Finance Minister Chrystia Freeland’s fall economic statement is an act of deception – or maybe self-deception.
While this Liberal government promises to invest up to $100-billion over three years in stimulus, to move toward a new national child-care system and “national, universal pharmacare,” and to launch major new initiatives to fight climate change, combat systemic racism and improve conditions on First Nations reserves, it fails to confront two truths that undermine all those commitments.
The first is that the pandemic has left this country poorer. The second is that the statement largely ignores the biggest challenge of all: societal aging. By failing to accommodate these two truths, the Liberals are fooling either themselves or us.
The COVID-19 pandemic has savaged this country’s finances. You simply can’t slough off a deficit that will likely surpass $400-billion once we’ve struggled through the dark winter that awaits us. Years of previously unimaginable deficits lie ahead.
The Conference Board of Canada, in its analysis of the update, calculated that federal and provincial net debt is approaching $2-trillion, more than 92 per cent of GDP, a level not seen since the fiscal crisis of the early 1990s.
Back then, it took years of cutbacks by every level and stripe of government to bring the deficits under control. Governments slashed transfers, raised taxes, closed hospitals, cut back welfare, expanded class sizes, cancelled infrastructure plans. People were left homeless.
Interest rates are much lower today than they were in the 1990s, a situation that the economic statement assumes will continue indefinitely. But “I just don’t know that we can hang our hats on that going forward,” says Pedro Antunes, chief economist at the Conference Board of Canada.
Governments around the world are softening the impact of the economic crisis by taking on debt. “Who’s going to want to hold that debt,” Mr. Antunes said in an interview. With governments competing to sell bonds, interest rates could rise.
For much of the 1990s, Canada’s real GDP grew by about 2 per cent or 3 per cent a year. But since the financial crisis of 2008-09, Canada has experienced sluggish growth, and faced more of the same even before the pandemic struck, making it harder to balance the books.
One reason for the weak growth is aging, a word that appears just once in the economic statement’s 223 pages. Yet costs for health care and long-term care are steadily increasing because the median age is steadily increasing, a situation that will worsen in the years ahead, undermining any government’s ability to spend on new programs.
As premiers pointed out on Tuesday, the economic statement doesn’t include increased funding for health care, while spending for improvements in long-term care is limited and temporary.
Where is the money supposed to come from for child care, for pharmacare, for green infrastructure, for housing supports, when long-term-care costs are expected to triple over the next three decades?
And that assumes that we continue to expect women to care for the elderly for little or no money. Residents of long-term-care facilities depend on underpaid and overworked personal support workers for their well-being. Most of these workers are women. Three quarters of all long-term care in Canada is provided at no charge by family members, mostly women.
“We absolutely have to be allocating our human capital in an efficient way to get the most that we can out of it,” said Lindsay Tedds, an economist at the University of Calgary’s School of Public Policy. “And the fact that women continue to be expected to take on unpaid work when there are highly qualified people, most of them women, who can do it as paid work is frustrating and challenging.”
For Canada, the task after the pandemic will be the same as it was before: to align federal and provincial responsibilities and resources to meet the needs of a society in which people are getting older – only now with a damaged economy and greater debt.
With their economic statement, the Liberals have promised sound finances, someday, while also promising greater social equality, details to come.
In a society growing older, in a country that is suddenly poorer, to promise both is to offer neither. And that may be the greatest deception of all.
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