Ottawa should think carefully on providing additional stimulus: Former deputy prime minister
One former Canadian finance minister is urging Chrystia Freeland to rein in some of her government’s planned COVID-19 recovery spending.
John Manley, a one-time finance minister and deputy prime minister and current co-chair of The C.D. Howe Institute’s Fiscal and Tax Working Group, said in an interview on Tuesday that Freeland has a lot of political capital and should use it to get more targeted recovery spending than what was proposed in the government’s Fall Economic Statement.
“This prime minister can not afford to lose another finance minister,” Manley said of Justin Trudeau, who is just six months removed from previous finance minister Bill Morneau’s resignation. “So, Miss Freeland is going to have to be tough with him and say ‘no’ to some things that he might like to do and face the consequences, and I don’t think there will be any.”
Manley served as former Prime Minister Jean Chrétien’s deputy PM and finance minister from 2002 until the party leadership was handed over to Paul Martin in late 2003. He retired from politics in 2004.
His comments echo those from a report that is set to be released on Wednesday by the C.D. Howe Institute. That report says that any debt-financed stimulus “should be temporary, essential, and targeted to improving the economy’s productive capacity.”
Manley added that while the Canada Emergency Response Benefit (CERB) “has tided people through,” the government has “got to get back to normal programs.”
The report also warns that “substantial hikes in [employment insurance] premiums will be necessary in the future for the program to remain self-funded over time, dampening job growth.” And it cautions that the Canadian economy could “easily” slip into another recession during this decade.
Manley added that the government should examine whether the $70 billion to $100 billion in spending it earmarked in the fall is necessary.
“They should think really carefully at this point whether stimulus is required at this point all,” he said. “What we’ve seen in Canada is a very rapid growth during COVID of savings rates. And the slowdown in corporate investment as balance sheets have improved.”
“So, there’s a lot of reason to believe that when the restrictions of the pandemic begin to unwind that both the household and the corporate sectors are going to spend some of that cash that’s been set aside.”