Federal budget 2022: COVID policy has gouged a permanent hole in our current economic circumstances
Freeland likes to claim, as she did in her December fiscal update, that Canada has “largely recovered” from the economic damage inflicted by COVID-19. “Our GDP has already returned to near pre-pandemic levels.”
That was not quite a full and fair accounting of Canada’s economic position. As one of the charts in her 2022 Budget demonstrates, real gross domestic product is still running about two percentage points below the growth trend that existed before COVID-19. It also shows that Canada will continue for the next two years to lag behind where the country’s real GDP would have been before the lockdowns.
The nearby graph illustrates the dollar magnitude of the hole the COVID crisis has imposed on Canada’s real GDP performance. The total real GDP loss to the end of 2021 is $268-billion. Gregory Mason at the University of Manitoba, who compiled the dollar figures, said that GDP may be back to pre-COVID levels, but that’s where the economy was two years ago. “To restore the economy to the pre-COVID trajectory will require growth rates well above the pre-COVID levels.
COVID policy has gouged a permanent hole in our current economic circumstances. At the same time, federal debt rose more than $400-billion and is set to go up another $250-billion over the next three years. It must be hard to keep a straight face while singing about boom times after having lost $268-billion in real GDP while net government debt will have almost doubled to $1.3-trillion by the end of 2026-7.
By claiming that Canada has recovered and is booming, Freeland and the government are glossing over the magnitude of the COVID economic hit and using the gloss to justify a budget and policy machine that greatly expands the role of government in the economy. All we need, say the Liberal/NDP leaders, is a lot more government intervention and more deficit spending to keep the roaring boom going.
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