The Morning Brief – 12.02.20

By Bruce Carson


Fall Economic Update (Part 1)

Finance Minister Freeland occupies the big political stage

Economic Update—Spend Now, Spend Later

On important Issues—Is this another Plan to make a Plan?

Few could say that Finance Minister Freeland didn’t pack a lot into the 237 pages of fall economic update. However, the number of initiatives and the spending they entail raises a number of questions about why so many matters, such as childcare and early learning are left to others, in this case a Secretariat, appointed by the government to decide scope and direction.

The same holds true for the Task Force for Women to advise on the implementation of the Action Plan for Women and the Economy. Added to this could be the recruitment of Major General Dany Fortin to develop, implement and oversee the distribution plan for vaccines with the National Operations Centre.

No doubt there may be other groups formed and given mandates to determine how the $70 to $100 billion, three year stimulus package is to be allocated and implemented.

The Harper government used this process, designating an outside advisory group to help it deal with Canada’s ongoing military engagement in Afghanistan. The Task Force which was put together was chaired by former Liberal Finance and Foreign Affairs Minister John Manley and quickly became known as the Manley Panel. It was composed of top rate people knowledgeable regarding the workings of government and the challenges facing Canada in Afghanistan.

This exercise was a success because of its hard work and cogent recommendations. It also had a short time line within which to work. With the appointment of this group the Harper government learned that independent panels or task forces are only as good the people appointed to serve and the mandate is clear.

On both counts the ‘Manley Panel’ was a success. The panel dealt with, among other matters, the role of Canada in Afghanistan and how Canada’s role contributed to Canada’s national and global reputation.

As the Trudeau government seems to want to go down the road of relying on outside advisory groups, it must be careful choosing who is to serve and set out a clear mandate and delivery date for a report and recommendations.

The areas where this applies in the update are crucial to the Liberal’s so-called progressive agenda, and it is actually surprising that these matters would not be dealt with directly by cabinet, as Paul Wells suggests in his most recent article on the Economic Update.

Another part of the update where there is little attempt to provide details is the $70-$100 billion stimulus fund which will kick in once the government decrees that the pandemic is over. This is the ‘Build Back Better’ component of the update. This was telegraphed in the September Speech from the Throne and if it hadn’t been for the virulent second wave of COVID-19, across the country, Canada might very well be into ‘Build Back Better’ now.

This is the spending that will form part of what Trudeau and Freeland have referred to often as the green recovery and the transformation of the economy from one largely driven by the energy sector. It is to point the way to net zero emissions by 2050.

National Post’s John Ivison questions this spending in his most recent piece on the update writing “spending should be limited to things that contribute to economic growth.” The same message has been delivered by Perrin Beatty, who heads up the Canadian Chamber of Commerce.

Beatty wants to see conditions set for a strong, business led recovery and for that a clear and coherent plan is needed. He is quoted in a Bloomberg article by Theo Argitis as saying “the government can’t let its attention stray to ‘nice to have.’ We need to be focussed on things that will drive growth, the ‘must haves.’

As Sean Speer wrote in the National Post recently “Build Back Better should actually be reframed to Grow Back Bigger, creating wealth for Canada and Canadians.

Ivison in his article notes that capital investment intentions of Canadian companies have fallen by $40 billion in 2020. Canada needs private sector investment for long term job creation and sustained economic growth. Stimulus in the order described by Freeland is not sustainable over time. He concludes with “low interest rates are not a substitute for durable economic growth.”

Economist Rebekah Young of the Bank of Nova Scotia writes on this theme that the “bigger question is whether the spending would be channelled towards growth boosting investment or stronger social spending that drives structural deficits.”

In The Morning Brief of November 26, the need for a fiscal anchor was set out and indeed there was speculation that Freeland, for her own reputation, would actually put one in the Economic Update.

Kevin Carmichael picks up on this in his article on lack of accountability. His opinion is that a fiscal anchor “could silence virtually all criticisms and yet Freeland couldn’t quite bring herself

to go there.” He notes that Canada and Canadians through the pandemic have suffered basically the same as other countries in its peer group, “while its rescue effort has been off the charts.”

He argues that a fiscal anchor would show Trudeau understands he should hedge against a spike in interest rates. However, what we have is a promise by Freeland that after the economy has recovered, there will be guard rails linked to hours worked and employment data. In response to guardrails, Carmichael adds that they should deal with quality of spending, not quantity.

Finance Minister Freeland owes it to Canadians to explain what she means by guardrails and how they would operate in practice.

The point here is that one cannot quarrel with spending that is to replace income when workers can’t work because of the pandemic or keep businesses afloat until the pandemic recedes. The issue is as Perrin Beatty said, government must be focused on growth, the ‘must haves’ and keeping businesses and workers connected until the pandemic recedes then ensuring that growth begins again.

If there is to be a stimulus, let it support the Canadian economy as it exists, not as the Trudeau government wishes it could be, at least until the pandemic is well into the rear view mirror.

On a completely different note, it is surprising that with all of the money that the government believes it can spend, the concept of a basic annual income comes only from the Green Party. The Parliamentary Budget Officer some time ago dealt with the costs of implementing a basic annual income and while they seemed high at the time, they are nothing close to the amounts the Liberal government is planning to spend over the next five years.

Those who have studied and written on this subject conclude that a basic guaranteed income reduces health care costs and the cost of social support programs.

Perhaps this is something the new leader of the Green Party should press the government to consider.

To Come

December 4
  • International trade numbers for October to be released
  • Job numbers for November to be released
December 9
  • The Bank of Canada deals with interest rates
December 10
  • First Ministers’ Meeting