Front Burner - Liberals pledge $100B to heal the pandemic economy

Episode Date: December 1, 2020

On Monday, Finance Minister Chrystia Freeland announced the Liberal government will spend up to $100 billion to support the post-pandemic economy. The priority is, as Freeland says, to do “whatever it takes” to help Canadians, despite the record-high $381 billion deficit. CBC senior parliamentary reporter David Cochrane breaks down the details of the economic update, and tells us what critics had to say about it.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hello, I'm Jamie Poisson. So there may be light now at the end of the tunnel, but for now, we're still being battered by the second wave of coronavirus. And in turn, it is still battering people's livelihoods, leaving them with uncertain futures. Yesterday, the Liberal government came out with an update on how they intend to financially support people through

this period and out the other side of it. So now my colleague, parliamentary reporter David Cochran is here to help walk me through what we learned in this fiscal update and the criticisms of it. This is FrontBurner. Hi, David. It's a pleasure to have you on. It's always good to be here. Thanks for having me. So look, before we get into this, I just need to talk about this for a second. I need to get this off my chest. I have never heard so many metaphors before. This careful husbandry. The liberal government took the batteries out of our smoke detector.

After winter comes spring. The seeds we have sown and will continue to plant. The COVID wolf is still at the door. Even wolves. Why? Why? Why? Well, numbers are hard.

Stories and images are easy. And really, if you want to know what's in the fiscal update, the speech from the finance minister is rarely the place to get the details. What you're going to get are a lot of value statements. And what the Liberal government wants Canadians to know right now is that their government is here for them and will spend what it takes to get through this and then rebuild on the other side. Like all those great

Canadian farmers, the work we do today will stand us in good stead in the spring. And that's a story they felt is best told in metaphor and image rather than billions of dollars down to the decimal point. Okay, okay, fair, fair. I might have been too cynical there. Though there is, there's a lot of metaphor. It felt like there was a lot of metaphors. But um, all right, so let's get started. For the kind of people who await these kind of things, I know you are one of those people. This economic statement from the government was long awaited, and it projected the deficit will reach $381.6 billion by the end of March, and it could go even higher. And it laid out plans for more spending ahead to get us

through the second wave and to boost the economy out on the other side of this. And so I wonder if you could quickly recap for me what the government announced today, starting with the short term, what's going to get us through this second wave? Yeah, I mean, essentially what the government is facing is the biggest economic crisis since the Great Depression. This is the most severe challenge our country has faced since the Second World War and our most severe public health crisis since the Spanish flu. And so that requires massive amounts of spending, $381 billion. And some of that, Jamie, that's the pandemic price tag to this point. That's a tally of the CERB and the wage subsidy and rent assistance all being tallied up and itemized now that we have a clearer sense of the uptake on those programs. But also the lost revenue from having the economy essentially put into a medically induced coma to

try to keep everybody safe. So it all adds up to that. So some of it is a summary of what we have already known and some kind of new measures, like the first being the wage subsidy. We've known that the wage subsidy was being extended until June to get people through this second wave. Well, now we know it's going to be boosted up to 75% subsidy from 65%, at least until March, recognizing that we're in this second wave and that the winter months are often the hardest for businesses. So right there, that's a big bump in spending. Then there's the rental subsidy program, something the government got very wrong in the early days of the pandemic, but which it's getting a fair amount of credit for

for getting right at this stage with the second kick at this particular program. Paid directly to businesses who this week will begin receiving support for up to 65% of their rent or mortgage interest. So that's billions there. And then there's new measures to help the most heavily affected sectors in this crisis. I mean, everybody is suffering, but some are suffering more. Tourism, hospitality, restaurants, bars, hotels, people who do live entertainment. None of this can come back to normal until everything kind of comes back to normal. So there's new government-backed loans there of extended terms of up to 10 years at below market rates, where a business can get up to a million

dollars backed by the government to get them through this. So more bridging for the most seriously hit, you know, along with $181 million that goes in direct supports to people like artists and entertainment workers who work in live performance and simply just can't go back to work in those sorts of venues with the public health restrictions are there. Okay, so we've got rent help, wage help, liquidity help, getting money into people's hands immediately. And what about after the second wave? I know they're holding back stimulus spending till post-pandemic. And so can you tell me a little bit about what we learned about some of that? Yeah, it's important to understand a couple of things about how the government views the COVID

spending. The emergency spending like the wage subsidy and CERB and the rental assistance, they say that there is no limit to what they are willing to spend on emergency measures to get the country through this. We will do whatever it takes to help Canadians stay healthy, safe and solvent.

