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Read the Transcript: The Federal Fiscal Snapshot. What Does it Mean and What’s Next for Canada?

On July 8, the federal Liberal government updated the country on Canada’s finances. This fiscal snapshot was unlike any other as it arrived after four months of reactionary spending as the Trudeau Government responded to COVID-19. As the government moves beyond the emergency phase of its response and into a new recovery phase, what can we expect next? Will we see the budget originally drafted for March of this year make its way to the House this fall? Does the government have the confidence of the opposition parties to continue to navigate these uncharted times?

In this episode, Peter Cleary, Stephanie Gawur and Ian Chesney unpack the economic outlook provided by Finance Minister Bill Morneau to Canadians Wednesday July 8. They discuss the issues the federal government will be tasked with this fall as health care organizations and providers brace for a potential second wave of COVID-19.

Listen to the podcast episode here.

Peter Cleary: Hi everyone, my name is Peter Cleary. I’m a Principal here at Santis Health. On today’s episode we are discussing the federal fiscal and economic snapshot. What does it mean for health care organizations and what is next for Canada?

Joining me virtually are my colleagues Stephanie Gawur and Ian Chesney. Stephanie is a Senior Director of Government Relations here at Santis and Ian works out of Ottawa as a Senior Consultant with me. Thank you both for joining the discussion today.

Stephanie Gawur: Thanks Peter for having us.

Ian Chesney: Thanks Peter.

Peter Cleary: Yesterday we were following the fiscal update here and the long awaited snapshot of just how much the federal government has spent in the past couple of months. I think it’s the first time we have seen a true cost figure come out of the government. The PBO has been putting out weekly updates to try to give a snapshot. $230 billion at the same time as revenues take a hit of $71 billion is a staggering. Reaction?

Stephanie Gawur: I mean I think to some extent this is what we were anticipating like you said Peter you know the Parliamentary Budget Officer has been estimating a deficit of approximately $250 billion so this is obviously much more than that I think the real shocker though yesterday was the fact that the total federal debt will exceed $1 trillion. For me that was a real, real staggering number.

Ian Chesney: I agree I mean certainly I think this we weren’t expecting good news going into this. I think the federal government had to update us and the way that it’s laid out is really reflective of that in that there is bad news up front but then the rest of it is basically a litany of the previously announced programs in various areas of spending on COVID. I do think the deficit figure is shocking. $343 billion to put that in context that’s 96 per cent of the total 2019 Federal Budget and I think if you think about it like that it really hits home what kind of economic state we’re in currently.

Stephanie Gawur: And I think the most disappointing thing is that from my perspective Peter is that there’s really no plan and recovery sort of plan going forward in this document. It outlines a debt management plan and utilizing the historically low interest rates but where’s the plan for small businesses? Where is the plan for municipalities? Charity’s going forward? It’s really just lacking any details in terms of that.

Peter Cleary: I would expect that the Prime Minister will need to come out following yesterday fairly quickly and indicate either what those plans are or when we’re going to start getting those plans. I mean it could come in two forms. They can start doing what they did prior to the fiscal update and just make an announcement in a given day and worry about getting legislative approval later from the House which seems to have worked so far. I’m curious to see how how long the Opposition will withstand an announcement that they are expected to rubber-stamp later or if they’ll come out with something a little bit more significant and whether or not they’ll actually come out with a thoughtful budget that will carry them beyond the six months time frame. Because the difference between a budget and this is just telling us what they’ve spent. A budget lays what they’re going to do over the next five years.

To give a sense of this, I was just reading the articles and everybody, or a lot of the media, were referencing that this is the most spending since World War II and in Canadian dollars in 2020 the cost of World War II over a period of about 10 years is $400 billion in 2020 dollars. We’re not even close to being done this thing, we’re not even close to putting funding in place to actually recover the losses from businesses are at a loss or getting Canadians back to work or frankly any money into health care that will help with sustainability. What what do the feds need to do on health?

