NP View: COVID-19 is the emergency we should have saved for

Canadian Border Services Agency officers stand in front of two closed border checkpoints at the Thousand Islands Bridge in Lansdowne, Ont., on March 19, 2020. Alex Filipe/Reuters

It should be noted that compound interest is one of the miracles of finance. You earn interest, and if you keep it instead of spending it right away, you earn interest on the interest. The same works for debt.

Certainly, governments seldom learn this. They may be aware of this, given their access to experts and advisers, but they choose to overwhelmingly ignore as long as the crisis doesn’t come during their term in office. The future leaders, and the population they claim to serve, are alone.

Now, before COVID-19, governments around the world are preparing massive spending packages in an effort to offset the damage the outbreak is causing to jobs, economies, and people. Economists indicate that the luckiest countries, like Canada, can bear the cost it will bring. We have “fiscal capacity”. We have resisted worse in the past.

Affected economy

As mentioned, Canada could certainly resist damage, but good fortune certainly does not alter the fact that successive governments have had many opportunities to put the national budget on firmer ground and let them pass. In fact, the current government is a specific case. In a time of prolonged economic growth, more than a decade since the last recession, the Trudeau government had ample opportunities to follow a more judicious spending path but chose instead to take any additional revenue and dedicate it to some new spending project. Even before the start of the current crisis, Morneau had given up setting dates when Canadians could expect the government to spend no more than it contributes.

Without a doubt, there will be no need for those economists who will defend such actions. Canada is a prosperous place and you can afford to pay a lot in interest, especially at the low and low rates available to a sovereign government. Relaxing projections are offered, suggesting that the future does not pose a great threat, assuming the absence of a general crisis. But then the crisis comes.

Western countries have been struggling for some time with a decline in public faith in institutions that have long been considered a cornerstone of society. Erosion results from a growing feeling of mistrust. People do not feel that those in power act with the honesty and integrity expected of them. Governments that handle public finances in such an arrogant manner so evident in Trudeau’s record can only exacerbate that belief.

Source: National Post