COVID-19 illustrates the flaw in Trudeau’s logic

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No one knows how much Canada’s response to the coronavirus pandemic will cost.

Sure, people have thrown out a variety of numbers, but none of them are true.  If one of them ends up being true, whoever said it simply got lucky.

When parliament reconvened a couple of weeks ago to pass an $82 million relief package, it looked to be the tip of the iceberg.

Estimates from economists and government analysts say we might be looking at $200 billion, though this is more of a guess than an estimate even.

As Toronto Star columnist Heather Scoffield said, “It’s certainly not backed up by rigorous math – because there is none.”

This isn’t a criticism of the spending, but rather a grim recognition that there will be long-term implications for Canada beyond the health effects of COVID-19.

The government’s approach in the thick of it is to spend the money now and deal with the fallout later.  It’s easy to understand why, in a crisis, this mentality can take hold.

Spain, for example, had an initial relief package of €200 billion, worth a whopping 20 per cent of the country’s GDP.  Spending this much comes at a price in more way than one.

One thing we do know about our response to COVID-19 is that every time a program is unveiled, we learn about large gaps and holes that require a new program – or an expansion of an existing program – to actually help those who need it.  That $82 billion was found to be inadequate just a couple of days after it was passed.  The 10 per cent wage subsidy for employers became a 75 per cent wage subsidy and other changes were made increasing the cost by about $2 billion.  (The revised legislation has yet to be passed by parliament).

This week, Prime Minister Justin Trudeau said the eligibility for the Canada Emergency Response Benefit would be opening up.  Given the sheer volume of Canadians who have been laid off, had their hours cut, or are otherwise unable to work because of COVID-19, this is important.  But every dollar out of the government’s bank account has to come from somewhere.

The silver lining here is the government’s disbursements are directly going into people’s pockets rather than being filtered through climate change initiatives and who knows what else.

Trudeau has been spending like a drunk sailor since he took office in 2015 – running deficits worth $100 billion for a litany of programs.  Trudeau’s rationale has always been, in effect, ‘we can afford it.’  The reason?  Because times are good.

He hasn’t been wrong.  Canada has been in the midst of solid economic growth for the last five years, albeit not as much as the United States has.

COVID-19 illustrates the flaw in Trudeau’s logic: if bad times call for monumental spending, and good times call for monumental spending, when is the time for restraint?

There isn’t one, in Trudeau’s calendar.  And it’s because of that that Canada will have a more difficult time weathering the economic fallout of COVID-19 than it needed to.

Before COVID-19 hit, federal and provincial debt in Canada was expected to reach $1.5 trillion this year.  This fiscal cycle the federal government will spend $24.4 billion simply on servicing debt.  These numbers will look very different next year because of what we’re in the midst of now.

I suspect Trudeau will invoke COVID-19 anytime he’s challenged on his spending record in the years to come, despite the growing deficit predating the pandemic by years.

At a press conference Thursday I asked Conservative finance critic Pierre Poilievre whether the Conservatives will hold off on criticizing the Liberal deficit record for that reason.

“No, we will make no such commitment,” he said.  “We will criticize them on debt and deficit spending because they added almost $100 billion of debt before the first case of coronavirus landed on our shores.  We think that is appalling; there was no excuse for that.”

“When the crisis is over we will argue for a resumption of strict spending discipline so that we can phase out the massive deficits that will be now, more than ever even, unsustainable,” Poilievre indicated.

Just as Trudeau insisted on spending in good times and bad, the recovery period from bad to good will no doubt be met by a call to, you guessed it, spend.

We should support the relief, but fiscal responsibility must start the second the crisis is over.

Photo Credit: Jeff Burney, Loonie Politics

Andrew Lawton is a fellow at the True North Initiative and a Loonie Politics columnist.

More from Andrew Lawton.     @andrewlawton

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