If you were the owner of a $1-million home, and your insurance agent quoted you a fire insurance premium of $50,000, you’d balk. But if your house was currently on fire, it would be a very different story. You’d do a quick cost-benefit analysis and pay up immediately.
Canada is a homeowner whose house has been on fire for the past two months. Governments are spending aggressively, and massively, on rescuing people and businesses whose lives have been turned upside down by the inferno and by our current strategy for fighting the fire. Under the circumstances, that government spending is good and necessary.
But are our governments devoting enough time, energy, research and money to changing those circumstances?
Are we investing enough in fire prevention and suppression – the public-health equivalents of smoke detectors, sprinklers, fire engines and firefighters?
Are Ottawa and the provinces spending enough on the tools to stop the fire from flaring up again and to ensure that, if it does, we’ll be able to fight it without locking down the entire neighbourhood?
It’s dizzying to tally up the novel coronavirus’s economic fallout. Ottawa is expected to run a deficit of at least $250-billion this year; provincial deficits will run into the tens of billions of dollars.
Even with all that stimulative spending, the economy is going to contract, and fast. A CIBC Capital Markets report from mid-April estimated a 40.5-per-cent decline in gross domestic product in the second quarter; and after a hoped-for rebound, an overall 6.9-per-cent drop in economic activity in 2020. That may be the optimistic scenario. Last month, the Bank of Canada sketched out a range of probabilities that included an even deeper and longer downturn.
That means the COVID-19 pandemic bill will include hundreds of billions of dollars in extra government spending and hundreds of billions of dollars in lost economic activity.
However, the size of those figures, and whether they balloon or contract, is entirely dependent on the course of the coronavirus in this country. And as demonstrated by the success of some other countries, the virus’s progress, and its costs, are to a great extent within our ability to control.
In government, decisions and policies are supposed to be regularly subjected to a cost-benefit analysis. That includes analyzing whether there are big savings going unclaimed, through a failure to make less-pricey investments.
Ottawa and the provinces have been quick to spend massively on limiting the economic fallout from the virus. And the cost-benefit analysis says massive deficit spending to mitigate the severity of the symptoms of a virus-induced recession is a good idea.
But if it were possible to attack the underlying cause of those symptoms, that would make even more sense.
With the right tools, institutions and spending, it should be possible to limit the spread of the virus and do so without having to rely as much on the use of costly economic lockdowns.
But doing so will call for a lot more public-health capacity, and probably spending, so that we can instantly diagnose anyone who has the virus and immediately track down anyone and everyone in contact with them. It means much more testing capacity and the ability to turn around results in minutes or hours, not days. It means lots of new public-health employees, working with carefully chosen technology, to trace and find everyone who has been in contact with an infected person. It means buying more than enough personal protective equipment for anyone working in close quarters. It means creating systems to ensure that quarantined people stay isolated. It means new strategies, and probably a lot of new personnel, so that we can keep the border closed to the virus but open to goods and people.
A few months ago, if someone had said that Canada needed to find billions of dollars to bulk up the country’s public-health authorities, voters and governments would have reacted like the homeowner who’s just been presented with a $50,000 fire insurance premium. It’s why relatively tiny amounts of money were not spent on such basic insurance measures as maintaining adequate stocks of PPE.
Given that our house is on fire, a better public-health insurance policy will be a case of spending pennies to save dollars and lives.
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