Spending too little worse than spending too much: Freeland
By Mia RabsonEconomy General Government Manufacturing deficit Economy Freeland government manufacturing mini-budget
Federal government's record deficit is more than $381 billion but she calls it affordable, given low interest rates.
OTTAWA — Finance Minister Chrystia Freeland’s first fall mini-budget finds new funds for families and businesses and scratches a longtime provincial itch over transfer payments as she tries to find a delicate balance between pandemic anxiety and political prudence.
Freeland defended the federal government’s record deficit of more than $381 billion as affordable – given low interest rates – and necessary and accused the former Conservative government of withdrawing stimulus too quickly after the last recession 12 years ago.
“As we have learned from previous recessions, the risk of providing too little support now outweighs that of providing too much,” Freeland said.
“We will not repeat the mistakes of the years following the Great Recession of 2008.”
However Freeland responded to calls for some sense of when the federal largesse will end only by promising what she calls “fiscal guardrails” based on employment numbers, to guide when post-pandemic federal stimulus will start to be phased out.
“These data-driven triggers will tell us when the job of building back from the COVID-19 recession is accomplished, and we can bring one-off stimulus spending to an end,” Freeland said.
Highlights of the federal government’s fiscal update
Freeland is also using the fall update to respond to calls from numerous political critics and interest groups with funds for parents of young children, aid for hard-hit sectors like tourism and entertainment, and another $1 billion to help provinces with the long-term care homes that have left our oldest citizens tragically vulnerable to COVID-19.
Fully aware that the Liberal government needs support from at least one other party to stay alive she handed the NDP another partial win by extending the federal interest holiday for student and apprentice loans through to the end of the next fiscal year.
The Liberals had stopped requiring any loan payments for Canada Student Loans between April and September, and no interest was accrued during that period.
A week ago the House of Commons unanimously backed a motion from NDP MP Heather McPherson to extend that through to May. In the fiscal update, Freeland said loans will be interest-free for the 2021-22 fiscal year but stopped short of fully extending the loan repayment holiday.
Thus far the NDP has been the only party showing a willingness to negotiate with the government to support it during confidence measures. In September the NDP supported the throne speech after succeeding in getting the Liberals to include paid sick leave and increased pandemic aid to individuals.
Freeland also threw out another olive branch in Ottawa’s often difficult relationship with provincial premiers by promising to answer their years-long call to overhaul the fiscal stabilization fund that sends federal cash to provinces facing serious drops in revenue. The program offers federal aid to provinces that see a drop in non-resource related revenues of more than 5% compared to the year before, or more than a 50% drop in resource revenues. But the payments have been capped at $60 per person in a province for more than three decades.
The premiers made the program the target of a request to the federal government almost exactly a year ago, issuing a joint statement out of their December meeting in 2019 for the fiscal stabilization fund to be changed. Freeland’s office said at the time she was open to a discussion about it.
The issue has been particularly acute for Alberta Premier Jason Kenney, whose province accessed the program in 2015-16 and 2016-17, during a significant drop in oil prices. The province received $251 million in each of those years. Freeland intends to increase the payments to $170 per person retroactive to 2019-20, and will index the amount in line with economic growth going forward. There will be other changes to the program, including how eligibility is calculated.
Alberta would get more than $700 million under the program if it qualified now.
When the premiers made their call, the expectation was no province would face a serious downturn in 2020. Nobody knew the virus that would cause the COVID-19 pandemic was already starting to spread in China. Alberta alone is projecting a revenue drop of more than 10 per cent now.
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