Stimulus spending is different. And this is where we're going to start talking about things like fiscal anchors and fiscal guardrails, which gets a little bit impenetrable. But there is a limit to what they're willing to spend on the other side of this. And we got our first real glimpse into that today. When the economy has recovered, the time-limited stimulus will be withdrawn and Canada will resume its longstanding, prudent and responsible fiscal path.

And what they're promising there is three-year spending anywhere between 70 and 100 billion dollars, pegging it at about four percent of the gross domestic product, which is in line with what other advanced economies have done. And what they say about this money is that it would be targeted and it would be temporary. And it's meant to just try to hit this target they have of creating 1 million jobs to recover from the job losses of the pandemic and move past it. And you'll see it, Jamie, used in a way that also aligns with some of their other goals, like having a cleaner, more environmentally friendly Canada. So they didn't give us a lot

of details on how that up to 100 billion could be used. But you might see things like housing retrofits. You know, you refit the house, that creates some jobs, it creates energy efficiency, which then lowers the emissions that Canada pumps out on an annual basis. And that then lowers the energy costs for the person who owns the house or owns the building and frees up money that they can use to stimulate the economy. So the size and scale and details of that we won't find out about really until the next budget and the budget after. But that is there to give a real jolt to the economy as we come out of the second wave and try to put Humpty Dumpty back together again. Our growth plan will foster economic rebirth in the short term and strengthen this country's competitiveness in the long run. Today, we are presenting a down payment on this plan.

Right, right. And what about these big marquee promises that we hear or that we've heard recently from this government? Pharmacare, I'm thinking a national child care plan. Is that part of this stimulus? I'm thinking a national child care plan. Is that part of this stimulus? No. I mean, these are really the long term permanent structural spending things that are going to take up a lot of fiscal space in future budgets. And you need to make sure you have the room to deliver on those. So Pharmacare right now, all we saw was a commitment that Health Canada will put out some options soon and conversations would start with the stakeholders. Child care, it's a little bit more than that.

They're going to spend some money to create secretariats to look at building a national child care and early learning plan. Just as Saskatchewan once showed Canada the way on health care, and British Columbia showed Canada the way on pollution pricing, Quebec can show us all the way on child care. But that requires a lot of conversations and a lot of agreement from a lot of people, the premiers first and foremost. You need to get them on board if they're going to come up with a program that is consistent across the country. You need buy-in, you need agreement, and this is going to take billions of dollars. Now, it is, in the views. We need to build a national

coalition to really say this needs to be a priority for our society and for our economy. So this is something she seems very personally committed to and has said, watch this space and pointed at herself in the past when talking about national child care. But there is a notional step towards national child care in this fiscal update. The real purchase of this and the development of this is going to take time and it's going to take multiple budgets over multiple years. Of course, before we can spend on any of these stimulus projects, on any of these big marquee promises, the big thing we need to do is get this pandemic under control. It seems like a vaccine is the way

out of this to get our lives and the economy back to normal. And did this update contain any details, any new spending that was aimed directly at getting this vaccine out to the country? I wouldn't say there is any big new headline revelation on the vaccine strategy in this document. It does interestingly open with a summary of the spending they've done, a list of all of the doses of the vaccines that they've procured or got options to procure from the big global drug makers. Safe, effective, and plentiful vaccines are on the way. And it really comes across or seems to be a bit of a defensive move because they know

this is something they are being watched very closely on and being criticized quite harshly on, specifically from the Conservatives and even some of the premiers. But the details of how, you know, they're going to get a vaccine from Pfizer and get it into your arm and my arm, that was not in the fiscal update. Those details are expected to come in weekly briefings going forward into December as the final details of their vaccine rollout plan becomes more clear. Right, right. And I mean, you know, Aaron O'Toole, conservative leader Aaron O'Toole, did spend quite a bit of time Monday criticizing the government for their vaccine plan or lack their lack of a plan and sort of tying it to the economy.