Stephanie Gawur: I think before we dive into that I think the way the way that the Prime Minister and and Minister Morneau sort of messaged this now going forward is really important to Canadians. I think there was a lot of Twitter commentary yesterday to Trudeau’s comment on “taking on the debts of Canadians so they didn’t have to”. Like whose money is it? It’s ours we’re going to be paying for this over the next five, 10, 15 years and I mean I think personally that’s a bit offensive that he said that. I saw the Twitter commentary pointing this out to him as well, but to your earlier point the economy is nowhere near where we were 10 years ago, we’ve lost all that growth and so what does that mean in terms of spending a budget? All of that I think you know there’s a few options in terms of how to grow the economy and it’ll be really interesting to see if they actually look to do a formal budget, a stimulus budget perhaps prior to an election. I know we’ll dive into that but I think there’s really only two main ways that they can grow the economy right now and increasing productivity and increasing labour market participation and you can’t really do the second one with no immigration at this point so it’s going to be really interesting to see what they do.

Ian Chesney: I do think though that on principle, at the end of the day, there’s really two options to approach a crisis like this and if the government can borrow at lower rates than the average Canadian and it’s better on principle I believe for the government to take on this deficit. We can argue about the figures and if certain programs were necessary and certain spending was unnecessary, but at the end of the day the other option is for Canadian consumers to take on this in the form of consumer debt and I think it can be argued that generally on principle the approach is right again. To Stephanie’s point, I do think I agree that some of the figures are pretty shocking and it does leave us wondering what the next step is how we get out of this situation. 

Peter, you raise a good point about a budget. At the end of the day you’re correct this was not a vehicle for spending, this was really something that they had to do and they designed it in a way to deliver the bad news that they knew they had to provide, but in some ways you could even argue it as a very early indication for an election of trying to kind of till the soil and set in narrative on all the areas of support that they provided that in the absence of a Liberal government Canadians would have been left holding the bag.

Stephanie Gawur: And I agree with that in sort of the global context. What would the Conservatives be able to offer that was any different than what we’re seeing? Some of the most Conservative governments around the world are operating in a similar fashion as the Liberals. Six months ago Boris Johnson and and the U.K. were the best promoters of a free market now they’re subsidizing 75 per cent of workers wages. It is something that’s happening around the world so what would the Conservatives be able to offer that’s any different? I think that’s a question that everyone’s thinking now. 

Peter Cleary: I think it’s a good quote to bring out because the reality is, that was clearly a clip that they wanted the Prime Minister to have that was clearly the headline that they wanted to leave behind which is that we’re taking on the debts so Canadians don’t have to. The issue I take with that, is it tells the story appropriately sure and I think Ian you describe why. The reality is there are a lot of businesses in particular taking on debt and a lot of the government programs are actually not cash to businesses, it’s actually interest free loans. So the reality is a significant number of Canadians and businesses are taking on debt in all of this, it’s not just the government. It would probably be nice to see that kind of framing thrown into the mix as well too and not pretend that it was only the federal government but the reality is better for one of the eight million Canadians who got CERB to get money from the government and pay taxes, minimal taxes if not any taxes all later than live off a credit card where you going to get a 20 per cent or 30 per cent interest fee. So I get the principle of it, but I think  it needs to be stated that there are, and the government stated that beyond us, there are a considerable number of Canadians and businesses that are going deep into debt. And you walk around downtown Ottawa around the market and I was there yesterday and the bars and restaurants — some of them busy and some of them just completely dead.

Peter Cleary: I think we’re about to go into six months of really seeing the impact of the businesses and the organizations both health and non-health related that are taking hits. Let’s get into health charities for instance, you’re seeing Heart & Stroke and the Canadian Cancer Society and a lot of these are standard brands of Canadian health care. They’re firing half the staff and we’re not even out of the thick of it. With what the federal government has done so far in health care, what should they be thinking of? Did they do anything wrong in the first couple months and what’s left out of the picture right now the picture they need to put a focus on?

Stephanie Gawur: I mean I agree with that completely Peter in terms of the assessment on small business and charities. In terms of the charitable side of things, they’ve seen their donor pipelines completely dry up so that’s that’s one piece of it. These amalgamated programs to sort of allocate the funding across the board, I am not too sure how that’s working. I certainly don’t think there was enough for all of the charitable sector to be divvied up. I do think that coming together with that one voice through a sector is certainly much more effective but is it enough? No, I mean I don’t think so at this point.

