While he applauds the federal government's support package, Jim Stanford writes that it should be larger -- and it will have to be larger -- because there are bigger shoes to drop:
Clearly, this terrible situation is going to get worse before it gets better. Expect the April labour force data (to be published in early May … assuming Statistics Canada staff are able to work!) to show a sudden decline in employment of 300,000 or more -- by far the biggest one-month drop in Canadian history. That would push the unemployment rate quickly up toward 7 per cent, with more to come. (The March data, based on a phone survey conducted last week, before school closures and other emergency measures were implemented, will capture only the beginning of the downturn.) Knock-on effects from the initial lay-offs (experienced through shocked consumer spending, disrupted supply chains, bankruptcies or closures) will cause those losses to cascade in subsequent months. Assuming the lock-down is extended for some weeks, expect a hit to annualized second-quarter GDP in the order of 10 per cent or potentially more, and unemployment to rise to 12-15 per cent.
It's been quite a while since we've seen unemployment numbers like these. And a lot of the unemployed will be people who have never been covered by EI. The federal government is the only institution that has the tools to deal with this crisis:
There is no doubt, then, that more immediate support will be required in many areas, as this crisis continues to unfold. All three leaders today indicated their understanding of this, and their willingness to act, which is encouraging. And apart from a few gratuitous boasts by Mr. Morneau about how Canada's "strong fiscal position" allows his government to act powerfully, there is almost no discussion of "how will we pay for it." Of course, no matter how big Canada's public debt was today, there is still no limit on the federal government's ability to create purchasing power and mobilize resources. This idea, once heretical, has now been widely accepted, even in polite mainstream company. Even Governor Poloz agreed today that quantitative easing is now a "standard part of the central bank toolkit." Progressives can push hard to make sure the full capacity of government and the central bank is used ambitiously and fairly -- and that it isn't replaced by knee-jerk austerity once the immediate crisis is over.
And, when this crisis is over, the federal government is going to have to be restructured to deal with the brave new world this virus represents.
Image: Big Think
6 comments:
$82,000,000,000 spread evenly over our 35,000,000 people will give each one of us over $2,300. How much of that do I expect to see - $3. How much do I really need added to my pension, $3.
It all depends on how this money circulates and into whose hands it passes, Steve. We'll have to wait to see how that works out.
" it isn't replaced by knee-jerk austerity once the immediate crisis is over." We can but hope but I suggest to not hold your breath Owen. Those on the right will no doubt have much to say once its over about how they would have handled things differently!
I'm quite sure that there will be those of the right who will complain about the cost of these measures, Rural. It will be the same people who know the cost of everything -- and the value of nothing.
How much of this is blowback from the era of "everyday low taxes" that has been the mantra of the neoliberal order?
The 2007-2008 Great Recession saw major governments throw vast sums into stimulus spending but, when it was over, it was clear if would be many years, decades, before government fiscal solvency would permit another rescue of that sort.
Obama was skewered for his deficits that he steadily reduced during his term. When he left the White House it stood around $565 billion per year. Trump, in his first three years in office, went on a spending/tax cuts rampage that, even before this pandemic, pushed that deficit to a new record of $1 billion plus. Now Washington is going to add another trillion in stimulus spending divorced from tax revenues. That means it has to borrow that trillion or just print more money. His first reaction to the pandemic was to talk of even more tax cuts for corporations, completely ignoring how his first round of cuts was misused by corporations not to increase production/employment but to buy back their own shares and inflate executive compensation.
Some say we're in another Minsky Moment. Trump launched another wave of deregulation/Casino Capitalism only, this time, he has no intention of reining it back in. Where is Lee Harvey Oswald now that we need him?
Trump makes everything immeasurably more difficult, Mound. He's the mean little kid who is hell-bent on destroying everything he touches.
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