Neither new bridges, nor roads, nor classic economic stimulus measures. And in my opinion, that’s good news, paradox!
When Chrystia Freeland spoke about a potential 70–100 billion plan last fall, many feared that money was still being poured into construction, as in the past. In short, men are favored and their “dysfunction syndrome”, as Monique Jerome-Forget said, at least in part under the guise of green infrastructure.
However, Chrystia Freeland practically ignored the construction. The decision is wise, knowing that this sector is overheating. Instead, the women’s minister has allocated money to women’s work, redistribution of affected workers, and COVID-19 victims.
The plan is $ 101 billion over three years. In fact, it is closer to 69 billion – the minimum – because it includes extending support measures (emergency wage subsidy), which are not, in and of themselves, a stimulus measure.
Much of this plan will not have spontaneous effects on the economy, as is the case with construction.
Its effects will be felt to some extent in the long run, by increasing Canada’s economic potential.
How ? Three examples. By supporting childcare, the federal government will increase women’s participation in the labor market, as we saw in Quebec. Before the family policy adopted by Pauline Maroua in 1997, the female participation rate was 4 points below the rest of Canada. Today, it is 4 points higher – and among the highest in the world – that are fueling the economy and helping alleviate labor scarcity.
The government of Quebec will not be excluded. Ultimately, it should receive an annual compensation of around $ 2 billion, which will allow it to reduce its deficit.
The second example: the redeployment of workers. As the post-COVID-19 economy will provide various jobs, the government will help disabled workers to improve their training and find a new job. In particular, merchants and students are targeted. This money will, once again, boost the long-term economic potential.
Example 3: The federal government is increasing benefits for less fortunate workers, as well as investing in affordable housing. These measures target Canadians who have been hard hit by the pandemic, either because of a job loss that will not return or because of a rent increase. The federal funds would reduce the exclusion of a class of Canadians, an exclusion that has detrimental effects on social cohesion. It’s called a sustainable recovery.
In short, $ 69 billion over three years, or well spent, or about $ 23 billion annually.
Of that amount, two-thirds of that will be permanent and recurring (16 billion), in particular the day care program (8.4 billion annually as of 2025) and workers’ allowance (1.7 billion annually as of 2025).
Impact on impotence? Less risky than expected, as the minister benefits from a more favorable economic situation.
Thus, the deficit for the year ending March 31, 2021 will not be 399 billion as in the worst scenario, or even 382 billion in the middle scenario, but “only” 354 billion. This deficit equates to 16.1% of the Canadian economy, as measured by gross domestic product.
This difference explains the higher-than-expected personal income tax revenue and lower federal spending.
In normal times, this favorable context would have lowered the deficit for the year that starts (2021-2022) to $ 105 billion, but the extension of emergency subsidies until the fall and the Freeland stimulus plan made it jump to 154 billion, or 6.4% of GDP. . That deficit is somewhat in line with what was expected last fall, all things considered.
However, the outlook for the following years is much better.
Next year, the deficit will drop below 60 billion, and it will be cut in half in 2025-2026 (31 billion), when the pandemic becomes a thing of the past (hopefully). Then the deficit equals 1.1% of GDP.
The change in direction is significant compared to the fall statement. So the post-COVID-19 federal debt should be less terrifying.
Yes, well, the federal debt, which was 721 billion before the pandemic, will reach 1,234 billion at the end of this fiscal year (March 31, 2022) and 1,411 billion on March 31, 2026. In short, it will have doubled in six years, to levels unintelligible to people. Ordinary.
However, the federal government expected the worst when the second wave struck and we are still not sure about the vaccines. In her economic statement, Secretary Freeland saw the debt reach 56% of GDP in 2026, while the target for 2026 has shrunk to 49.2% of GDP.
Our debts will remain very high, let’s not kid ourselves. But this projected contraction, coupled with a sane plan, makes it possible to see Canada’s future after COVID-19 with some optimism.