THUNDER BAY – A prominent Lakehead University economics professor is questioning Ottawa’s need to include $100 billion stimulus spending in Monday’s federal budget, the country's first in nearly two years.
Livio Di Matteo on Tuesday said to a certain extent, the government’s initial response to COVID-19 was called for, at the time.
With the economy expected to grow by seven per cent, after inflation, in 2021, and four per cent next year, combined with low-interest rates, Di Matteo said there already going to be stimulus spending by taxpayers whose personal financial situation could be markedly improved going forward.
Stimulus spending might help that situation, but it would also add to both the annual deficit and the overall debt, which is projected to near $1.4 trillion by 2026.
“The economy is going to be growing robustly,” Di Matteo said. “Interest rates are low. There’s about $100 billion (in savings for people) which is probably going to be spent. So there’s a lot of stimulus already coming, so do you need to inject more stimulus into the economy, especially given the potential there is for interest rates to rise.
The 739-page document, which details a planned $497.6 billion in spending, made a lot of promises to a lot of people, leading opposition leaders and other experts to declare it an election budget.
It includes $30 billion to create a national $10-a-day childcare plan by 2025-26, a $15-an-hour minimum wage for federally regulated workers, $101 billion to help transition the country to a green economy, $18 billion to Indigenous communities, $17.6 billion for a green recovery and a continuation of the wage subsidies and other supports to business made necessary by COVID-19.
The plan also calls for the deficit to shrink from $354.2 billion in 2020-21 to $30.7 billion in five years time, $3 billion for the provinces to fix long-term care, $300 million for Black and other minority entrepreneurs and the extension of an interest-free loan period to students to March 31, 2023.
“Everyone likes to have spending, I suppose,” Di Matteo said. “If you look at the list, there’s money for just about everybody and everyone with a specific interest. There’s money for tourism, there’s money for development, there’s money for research, though it’s not directed at basic research, but at what the government thinks is research.”
Di Matteo said the budget indicates a shift in government spending priorities.
“If you take the budget down five or six years to until about 2025 or so, federal spending will be about a third higher than it was in 2019. What’s happening is there is a sort of redefinition of what government is going to be doing. Spending is going up. The current federal government sees government in a more interventionist manner, more directive spending, so that is reflected in the spending numbers,” Di Matteo said.
Though it was mentioned only briefly in the document, the federal government indicated it plans to make FedNor, the regional development agency, a standalone entity.
Di Matteo said that could be a good thing, noting FedNor has always been an agency within a government ministry.
“By making it a standalone entity, basically it will essentially have more control over its activities and affairs. It will be like a separate corporation. That could be useful for regional development because in a sense it will have more autonomy, as opposed to being under direct political control. On a day-to-day basis, I’m not sure how much would actually change,” he said.
Other critics, including Conservative Leader Erin O’Toole, said the Liberals are spending too much, with no end in sight to pandemic spending. NDP Leader Jagmeet Singh says his party will support the budget, but will continue to push for universal basic income and a national pharmacare program.