She'll say we'll rebuild the economy once COVID is beaten. Well, Mr. Speaker, rapid tests could help preserve the economy and the vaccine will help us beat it. the economy and the vaccine will help us beat it. One other thing that he talked about that I wanted to ask you about is that we keep hearing from O'Toole and other conservatives like finance critic Pierre Polyev say that emergency programs like CERB and other wage subsidies. Those account for less than half of that record smashing deficit. And what do they mean when they say that? I was trying to wrap my head around this myself today. Yeah, so the conservative narrative has

been that even when the government was running these 20 and 30 billion dollar deficits prior to the pandemic, that this was an irresponsible, spending, wasteful government. And their argument is that the deficits now are so large because even in the good times, the federal liberals were spending just way too much. And this was ruining the country's balance sheet in a way that is not necessarily supported by the analysis of the bond rating agencies.

Ignoring our warnings, the liberals took pride in running large structural deficits and raising taxes in good economic times. Ideological policies opposed by the entire country. So their argument is to look at a $381 billion deficit and say, well, only about $260, $270 billion of that is direct support to Canadians and businesses. You know, the rest of that is essentially on you. The deficit is a component of a bunch of things.

There is the existing deficits that were there because of the spending prior to the pandemic. There is the emergency spending required to put a fiscal floor under Canadian families and businesses and extend credit facilities to companies both big and small. But then going back to the economy, being in this medically induced coma, income tax is down, corporate tax is down, spending is down, oil price is down. Every level of economic activity is slumping around the world because economic activity has been depressed. So your revenue is down. So this is not a deficit entirely created by spending. It's the vast majority of it. But if you look at the components of all of this spending, it is a deficit that will largely go away over time as the need for these emergency spendings wind down.

And as the economy opens back up and consumption and economic activity resumes, revenue will go up with it. We heard O'Toole say he was fine with emergency supports, but he is also criticizing the government spending. He said at one point in French that the government was burning money to hide its incompetence. And is it clear to you what emergency spending O'Toole doesn't support? No, it's not. I mean, this is one of the frustrations here that it's very easy to criticize an opposition. And when you're asked, like our colleague Vashie Capellos asked him repeatedly, which of these support programs do you not support? The CERB program, the wage subsidy, others, we were actually pushing for smarter wage subsidies.

We didn't agree with some of the expansion to students for the CERB and other things that weren't effective on leveraging jobs. The criticism today didn't just come from the Conservatives. Of course, it also came from the NDP. And we heard NDP finance critic Peter Julian say in the House that when they read the economic update, what they will see is austerity is coming, Mr. Speaker. Now, we know during this pandemic so far, and it turned into a bit of a joke in the House. I'm accustomed in this House to facing many accusations, but I didn't expect to be accused of a policy of austerity this afternoon.

But joking aside, David, what is the point that the NDP was trying to make here? Well, you know, a bit like the conservatives say that they've sort of spent too much and not spent it well, the NDP would say that they've not spent enough in certain areas. Their focus has consistently been on a couple of things. The first is maintaining strong supports for people throughout this pandemic so they don't have to compromise their health to work. They look at support for industries and sectors like the looming discussions that are happening with the airlines, like what are you going to do for the airlines? And they want any level of support tied to job numbers and employment. They don't want it to be something that just helps the corporate balance sheet. They want it to be something that

helps the employees and the workers of these companies survive this difficult time. They have not put in place the help to sectors that are in need. The workers of the hardest hit sectors can't count on any help. So their criticism, much like when the CERB was going to wind down to the CRB, it was initially supposed to have a reduction in benefits. They don't want to see any reduction in those things until we're free and clear. But Singh has been consistently taking these big positions, Jagmeet Singh, the NDP leader, he's been consistently taking these

strong positions in public that whatever the first draft of government support is, it's not enough. And that as it moves towards the need for parliamentary approval, he uses his cohort of support in the House of Commons to leverage negotiations to get some improvement. And he's done that quite successfully in the past. And it may be that he tries to do that here going forward as they move towards financial votes in Parliament. Right. You know, of course, we're in a minority government situation and the NDP could, you know, essentially keep the liberals in power if they voted with the liberals here. Also, you know, of course, we're in a minority government situation and the NDP could, you know, essentially keep the liberals in power if they voted with the liberals here. Also, you know, interesting.

