The massive federal deficit created by the unprecedented coronavirus emergency response could take more than 10 years to get under control, one economist suggests.
In an interview with The West Block guest host Robin Gill, the B.C. Business Council’s chief economist, Ken Peacock, speculated that while some economic activity might normalize more quickly, the $260-billion federal deficit forecast by the parliamentary budget watchdog will not be under control for some time.
“That is going to take many, many years. It might be upwards of a decade before they get the deficit eliminated and start paying down the debt,” said Peacock.
“If you’re talking the economic hole, it’s also very deep but I would think we’ll probably be returning to where we were kind of prior to the pandemic within a couple years in terms of economic output and then we’re going to need to see the economy grow to begin paying down that debt later.”
The $260-billion predicted deficit is just for the current fiscal year.
Yves Giroux, the parliamentary budget officer, has warned that kind of spending is not sustainable and unless emergency spending programs are rolled back, “we’ll be looking at a level of taxation that’s not been seen for generations in this country.”
The federal government secured parliamentary approval to spend effectively without limit until September 2020 on measures related to the coronavirus response.
The hundreds of billions in emergency spending has taken the form of things like the Canada Emergency Response Benefit (CERB), the wage subsidy program, support payments for seniors, students and youth, and funding for public health awareness campaigns and vaccine research, among other measures.
Some argue though that the $2,000-per month CERB could limit the economic recovery if those receiving it opt out of pursuing a return to full-time work.
The government had tried to introduce a bill last month that would have required CERB recipients to take reasonable jobs but that was blocked by the opposition parties.
And while the government has had to submit biweekly spending reports to the finance committee as part of the spending authorization it received, officials have not yet shared a budget or fiscal update.
The budget was originally scheduled for March but was scrapped as the House of Commons suspended in an effort to limit the spread of the virus, and Prime Minister Justin Trudeau for months insisted the situation was too uncertain to offer any kind of economic forecast.
Peacock said he doesn’t fault the government for not attempting to provide some kind of modelling in the middle of a crisis but suggested that they could have still tried to “take a shot.”
“It was, perhaps, a little bit cowardly but given the fact that revenues were plummeting, the economy was slowing dramatically and money was being shoveled out the door, for lack of a better term, at a very, very rapid pace, I can understand,” he said.
“I’m a little bit sympathetic with the notion of just trying to figure out just where exactly we are being difficult … waiting for a clearer picture I would say is not a bad move.”
Last month, officials finally agreed to release what they are calling a “fiscal snapshot.”
That is set to come out on July 8.