Ian Chesney: Yeah, I think they still of course have a ways to go and to think about the last few months and the role that the federal government has played. I think one area of criticism early on there was an attempt to kind of over design and redesign various programs in spending and there was a lot of fixing programs and changing things to fit certain sectors and sub-sectors. I think that, at the very least, will make for a very complicated tax year next year, but in reality that approach has caused a lot of problems for them and I think that going forward where a better approach to support provinces is going to be is in areas of health transfers and financing. When you spoke to their support on health, one of the areas that I would like to see is the federal government take on a stronger role in increasing health transfers. I think that’s something that will be really important for provinces and territories as they continue to navigate this going forward. There has been of course some support from the federal government already on this in the last few months but I think that that’s going to be one of the major areas of support that we’d like to see going forward for provinces and territories.

Peter Cleary: So let’s be honest. You know they’re getting PPE under control. I at least trust that they are. You have drug shortages that are only going to become ever more rampant as supply chains get stressed, as the use of a particular drug when a person goes on a ventilator is through the roof. You have a long-term care system that is nothing short of broken, you have a home care system that is dependent on what province you’re in which has a different state of maturity and in some circumstances I feel kind of the lost sub-sector of the health care during this pandemic. You have staff in the hospitals and elsewhere in the sector that are just completely exhausted. And this actually is a pan-Canadian concern which is why we not only need to recover our losses, we need to bolster and prepare. I’m not hearing that from any government and I think part of it is that the governments are focused on wanting to show to the population that we’re recovering that we’re opening up that we’re moving to the next phase. It might just be the jaded person in me, but part of me feels that they should be saying well actually there’s a whole different strategy going on here simultaneously because there’s a good chance that this recovery thing isn’t going to work very well.

Stephanie Gawur: Yeah absolutely and I think you know no one is really talking about a second wave. Looking at Ontario specifically, I think that they should still be focussing on PPE and on testing and ventilators and making sure that we actually have everything that we need in case there is a second wave. Give an update to the public as to where we’re standing on all of that. Contact tracing still hasn’t even rolled out in Ontario, there’s been a lot of initial delays with that and was the initial investment from the fed’s enough for that? Likely not. The real push for supporting local manufacturing as well where are we at on that? I think all of this is still issues for the government and the bureaucracy really roles things out quickly but also struggled to manage the process. I feel like it was a very delayed process on a lot of things that should have been relatively simple so I think Canadians, certainly Ontarians, would like to know are we ready in case there is a second wave in the fall? All of these things are top of mind at least I think they should be. 

Peter Cleary: Ian, can public health say that they did well? Were they prepared? I mean we know we know of public health units that were operating on fax machines. Were they prepared and do we have the confidence they are prepared for the future? 

Ian Chesney: It’s a good point. I think there’s a few areas where public health faltered early on and other areas where they have demonstrated leadership and I think that can give us some confidence going into potentially, as Stephanie spoke to, a second wave. Or some are predicting now it will be in Canada less of a second wave and more of little flare ups in different geographic pockets of the country. 

On public health leadership, I think fundamentally there was a failure on masks and on the communication and information to Canadians around masks. At the end of the day while the research does show that wearing a mask is more about protecting other people than protecting yourself, clear and consistent messaging on that point lacked from day one. I think there was a lot of confusion for sectors you know there was obviously a shortage going into that generally to boo. It sort of seems like they were playing this strange catch up game where it was you know that they were trying to address the PPE issue, but at the same time reassure everyone that you know the average Canadian doesn’t need to wear a mask, in that kind of messaging led to a lot of confusion. 

I also think with masks there’s a demonstration of solidarity in wearing a mask and I think that’s important when you’re trying to mobilize the public to take a pandemic seriously, particularly when it’s an existential threat, that we can’t really see on a day-to-day basis. It’s easy for a lot of people to forgo some of the precautions that they could be taking and I think my hope is that they’ve learned from that a bit. The messaging has changed from public health certainly from Dr. Teresa Tam, there’s a bit more of a you know, I guess you could call it accepting the fact that that masks should be utilized by the average Canadian. But I do think that they did it. Again they’ve been sort of slow to take up these things that you know there’s a lot of new technology that all three of us have been have been exposed to from clients that Canada could be utilizing and its those kind of systems when they become overly slow and that those are areas where they really need to step it up over the next few months. I think things are getting better so the next few months they have an opportunity to do that, but I definitely feel more confident now than I did a few months ago with our public health system but there has been a lot of areas of improvement.

