OTTAWA––Today’s federal economic and fiscal snapshot revealed a $343 billion deficit funded at record low interest rates.
According to analysis from the Canadian Centre for Policy Alternatives (CCPA), of the other sectors of the economy, 65% of the deficit was spent on households, 12% on supporting corporations with 5% going to the provinces. That 75% of the deficit for households breaks down into 27% on jobless benefits, 24% on payroll supports and 7% on lower income taxes (because incomes fell).
On the deficit
“A deficit is just an accounting convention looking at only one side of the ledger. To fully understand what is going on, we need to look at both sides––in particular who benefited from the federal deficit. Mostly on the opposite side of the ledger were critical supports for jobless Canadians and those at risk of job loss,” said David Macdonald, CCPA senior economist.
“A deficit means the federal government shouldered the burden, rather than businesses and households,” added Macdonald. “Without spending on supports like the Canada Emergency Response benefit, it would have been households incurring this deficit through emptied bank accounts and racked up credit card debt as they lost their jobs.”
“We can’t divorce federal deficit spending from what it’s paid for: COVID-19 emergency spending supported Canadians through a lock down that saved lives, and cushioned the economic blow to both households and businesses,” said Sheila Block, CCPA Ontario office senior economist.
On the way forward
“Given the uncertainty about the course of the pandemic in the months ahead, now is not the time for rash spending cuts and a turn to austerity,” said Block. “Instead, there will be significant need as we move forward to maintain or even increase government investments to support the public health of our communities. We can’t have a fulsome economic recovery during an ongoing pandemic.
Looking ahead, we need an investment in the care economy, in particular, in child care and education, so that women can go back to work. The absence of a national plan for childcare in this fiscal update was a huge mistake.”
“This crisis has thrown a wrench into the federal government’s finances, but the feds are best prepared to step in with financial aid to Canadians, businesses, the provinces and municipalities,” added Macdonald. “The interest rates on federal borrowing are at record all-time lows that can be locked in at less than the rate of inflation. In other words, investors are so desperate to lend to the federal government, they are willing to lose money on it in real terms.”
For more information and interviews contact Alyssa O’Dell at 343-998-7575 or [email protected].