March 19, 2019: That was the last time the Trudeau government presented a budget. The situation is unusual, tending to problematic. The provinces, grappling with the same pandemic challenges, somehow managed to table budgets. Ottawa still has not.
Yes, the Liberal government has, of course, had to get its spending plans through Parliament; no small thing for a party holding only a minority. As such, while Prime Minister Justin Trudeau’s government did bend a convention – the one about annual budgets being, you know, annual – it does not appear to have ignored the rules, namely about Parliament having to approve spending.
But given the government’s tenuous minority status, which has it operating in permanent pre-election mode, the lack of a budget has certainly been convenient. It got to spend the past year focusing its messaging solely on one side of the ledger, namely spending, and on the extent and generosity of its many emergency programs and income supports.
The thing is, a collection of press releases for individual programs, however worthy and necessary, is not a budget, any more than a list of numbers is an equation. To budget is to choose and, without a budget, it’s not easy for Canadians to tell what choices are being made, how they sum – and how each bit of taxing, spending and borrowing adds up to a larger picture.
As we come into what will hopefully be the final innings of the pandemic, a federal budget mapping out the fiscal roadmap for the coming years is badly needed. On Monday, this newspaper reported that Finance Minister Chrystia Freeland will not be releasing a budget this month. But signs are that one is likely coming soon thereafter. It’s about time.
So what should be in Ms. Freeland’s eventual budget?
Let’s start with what might not be needed, or might at least be needed in lesser quantities.
A year ago at this time, the assumption was that, once the pandemic was at bay, the economy would still need several years of recuperation through relatively heavy fiscal stimulus – one-off, deficit-financed emergency spending – to return to full employment. The cautionary tale that was top of mind for most economists was the anemic recovery after the 2009 Great Recession, which in most of the developed world was painfully slow, owing in part to a too-quick reduction in deficit spending. Ms. Freeland last fall saw the need for a multiyear stimulus package worth $100-billion.
But the speed and extent of the pandemic recovery has so far exceeded all hopes. Earlier this month, Statistics Canada reported that the economy grew at an annual rate of 9.6 per cent in the final quarter of 2020 – a huge, positive surprise, given the business closings imposed on much of the country late last year. The economy grew in December, when it was expected to have contracted, and appears to have enjoyed even stronger growth in January.
Canada is still nowhere near the state of good health of early 2020. The unemployment rate in January was 9.4 per cent, and the labour market, which lost three million jobs between February and April of last year, is still down nearly 900,000.
But all signs are that, as vaccinations pick up and pandemic restrictions lift, the economy already has two key ingredients it needs for a roaring comeback: idled businesses eager to reopen, and consumers sitting on a mountain of savings that they’re itching to spend.
Thanks to Ottawa’s record deficit spending, most of which wound up in the pockets of Canadians through such programs as the Canada Emergency Response Benefit and the wage subsidy, the country’s savings rate was 12.6 per cent at the end of last year – up from 2 per cent a year earlier.
It’s a unique recession: The average Canadian hasn’t been this flush since the 1990s.
That means this spring and summer stand a very good chance of seeing a continuation of the sharp, V-shaped recovery Canada experienced last summer and fall. By the time the budget lands in April or May, the amount of additional money Ottawa will need to spend over the next two to three years stimulating growth may – may – be considerably less than $100-billion.
So that is, hopefully, what Ms. Freeland will be able to budget for less of. But what should she be preparing to spend more on?
We’ll return to that, later this week.
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