A prominent leader in Canada’s Senate says the federal government should be prepared to take more aggressive steps to steer the economy out of the coronavirus pandemic, including purchasing stakes in companies and encouraging banks to waive debt repayments by businesses.
Yuen Pau Woo, the head of the Independent Senators Group – the largest bloc in the Senate – said Ottawa should also consider a “temporary guaranteed livable income for all adult Canadians.”
He said the goal must be to keep the Canadian economy in a “state of suspended animation” so workers and households can meet their basic needs and companies can remain solvent “until such time as the health crisis is over and we can restart the economy.”
Mr. Woo is one of several Ottawa politicians and economists who argue that the government needs to take more ambitious action on top of measures it has already announced.
David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, said he thinks the government should begin making special Goods and Services Tax (GST) credit payments and emergency Canada Child Benefit payments in April, rather than May.
Ottawa should also commit regular payments for a few months “so it can be relied upon,” Mr. Macdonald said. Looking beyond the crisis, he said the extra child benefit and the GST payments could constitute the basis of a more permanent basic income system.
Mr. MacDonald added that emergency response measures for people left unemployed by the pandemic or forced to stay home should be extended to cover the million-or-so Canadians who were already unemployed prior to the crisis.
NDP MP Charlie Angus said he would like to see Ottawa tackle mortgages and rents next by allowing individuals and businesses to waive payments for at least two months. “The big issue outstanding issue is rent is hitting businesses and families on April 1," Mr. Angus said.
In arguing for Ottawa to buy stakes in companies, Mr. Woo said it could help preserve vital production capacity during the downturn caused by the crisis. He cited industries such as airlines, transportation and food. “This is where we will hear more and more calls for help,” he said.
Mr. Woo is an economist by training and profession, and he worked as a central banker in Singapore. Before he was appointed to the Senate, he headed the Asia Pacific Foundation of Canada.
“My own view is that taking a direct stake in industries and companies are distressed is probably the best approach because it enables the government to strike the balance between meeting the needs of shareholders, executives and, more importantly, workers,” he said.
Mr. Woo added that there are precedents for governments buying shares in companies to preserve their operations in Canada.
In 2009, during the financial crisis, the federal and Ontario governments injected $13.7-billion into Canada’s auto sector by contributing to the U.S.-led bailouts of Chrysler Group LLC and General Motors Co. Ottawa and Queen’s Park received shares in return for their support and later sold them off.
Mr. Woo said Ottawa should also encourage financial institutions to waive interest and principal payments on loans to businesses for a period of time.
The senator acknowledged that some lenders have already allowed deferral of loan repayments, but this doesn’t address the fact that interest on the loans will continue to accumulate.
“We have very well-capitalized, very well-run and very profitable banks,” Mr. Woo said. “We need to see the financial institutions step up and provide solutions on debt servicing.”
Mr. Macdonald said if Canada were to buy stakes in companies, the support should come with strings attached, including a moratorium on dividend payments to shareholders and bonuses to corporate directors and executives, and a commitment to maintain employment in this country.
He also said Ottawa should try to convince providers to waive interest charges on credit cards and payday loans, and to encourage financial institutions to renegotiate mortgages.
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