turning off the taps too quickly after a recession,” said the prime minister.
“In the 2008-2009 recession, spending was scaled back too quickly and that austerity hurt Canadians. What we're going to be doing, is continuing to be there as long as it takes for Canadians to get through this pandemic and kick start the economy once again so it can come properly roaring back.”
Trudeau said that with vaccines on the horizon, the Liberals are starting to look in earnest at what comes next, and that will include a stimulus plan of between three and four per cent of Canada’s GDP, depending on the state of the economy and deficit at the time.
"This will be a significant investment to get our economy back on track, and it’s an investment that will make sure no one gets left behind. We need to address the very real gaps this crisis has laid bare… Because we are all better off when everyone can contribute to their full potential,” Trudeau said.
Though, the opposition parties are less confident in the government's approach.
“We thought that there would be some damage control... And there wasn't any. There was no plan for paychecks, there's no plan to get people back to work, just more credit card bills,” said Conservative MP and finance critic Pierre Poilievre about the fiscal update on CTV’s Power Play on Tuesday.
During the same panel, NDP MP and finance critic Peter Julian said Canada needs to put in a “sustainable” structure, suggesting to go harder after Canada’s richest. “It is foolish to only look at the expenditures side when we have to look at revenues,” he said.
The fiscal update showed a best-case $381-billion deficit, billions more in new spending on COVID-19 aid, and plans to launch into up to $100-billion in stimulus once society begins rolling back into some form of normalcy, potentially just in time for an early federal election.
The 237-page document also outlined a suite of promises targeted at key demographics. Among them:
- For young families: The creation of a Canada-wide “Early Learning and Child Care System” in 2021 and increasing the Canada Child Benefit program by up to $1,200 a year in 2021 for each child under the age of six;
- For seniors and those who care for them: a $1-billion “Safe Long-Term Care Fund” to help provinces and territories better protect Canadian seniors. The money will help improve infection prevention and control in long-term care homes and hire additional staff;
- For the environmentally friendly: the return of the home energy retrofit program to the tune of $2.6 billion, and a commitment of $3 billion towards the outstanding commitment to plant two billion trees;
- For students and home-workers: Eliminating federal interest on Canada Student Loans and Canada Apprentice Loans for 2021-22, and a new tax credit of up to $400 to cover costs associated with working from the dining room table;
- For Indigenous communities: allocating an additional $1.5 billion to eliminate the outstanding boil water advisories on First Nation reserves;
- For those wanting the wealthy to pay more: a plan to recoup billions in tax revenue by imposing the Goods and Services Tax/Harmonized Sales Tax (GST/HST) on multinational digital giants such as Netflix and Amazon, “so they pay their fair share,” as of July 1, 2021; and
- For the premiers: A proposal to update the fiscal stabilization program, offering to nearly triple the maximum payment to $170 per resident, up from $60, for an unspecified amount of time.
In an effort to quell concerns raised about the lack of fiscal anchor and the absence of a plan to ever return to a balanced budget, the Liberals introduced what they are referring to as “fiscal guardrails” in the economic update. These metrics, such as the unemployment rate, are meant to inform how much spending the economy can handle, but economists have said this approach likely won’t stop the calls for more fiscal restraint.
“The message from the government has been that with low interest rates we’ll be okay. But we're a little concerned that we may see interest rates coming up, that the debt burden will take a bite,” said Chief Economist with the Conference Board of Canada Pedro Antunes on CTV News Channel.
Asked to specify the role of these so-called “guardrails,” Trudeau offered no new detail on Tuesday, vowing though to “do this responsibly.”
With the legislation to implement Deputy Prime Minister and Finance Minister Chrystia Freeland’s economic statement on notice, the question in the House of Commons will now shift to whether or not the proposals for spending the Liberals have presented merit the backing of the opposition parties.
The initial reaction on Monday from the Conservatives was that the Liberals are putting the economy “on hold” due to what they described as a delayed COVID-19 response, while the New Democrats came out warning that with so much spending ahead, eventually “austerity is coming.”
However, neither party has committed outright to backing or voting against the fiscal update. The prime minister confirmed that indeed, the eventual votes on this bill will be deemed a matter of confidence, but said he’s “reasonably confident” that none of the opposition parties want an election right now.
“We certainly don’t want one… and there’s certainly things in this fall economic statement that every party should be able to support,” Trudeau said.