For the time being, Canada’s finances are not too worrisome for a regional think tank.
Charles Cirtwell is Northern Policy Institute’s President, and tells us while the federal government keeps providing support during COVID-19, the debt to GDP ratio now is about 34%, much better than 25 years ago. “For those of us around in ’95, it was double back then. For those folks who remember years of cutting spending, no bridges, no twinning highways, closing hospitals…. it was twice as bad.”
The Policy Institute President estimates another four to five months before mid 90’s levels are reached. The debt to GDP ratio is the amount of debt owed compared to economic output, or, in other terms, the amount of debt a household has compared to income and the ability to pay.
However, a potential second wave is leaving him concerned. According to government figures, the budget deficit at roughly $350-billion, which hasn’t been seen since the Second World War, leaving Cirtwell questioning the $500 weekly Canada Emergency Response Benefit.
“There’s no question that we’re going to quickly get to a point where we’re not going to be able to sustain this. And the level of support, yeah, we’re planning on winding that down. But if we get a second wave, we’ll have to take a look at winding that back up. But I don’t think we’ll be able to afford the $500 in the second round,” says the Policy Institute President.
As for taxes, he says any politician promising no new taxes to pay for COVID-19 is lying. Cirtwell points out all political parties are hinging on economic recovery, while he’s looking at consumption taxes, such as the Goods and Services Tax.
“So instead of going after high income earners, or increasing personal income tax for all of us, which slows the return to work, I’d like to see a shift onto that consumption tax. The Harper government took away two percentage points on the GST.”
Cirtwell adds the Bank of Canada has kept the prime interest rate around 3-percent, in the mid 90’s it was about nine.
