The Morning Brief – 04.01.20
By Bruce Carson
Economy—Need for Timely and Effective Decision Making. On Economic Aid for Canadians. And in the Fight against COVID-19.
On Monday, a poll carried out by Ipsos for MNP found that half of Canadians, 49%, surveyed said they were on the brink of declaring bankruptcy. They were $200 or less away from not being able to meet debt obligations each month.
One quarter of them say they are already unable to meet their debt obligations.
The main conclusion was that “Canadians are vulnerable to income interruption.”
Grant Bezian, MNP President commenting on the poll, said that we could see two crises in the next few months; a global pandemic and the bursting of the Canadian debt bubble.
It is too late to argue about why and how household debt got so high, and time is short for putting in place income supports announced by the Trudeau government that might keep Canadians whole through the COVID-19 crisis.
Two recent Globe editorials are helpful when looking at the dual issues of the economy and fighting the virus.
Its editorial “Next Steps” refers first to measures already taken to combat the spread of the virus. “In place are social distancing rules, a border largely closed to non-Canadians and quarantine orders for those coming home.”
What is now needed is effective screening of travellers which requires proper screening equipment at airports and now train stations and more staff trained to operate the equipment.
Then there is the need to “test, test, test” as we need to know who has the virus, trace contacts and subsequent quarantine. In order to do this there needs to more and faster tests.
There is a need to protect Seniors Residences; vulnerable people living in close quarters and possibly in poor health. And we need to ramp up protections for staff in these residences.
On the border and trade front we need to ensure that trade flows safely and travellers don’t become importers of the virus. We need “a system for quickly and accurately testing truckers at the border.”
The second Globe editorial speaks to the economy and creating a “bridge” from where we are to where we want to be when we come out of this. Steps taken so far to support those who are now out of work or forced to self-isolate as well as the Bank of Canada lowering interest rates are listed.
The best way to recover is to beat the virus but when that happens large sectors of the economy will have been shut down for weeks, if not months. It concludes that Canada will need “a massive, but temporary, income support program.” Quoting from a recent C.D. Howe study “the risks and consequences of not supporting employers is significantly higher than doing too much.” This gets close to Governor Poloz’s firehose analogy.
The need to move quickly and effectively is reinforced in an article written by Bob Rae and Mel Cappe, both with plenty of experience dealing with roller coaster economies and government decision making. They write that “we need to do everything we can to maintain the economic and social ties that are so important. We cannot just pick up the pieces in two or three months-we need to keep the pieces together.” As they say “running deficits is much better than letting the economy wallow in depression.”
During an appearance on Power and Politics yesterday, Rae and Cappe elaborated on their ideas. Rae asserted that the present situation is deeper and more complex than any seen before as we slow down the economy and help people out. As Cappe said, it used to be with stimulus that the mantra was ‘go big or go home’, now it’s ‘go big and stay home.’
Cappe spoke of a three part situation; first, everything is closed and there is a need for cash and while interest rates are low, that doesn’t help much when the economy is shut down. Then there is the recovery when liquidity is crucial and now low interest rates are helpful. And the third phase involves the development of new social programs. Such a program could see the federal government and provinces jointly working together on large infrastructure projects.
The counsel of caution offered by Cappe is that in any recovery it is vitally important that money flow quickly to support the recovery, and worry about accuracy later. As he said there will be plenty of time for audits.
The need to move quickly is a theme in an editorial by the National Post which describes the movement in the wage support program proposed by the government from the totally inadequate 10% subsidy to the more helpful 75% subsidy. It described this change as “a big step in the right direction.” It added that “this is the kind of support that is needed in order to prevent millions of Canadians from losing their jobs, as businesses shut down.”
The problem here is the one highlighted by Mel Cappe and now Robyn Urback in an article in the Globe that government must act quickly to keep ahead of the virus and put programs in place while they still can be effective.
Urback writes “over just a few weeks we’ve watched the unthinkable become essential. We need to anticipate what will become essential soon and enact those measures now.”
In this she was talking about the debate over the wearing of masks and over whether there is actually sufficient personal protective equipment in Canada. No doubt it is difficult in this unprecedented crisis to anticipate what is needed. But the Trudeau government always seems to be a few steps behind where others have been. Urback concludes by writing “no more incremental measures. We need to enact tomorrow’s policies today.”
Yesterday in the prime minister’s media availability we got a glimpse into decision making at this crucial time. Trudeau was asked by Mike Blanchfield in relation to scarce personal protective equipment “can you walk us through your decision making process around the cabinet table?”
Trudeau’s response was that we don’t decide around the cabinet table…”We rely on experts, on medical officials on coordination between medical officials in all different provinces to make determinations on where they are most needed, and we follow the direct advice of medical experts to ensure that everyone, everywhere has the equipment that is needed.”
This may be an appropriate process when dealing with scarce medical resources, but in other matters and perhaps even this one, one would have thought that even scientific decisions might benefit from political input, that is why the cabinet is there.
This statement by Trudeau also brings into question the length of time for decisions to be made and the process whereby decisions seem to be changed, rethought and another attempt made to get it right. The wage subsidy initiative is a good example of not looking at what works elsewhere and adapting it for use in Canada. Hopefully later this morning the finance minister can provide details necessary for businesses to decide whether this is a program within which they want to participate.
As I wrote at the outset, I realize how difficult decision making at the federal level can be, having been involved in the experience of 2009, which was a much simpler fix as the government was attempting to ramp up the economy, not shut it down in order to fight an insidious killer.
Having said that, a political gloss on decisions will become more and more necessary to speed them along so that Canada can get out in front of COVID-19 thus protecting Canadians, front line health care workers, first responders, essential workers and the economy.
As relayed in this space last Thursday it was Prime Minister Harper who said in 2009 that it was more important to get the cash out the door and perhaps make a few mistakes which seems to be what Mel Cappe is saying as well when it comes to funding aid and stimulus programs.
It is through political input that urgency can be brought to bear on decision making and implementation.
- Finance Minister Morneau to provide details regarding the proposed wage subsidy program
- International trade numbers for February to be released
- Job numbers for March to be released
- Bank of Canada deals with interest rates and releases its Monetary Policy Update