|Establishing a national childcare plan is a key long-term goal, with Freeland vowing a detailed plan in next year’s budget. In her forward to the fiscal update, she described the daycare strategy as “a feminist plan” that also “makes sound business sense.”As a start, the Liberals are proposing in their fiscal update to spend $420 million in grants and bursaries to help provinces and territories train and retain qualified early childhood educators.
The Liberals are also proposing to spend $20 million over five years to build a child-care secretariat to guide federal policy work, plus $15 million in ongoing spending for a similar Indigenous-focused body.
The money is designed to lay the foundation for what will likely be a big-money promise in the coming budget.
Current federal spending on child care expires near the end of the decade, but the Liberals are proposing now to keep the money flowing, starting with $870 million a year in 2028.
There is also money for action on climate change. The government allocated C$2.6 billion in grants for homeowners to improve efficiency and $150 million over three years for electric vehicle charging stations.
The government also detailed some help for the hard-hit tourism sector, including funding for airports. But with Transport Minister Marc Garneau’s negotiations with airlines underway, there is no specific money for carriers including Air Canada and WestJet Airlines Ltd.
There will continue to be great concern about the largest budget deficits since World War II. Does Canada really need the proportionately largest COVID fiscal response in the industrialized world? The outlook is somewhat less dire than when the government released a fiscal snapshot in July. The unemployment rate at 8.9% is down materially from May’s 13.7% high but well above February’s 5.6%. The economy recovered ground through the third quarter, although the second wave of pandemic and ensuing restrictions undoubtedly will topple economic activity this quarter.
There is little worry that the government can sustain a massive deficit this year. It can, given low debt levels entering the crisis and historically low interest rates. But now that it has no fiscal guardrails, there’s a risk debt-to-GDP will continue to rise in the medium term if it continues to spend ambitiously.
The government is adding a new revenue source by taxing large digital companies. Still, in time, with this level of spending, they will be tempted to raise taxes on domestic sources, for example, hikes in the GST and higher capital gains taxes. This would be misguided, given the fragility of the recovery.
There is a greater risk that the government is overdoing the stimulus with vaccines on the horizon than undergoing it. Canada’s programs have been generous and household-focused compared to our G7 peers. The government must be strategic in assuring that new program spending is focused on future growth, beyond the pandemic, so that our debt-to-GDP will resume its downward trend. The risk is that once created; it is difficult to rein in spending.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres