As welcome as Ottawa’s bailout package, which finally passed parliament, might be– the consensus is that much more government support will be needed. Out of the $82 Billion in assistance announced earlier, only $27 Billion takes the form of direct aid to ordinary Canadians. $55 Billion takes the form of deferred taxes and repayable loans or deferrals. Pressed by reporters at his news conference today, Prime Minister Trudeau hinted that more direct assistance to Canadians may be on the way, over and above the Canada Emergency Response Benefit (CERB), which provides $2,000 a month, for the next four months to workers who lose their income because of COVID-19. That program, announced today, replaces the wage assistance programs announced earlier in the crisis.
If you strip out the $55 Billion in the federal package that is repayable, what’s left in the form of direct aid represents 1 percent of Canada’s GDP. Contrast this expenditure to how the government responded to its biggest crisis ever-World War II. Canada entered the war in 1939 with a total federal budget of just over half a billion dollars. Spending as a percentage of GDP sat at around 10 percent. In the next three years Canada had tripled and then quadrupled its spending to over two billion dollars a year—representing nearly half of Canada’s GDP. Amazingly the entire debt was financed in Canada through aggressive taxation and a series of Victory Bond issues that raised nearly $12 Billion. In all Canada spent over $20 Billion to finance the War and raised all of that money domestically.
It appears the government decided to make a relatively modest start to relief measures in order to have sufficient headroom to meet emergencies later on. It is likely we will see more assistance measures as the COVID crisis works its way through the country.