BE DECIVESS MR. MORNEAU


Early this week the Prime Minister announced that new policy measures to address the COVID-19 virus would be released on Wednesday. Expectations were high that he would respond with a substantial package of policy initiatives to support Canadians and the economy.

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THE GLOBAL VIRUS RECESSION

 

In 2008, the global economy was shocked into a recession by a meltdown in global financial markets. G-20 leaders reacted quickly to the deteriorating economic situation with a coordinated fiscal policy response. The International Monetary Fund encouraged those countries that had the fiscal flexibility to implement fiscal measures amounting to 2 per cent of the their economies. The resulting fiscal stimulus went a long way to mitigate the impacts of the global recession.

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A LARGE DEFICIT IS INEVITBLE BUT VERY MANAGEABL


Right now, federal, provincial, and municipal governments, the private sector, and all Canadians are implementing a counter-cyclical policy aimed at “shutting down the economy” in order to halt the COVID-19 virus. Successful implementation of this policy is critical to eventually restarting the economy. This is true of fiscal costs will be temporary and manageable. They are not something to worry about now.

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Fiscal Monitor for April 2019 – November 2019


The federal government posted a deficit of $2.7 billion in November 2019, compared to a deficit of $2.2 billion November 2018. All of this deterioration in the monthly deficit was attributable to the timing of payments, most notably transfers to provinces and territories for the Labour Market Development Agreements program and to the Gas Tax Fund and Home Care and Mental Health programs. This implies lower year-over-year expenses in future months.  

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THE “MYSTERIOUS” INCREASE IN THIS YEAR’S DEFICIT

 

As it turns out the increase in the deficit this yea to $26 billion is not that mysterious. It is in fact largely the result of spending and tax policy changes this year and last year. Without these policy actions the deficit would have been about $11 billion this year, $3 billion lower than last year.

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Fiscal Monitor for April – October 201


The federal government posted a deficit of $3.3 billion in October 2019, compared to a deficit of $1.1 billion October 2018.

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