Unprecedented circumstances and unfathomable costs
The federal government has released a 168-page fiscal snapshot of the country’s finances amid the ongoing pandemic. Some programs will be continued, others may not.
At $343.2 billion, the projected federal deficit will be 10 times last year’s, second only to spending during the Second World War. The net deficit combining the existing debt with pandemic spending is now over $1 trillion.
Finance Minister Bill Morneau told the House Canada made a collective decision to put health first.
A decision that saved thousands of lives at the sacrifice of jobs, wages and businesses. Government provided emergency support for individuals and to keep businesses afloat.
The latest deficit numbers include $80 billion for the CERB (Canada Emergency Response Benefit), and $82 billion for an extended wage subsidy for employers.
Government’s priorities are now changing in extending the wage subsidy to get people back to work. Many provinces blame the CERB for the low work returns in many sectors when recipients are making more from CERB than their wages.
Government is working on its debt management plan, such as purchasing government bonds bought at today’s very low interest rates. There is little planning included at this stage for the coming years of debt management.
The big question on debt servicing is what happens once interest rates start to rise and the debt servicing costs are mounting.
There is no mention of raising taxes, a move that would not promote a new economy. Revenues have dropped an estimated $72 billion over last year’s projections.
Critics want to know what the financial game plan is past this year; government hasn’t released that information in this snapshot.
Now it’s all about which assistance program is or isn’t extended in the fall, the wage subsidy and/or the CERB.
Government will be watching to see what works to tempt both employers and workers back to business.