Stephanie Gawur: I think the communication aspect around the masks is still kind of broken right? We’re seeing in Ontario municipalities doing their own individual mask orders and mandatory orders inside public spaces or whatever it is per jurisdiction. But the province is saying  there’s no way that we can enforce that, we’re not going to look at doing a provincial mandate for that either or a mandatory order. I think that’s causing a lot of problems just on its own too. You know people don’t know how to react to this and there’s a lot on social media about people refusing to wear masks, things like that. I think a little bit more guidance from the province and the feds on would go a long way.

Peter Cleary: I think it’s two parts. I think they need clear guidance on how to use a mask and they also need to think about on the back end how are they procuring these this PPE because right now you have municipalities, private sector areas of health care system, the public sector, the federal government, provinces competing for the same supply right now which is driving up prices. Our own jurisdictions are going to pay through the nose because you have a Region of Waterloo competing with Vancouver. That’s a big problem when it comes to procuring a lot of different supplies. 

Peter Cleary: Let’s wrap up by thinking about the political implications of health care. So in the next couple months we’re going to continue to see a greater emphasis on a potential election. We’re in a minority government, we will have a new Conservative leader so it will actually put ourselves in the position where we can speculate about a campaign in a way that we perhaps can’t do now. What is the winning issue or strategy for the political parties on health car? What will the Liberals do with their laundry list of commitments from from pharmacare, to transfers, to home and community care. What do the Liberals do with those big ticket items that they’ve already had that you can argue they probably haven’t done too well on. Stephanie you kind of alluded to this before but where do the Conservatives put themselves? What’s the approach they’ll take to differentiate themselves on supporting Canadians during a health care pandemic over the next say six months? 

Stephanie Gawur: First thing, minority governments only typically last 18 months and we haven’t seen a global pandemic to this scale before with minority government so keep that in mind as we’re looking at the start of the election calendar. I think we will see a budget in the fall as we were talking about before followed by an election. It’ll be sort of the same spin you know the Liberals have weathered this COVID storm, we supported Canadians in their time of need but we can’t build up Canada or restart the economy with a minority government. We need the full support of Canadians to do that etcetera etcetera.

The Conservatives will be in a really precarious position. We’re electing a new leader at the end of August so that doesn’t leave much time for fundraising, staffing up, writing a platform and I think the Liberals will be obviously smart to use those vulnerabilities to their advantage. But in terms of what the Conservatives can offer, I think it goes back to my earlier point of what’s vastly different that we would have done in the in this situation? I go back to that sort of typical Conservative question or typical election question which is, who do you trust with your money? To manage your money and to rebuild the economy? I think that the main difference will come down to sort of that competent money management piece regardless of who the Conservative leader is and I would expect to see that the team around whoever is chosen as leader many of them will be familiar faces that worked with Prime Minister Harper in 2009 when we had weathered serious economic storms before.

I think there will be two questions and they’ll be fairly general, but who do you trust with your money and who can rebuild the economy? Where does where does the health care piece fit into that certainly in Ontario we will be looking for substantial investments into the long-term care system. Where do we go from that? We’re looking at it obviously having a review here in Ontario but where did the feds insert themselves and that will be a big question. I really think it’s going to be about the start of fiscal management and incompetency that will come into question.

Ian Chesney: Yeah I agree in terms of likely to see some kind of fall budget that really becomes an election platform that the Liberals run on in an upcoming election that I think we’re all starting to consider more and more is real possibility on the immediate horizon. I think the challenge that they’re going to have is basically a battle of explaining the metric that is the deficit level at its current state heading into an election. I think fundamentally that there will be some pockets of Canadians who take issue with that and there will be attempts by Opposition parties to paint a picture of uncontrolled spending and basically poor fiscal management. At the end of the day, I do believe Canadians, at some level, in an emergency and a crisis there is an understanding that spending levels would be higher than normal and I think there are ways for the Liberals to navigate around this as they head into an election. It will be interesting to see what additional priorities they run on because Peter you made a good point about previous priorities.

I think a lot of that is now called into question on some level there are things that they will want to return to, but I don’t think they’re going to make a lot of progress on those priorities in the rest of the minority government mandate. It will probably turn two things that they put back into their potential Fall budget and ultimately an election platform, but they’re also new things that we spoke about. Long-term care, that’s going to be an area where there is much more public pressure now than there was before to take a serious and hard look at the state of seniors care in Canada. Those additional pieces are going to have to play into their priorities. Ultimately, I think from the Liberals what you hear is that Canada weathered the storm and I think that our COVID numbers, you could argue in some respects, show that. Of course fiscal management and rates of COVID infection are very different things and they’re not connected, but at the end of the day I think that will paint a narrative for Canadians of strong leadership. I think the Liberals will hope to capitalize even with the deficit figures were there at a heading into an election.

