This afternoon, Finance Minister Bill Morneau provided a fiscal snapshot and short-term economic analysis of what the federal government has spent amid the global COVID-19 pandemic.
According to the fiscal snapshot, the federal government deficit is expected to reach $343-billion this year, which was notably described as “the challenge of our lifetime”.
The level of spending had been compared to levels last seen when Canada officially joined in the Second World War.
“This spending level is on par with, but lower than the peak deficit (as a percent of GDP) experienced by Canada during the Second World War. This is truly the challenge of our lifetime. As temporary investment measures come to an end and GDP recovers over time, deficits are expected to retreat,” read a statement of the snapshot by the Finance Minister.
Addressing potential criticisms about the high level of spending from oppositions and other critics, Finance Minister Bill Morneau said in his speech at the House of Commons that “our government knew that the cost of inaction would’ve been far greater”.
“Those who would have us do less ignore that, without government action, millions of jobs would have been lost, putting the burden of debt onto families and jeopardizing Canada’s resilience,” added the Finance Minister.
Highlights of the Fiscal Snapshot Announced Wednesday
- Deficit for 2020-21 rises to $343.2 billion from $34.4 billion projected before the pandemic.
- Net federal debt will hit $1.2 trillion.
- The federal debt-to-GDP ratio is expected to rise to 49% in 2020-21 from 31%
- Direct federal support for Canadians and businesses: $212 billion.
- COVID-19 slowdown has cost the federal treasury an additional $81.3 billion.
- GDP will shrink by projected 6.8% this year — worst since the Great Depression.
- The economy is expected to bounce back by 5.5% next year.
From the fiscal snapshot announced today, of the $343-billion deficit the country will face in the coming years, the federal government spent $231-billion on health and safety measures as well as direct financial aid to Canadians and businesses.
These would include benefits such as the Canada Emergency Response Benefit (CERB), Canada Emergency Wage Subsidy (CEWS), and the Canada Emergency Business Account (CEBA) in addition to other pandemic-related financial aid payments and benefits.
To put into the dollar amount of how much was spent for these programs, the fiscal snapshot detailed the following:
- The $2,000 a month CERB program that 8.2 million Canadians applied for cost $53.5 billion
- The 75 percent emergency wage subsidy, with more than 252,370 applicants, cost $18.1 billion
- The $1,250 a month Canada Emergency Student Benefit, with more than 600,000 applicants, cost $1.4 billion
- The Canada Emergency Business Account, which offered business loans of $40,000, had 688,000 applicants, cost the government $27.4 billion.
Summarizing his fiscal update, Finance Minister Bill Morneau told the House of Commons that nearly 9 out of every 10 dollars in COVID-19 aid was delivered to Canadians and businesses were financed by the federal government.
In other words, despite the high level of spending that was announced today, the Finance Minister says that a majority of the government spending was in efforts to financially support Canadians and businesses weather out the pandemic.
While critics and opposition may question the spending, it is undeniable that the federal government was in a difficult situation in their spending decisions amid the COVID-19 outbreaks across Canada.
Prime Minister Justin Trudeau, spoke to reporters in advance, said that the situation would have been worse had his government not bring in the massive financial aid measures.
“When the pandemic first hit, a lot of people lost their jobs overnight. They didn’t know how they were going to feed their families or pay their bills” said the Prime Minister
“Faced with this unprecedented challenge our government had two options: We could sit back and let Canadians fend for themselves… or we could swiftly and substantially choose to support Canadians. We chose to support Canadians.”
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