Canada’s federal deficit is currently forecasted to be $343 billion in fiscal year 2020-21, or more than 15% of gross domestic product (GDP). Not surprisingly, this deficit and the associated accumulation of debt is attributable to the government’s response to the COVID-19 pandemic. Federal budget deficits are, however, expected to continue well beyond 2020. This commentary discusses how we should think about the federal government’s debt, and what perspective we should take that may be different from how we are used to thinking about other kinds of debt. Read this articleIs Canada’s Federal Debt a Cause for Concern?
The Canada Recovery Benefit (CRB) is a bold step in the delivery of pandemic-related aid to self-employed and gig workers, who are poorly served by Employment Insurance. Advocates of reform to Canada’s income transfer system will find much to like about the CRB, and some may wish to make the program, or something like it, a permanent feature of Canada’s social safety net. However, there are likely to be substantial enforcement and implementation issues with the program, as well as problems around fairness. As currently designed, the CRB is not a good template for a guaranteed basic income for Canada. Read this articleThe Canada Recovery Benefit: Employment Insurance or Basic Income Guarantee?
The Canada Recovery Benefit may become an important source of support for self-employed individuals during the COVID-19 pandemic, particularly among those without employees. One important obstacle to the policy’s success is that the self-employed are a heterogeneous group that is not easily characterized, with workflows that do not fit neatly into weekly benefit periods. Efforts to develop well-targeted post-pandemic support for the self-employed require better data to understand their workflows, incomes, and behavioural responses to adjustments in policy parameters. Read this articleThe Challenge of Designing Income Support Programs for the Self-Employed
The Federal government is in need of a new fiscal anchor. If there is one thing the current crisis has revealed on the fiscal policy front, it is that the debt-to-GDP ratio alone cannot adequately play that role. As a result, additional fiscal rules that allow potentially large deficits during recessions while ultimately balancing budgets over the cycle will be needed to keep the country’s finances on a sustainable path. Read this articleCanada Needs a New Fiscal Anchor. (Québec Has One to Offer.)
The federal debt is rising fast and is likely to reach at least 63 percent of GDP by 2025, a level not seen since the fiscal crisis of the 1990s. But the current low level of interest rates (if continued in the future) mean that the debt-to-GDP ratio is sustainable and will likely decline gradually over time, without the need for any sharp fiscal consolidation in the coming years. Read this articleFederal debt from 1867 … and after the pandemic
This instalment of the Finances of the Nation Research Roundup Series covers the Bank of Canada Monetary Policy Report, profit shifting by multinational enterprises, a number of Canadian think tank articles relevant during the pandemic, Newfoundland and Labrador’s fiscal update and much more. Read this articleFinances of the Nation Research Roundup – July 30