I heard Jagmeet Singh talk today on power and politics as well. And he was talking about how he also doesn't think the government is doing enough to raise revenue, to tax the wealthiest and big corporations to pay for the deficit. This is a massive failure. And if we don't tax the wealthiest corporations that are making profit now, then the pain is going to be felt by people. They're going to see cuts to their services. And that's why we're saying we've got to talk about revenue. Yeah, this is the other part of it, right? The NDP says you need to do more for the little person. And he really wants to see wealth taxes, excessive profit taxes. You know, you look at how tough this pandemic has been.

There have been sectors like retail giants who have made a fortune. And the New Democrats have a real problem, what they consider to be pandemic profiteering. There is no movement on that per se in this fiscal update, though Chrystia Freeland does commit to exploring ways to have a fairer tax system in terms of dealing with excessive wealth. There are tax changes proposed in this budget to go after the digital giants of the global economy. And that is requiring Amazon, Netflix here, Google, and even Airbnb, initially requiring them to collect and remit sales tax, GST, HST, on transactions done here in Canada, and by 2022, forcing them to pay some sort of corporate tax to the federal government. Now, that's only a couple of billion dollars a year is what they have earmarked for this going forward when it sort of reaches its peak. And there is a proposal to

review stock options to some degree on large corporations. Those are things in line with what the NDP wanted to see from the Liberals, but they're really keen on this wealth tax. And right now, there is just not any serious movement from the Liberals on that, though there is a commitment to explore it further down the road. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. of the people I speak to, 50% of them do not know their own household income. That's not a typo,

50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. search for Money for Cops. David, I want to come back for the final question today to a term that you mentioned earlier, fiscal guardrails. Very, very exciting term. And, you know, of course, we've talked about the importance of spending through this time. Basically, every economist, we've heard from so many economists who believe that this is necessary, although, of course, there's disagreements over where and how to spend and how much to spend. But did we get any signals today from Christopher Freeland on when the government thinks the spending is too much or when it might stop? I think my interpretation of where this government is, is that the spending will stop

when it's safe to stop it. And that's on the emergency phase. As I said, there is no limit for that. On the stimulus and the recovery thing, that is going to be tied to a series of economic indicators, which are now being called the fiscal guardrails. In the past, we had fiscal anchors, which were firm and rooted in place, and your debt wouldn't go above a certain percentage of the gross domestic product of the country. Or, you know, the deficit in real terms would not be bigger than $10 billion going to balance over five years. The focus now is far more ephemeral than something like that. The focus, according to Chrystia Freeland, is to really tie it to

employment recovery. She feels, she argued today, that the biggest casualty of this pandemic has been jobs. People have lost theirs. They've had their hours reduced. They don't know if they're ever coming back. And some jobs, some sectors and industries could be completely destroyed or transformed in a massive way by the innovations of being forced to adapt to life in a pandemic. The government will track progress against several related indicators, recognizing that no one data point is a perfect representation of the health of the economy. So they plan to keep spending on the stimulus side until the economic indicators show a healthy workforce, which means healthy Canadian families.

So that won't just be the employment rate or the unemployment rate. That's going to be things like hours worked, because a lot of people have just seen their hours slashed from 40 hours a week to, say, 10 hours a week. So you still have a job, but you don't make enough to live on. So you're going to need some help to get to the other side of that. These data-driven triggers will tell us when the job of building back from the COVID-19 recession is accomplished, and we can bring one-off stimulus spending to an end. So that philosophically is what they're talking about. They are promising more details on that. I think it will come in the budget. But it's less about the strength of the immediate balance sheet. In my sense, it's more about the economic well-being of Canadians. Because if you look at the approach they've taken in this pandemic, it's that the Canadian family is too big to fail. And that's their focus more than deficit and debt numbers that more conservative-minded economic thinkers say they should be focused on. Because let's face it, this government, they are not conservative-minded

economic thinkers. Okay, well, lots for us to keep watching in the coming months. David Cochran, thank you so much for listening to front burner For more CBC Podcasts, go to cbc.ca slash podcasts.