How the Canadian Government Spent $240B During COVID-19
By: Junior Economist
Tags: Economics, Canada, Government, Business, Coronavirus

How the Canadian Government Spent $240B During COVID-19

A guest article by Stephanie Xiang, 2020/2021 CEO of JEC Toronto

Since lockdown began on March 13th, the Canadian government has implemented a slew of policies and programs to support both citizens and the economy. While for many, the main concern is how to weather this pandemic, but it is also important to consider the sum and impacts of all this spending.

Image Source: Lars Hagberg/Reuters

Those interested can find the official COVID Economic Response Plan on the official government website, where it is broken down into four categories: protecting health and safety, direct support measures, tax liquidity support, and other liquidity support and capital relief. The primary objectives were to ensure that citizens could maintain essential spending and prevent businesses from going under.

Thus far, federal spending has totaled to around $240 billion Canadian dollars, and shows no signs of slowing — nor was there much opposition from other parties. According to CBC News, this averages out to around $952 million per day. Chrystia Freeland, the current Minister of Finance, anticipates total government spending on the pandemic to reach $322 billion for the fiscal year ending on March 31, 2021. Deficit projections are at $382 billion, coupled with plans for $100 billion in stimulus over the next three years.

Image Source: CBC News

The Four Categories of Spending

Protecting Health and Safety

This category includes purchases of personal protective equipment (PPE), increased funding for healthcare, and consular assistance. Some subsections do not have specified costs, but the ones that do range from $25 million to $500 million in implementation requirements. The total estimated impact totals to around $25 billion dollars in 2020–2021, primarily as a result of the Safe Restart Agreement.

Direct Support Measures

As the title suggests, this category is responsible for the Canada Emergency Response Benefit (CERB), Canada Emergency Wage Subsidy (CEWS), Canada Emergency Commercial Rent Assistance, and Canada Emergency Business Account (CEBA). These are separated into benefits for individuals, including the $2,000 payment that almost a third of all Canadians took, and businesses, who saw over $31 billion go into CEBA. The total estimated impact of all this totals to over $200 billion dollars.

Tax Liquidity Support

This form of support allows for income tax deferral until after August, meaning that individuals had less to worry about managing. There were also remittances for sales taxes, and deferrals for customs duty payments. No implementation costs are available on the site, however the estimated impact is around $85 billion.

Other Liquidity Support and Capital Relief

Further support for enterprises as well as Capital Relief (OSFI Domestic Stability Buffer) falls under this section. The primary measures taken involve financing for small- and medium-sized businesses, the agricultural sector, and large employers among others. Again, there are no implementation costs listed, and the estimated impact totals to over $680 billion.

Increased Governmental Deficit

As you might imagine, the increased spending during this pandemic has fundamentally changed previous expectations for both the government budget as well as predicted deficits.

Image Source: Department of Finance

This level of spending was not anticipated for previously, resulting in raised deficits not only for 2020–2021 but in later years as well, as the government implements a $100 billion dollar stimulus plan designed to kickstart the economy and prevent effects like those of the

Parliamentary Budget Officer Yves Giroux has stated that “Based on a return to pre-crisis policy settings and our economic outlook, federal fiscal policy over the medium term would be sustainable.” For her part, Minister Freeland has commented that relative to the rest of the G7, Canada’s debt-to-GDP-ratio remains quite low, and remains manageable due to low interest rates.

Whether this will be a strong point of contention in the elections later on remains to be seen, as many voters have directly benefited from measures supported by this spending, such as CERB.

Criticisms & Concerns

The current government’s actions during this pandemic have not gone without criticism. Ignoring the complaints regarding the detrimental effects of the lockdown specifically on small businesses, others have commented on the lack of oversight in direct support measures.

The federal government has not released any details regarding businesses who have received funding, and the names of both landlords and tenants were redacted in released CECRA applications. By contrast, the US government has released a website with the names and amounts of COVID-19 funding for businesses.

Documents related to PPE expenditures have been less than detailed, but Public Services and Procurement Minister Anita Anand states that releasing those “will undermine our supplier relationships.”

The Fraser Institute has criticized the government for offering money to those who may not even have needed it during this pandemic, having conducted an analysis which concluded that over a quarter of the payments were unnecessary. Adults and children in high-income households were noted for having taken the payments, having personally qualified for them.

Ultimately, the full effects of COVID-19 are yet to be seen, but we can be sure that there is still more to be spent preventing further infections and deaths. Whether this spending has been effective, and whether or not the government will release further details can only be revealed in the aftermath.