Canada is at war.
Somebody ought to put those words on a giant billboard on Parliament Hill. Stamp it as a watermark on the screen of every Liberal, Conservative and New Democratic Party Zoom meeting. Mass mail it to every critic on the left, who sees the current crisis as a heaven-sent opportunity to build the green energy New Jerusalem they’ve always wanted, and every critic on the right, frantically forging new “fiscal anchors” to weigh down Ottawa, the better to deliver the spending cuts they’ve always wanted.
Because until Canada wins the war, the future is on hold. The present troubles are like a roadblock: Until it’s removed, or at least whittled down to the height of a speed bump, the country can’t move on.
What does the Trudeau government’s Throne Speech need to lavish spending and attention on? That.
Almost everything now rides on Canada’s success, or lack thereof, in fighting COVID-19. The virus has turned the economy, the job market and even the school system into dependent variables.
The recession Canada was plunged into was triggered by the coronavirus, and a need to lock down the economy to stop its spread. The precipitous loss of jobs happened because of that coronavirus recession. The need for Ottawa to borrow hundreds of billions of dollars to support unemployed Canadians and struggling businesses is because of the virus. It’s because of the virus that some business sectors, such as tourism and travel, are barely alive.
And if Canada has to halt or roll back the economic reopening, and the economic recovery, that too will be because of the virus. Or more precisely, it will be because of a failure to adequately tackle it.
For the foreseeable future, the quality of life in Canada is, like the economic recovery, dependent on Canada’s success in waging war against the virus. If governments devote enough money, resources, brainpower and technology to further expanding testing, contact tracing and isolation supports for those who have contracted the virus, we can get this thing under control. That means not only minimizing hospitalizations and deaths, but also allowing the economy to continue its recovery.
But to the extent we fail to get the virus under control, because of everything from lax rules on group gatherings, to lax enforcement of quarantine on travellers and positive cases, to insufficient testing and contact tracing, the economic recovery will be slowed, or reversed.
For now, economic outcomes depend in large part on virus outcomes. But it’s within government’s ability to control, or at the very least strongly influence the course of the virus, and to ultimately defeat it. A full and speedy economic recovery depends on it.
Like the state of the economy, federal and provincial budget deficits are also a function of Canada’s progress, or lack thereof, in the fight against the virus.
Deficits will shrink to the extent that more people are working, and fewer need employment insurance or other assistance to replace the salaries that closed businesses can’t pay them. But government spending on supporting jobless and income-deprived Canadians can only be reduced to the extent the economy reopens and grows, giving them new jobs and incomes. And that economic recovery is dependent on the degree to which the virus is controlled, without resort to the blunt instrument of lockdown.
It’s a lot like the last time Canada went on massive spending binge, from 1939 to 1945. To fight the Second World War, Canada engaged in an unprecedented level of deficit spending, driving the national debt to more than 100 per cent of the economy. That spending was brought to an end the only way possible – by winning the war.
In the early 1940s, the route to Canada’s future went through Berlin. Today, whatever side of the political spectrum you’re on, and whatever your hopes for Canada’s future, that future can’t arrive until the virus is contained.
Containing the virus, thereby allowing as many people as possible to return to work and school, has to be Job No. 1 for the federal and provincial governments. The focus for the past few months should have been on hugely increasing Canada’s testing and tracing capacity, as a means of savings lives and averting tens of billions of dollars of economic damage. That summer lull was squandered. Time to refocus.
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