Stephanie Gawur: Ian, I beg to differ though a little bit in terms of fiscal management COVID numbers. I think that Conservatives may argue the fact that if we had a more aggressive strategy and locking down the borders and limiting flights and travel into the country at an earlier state, that we wouldn’t have had this massive economic storm and shutting down the economy and now recovery. I think we will hear that a bit more from from all the leadership candidates and whoever is elected leader as well.

Peter Cleary: So sure, but name the country that got away with keeping cases low and not shutting down their economy. It doesn’t exist. I feel like it’s just going to be part of the the discourse and people are going to say it, but it’s not based in reality because the reality is the saving grace for the Liberals is that they get to compare themselves to all the other countries that have had to take similar measures in similar or different time frame. But I’d say the countries that have done well made the same decisions within within a matter of weeks of the first hundred cases and there will always be some hindsight issues, but we won’t know unless we want to try and experiment like Sweden or the United States. I don’t know what else the the the country could have done other than, to your point, which is true of course you can act faster and that’s just kind of hindsight being 20-20.

Peter Cleary: I think though, the difference between the Liberals and Conservatives in this is going to be the difference between how interventionist do you want your federal government to be on health care? If they want to do it, the Conservatives will traditionally provide transfers to the provinces, provinces you do what you wish and I think the federal government under under the Liberals or at least the Liberal election platform will probably include and test the appetite of Canadians for the feds to make a bigger move into health care. So how do they amend the Canada Health Act? What do they do with pharmacare? How prescriptive do they be with health care and with health care funding? I think that will be the key difference between the two and it will be up to Canadians to decide how they think the federal government should play in that space. It will be super interesting seeing this play out with a predominantly unfriendly Premiers compared to 2015-16 when the Liberals had a bunch of friendly Premiers and even that was a rough ride.

We should probably wrap it up. Stephanie do you have any final thoughts to leave us with and then Ian then we will let people get on with their days.

Stephanie Gawur: I hate to say this, but we probably haven’t even seen the worst of the economic piece yet. I think we’re waiting and for the next six months we’re going to see some the next round of big layoffs happen. We’re going to see potentially you know a second wave or or as Ian said a little flare ups everywhere. I think we’re still waiting to see what the Liberals are planning and also if an election is on the horizon. How the Conservatives really can differ themselves. Not to mention we haven’t even raised the NDP in all of this. They’ve been pretty quiet throughout the entire thing with the exception of a few issues and supporting the Liberals when required. If you are a party that is still reeling from their election debt from the last election, how are they going to fair if there’s an election in November? So many unknowns at this point and I think we just have to wait and see what happens over the next six months.

Ian Chesney: This has been the theme with all of this since we don’t have a crystal ball and we can barely see six feet front of us. That was really reflective of the federal government’s fiscal update and to Stephanie’s point, it didn’t provide much of a plan longer-term because they are taking things one day at a time in many respects. It is impossible to predict what’s going to come in the future. I think as things head more towards the fall, this goes on longer and longer and we get closer to election mode, I think it will be really interesting to start to see relationships between the federal government and Premiers and tensions start to boil up along partisan lines and those relationships start to kind of sour. In ways, they’ve sort of held together over the last few months obviously because of solidarity around dealing with COVID, around supporting Canadians, and as that starts to move forward I think it’s going to be really interesting because that’s going to be really tough on governments. We’re heading into the dog days of the pandemic, as this pandemic goes on longer and longer. What we’ve all been talking about is that there isn’t an end in sight we could be experiencing this for the next two years and I think that’s going to be the toughest test for both the federal government and provinces and territories. But that’s where we’re going. There’s an opportunity for anyone regardless of partisan stripe to really shine and show leadership in pulling the public through that.

Peter Cleary: Thanks team, this was fun. Let’s come back in a couple of weeks and have something else to hook onto with the federal government and find out where these parties are  going to go, and see what sort of focus they’re going to put on health.

Stephanie Gawur: Sounds good, thanks Peter.

Ian Chesney: Thanks Peter.