On the edge of a bleak pandemic winter, Freeland offers a vague plan for recovery

The central metaphor of Chrystia Freeland's speech to the House of Commons on Monday was seasonal.

"We know the winter ahead will be hard," the finance minister said. "But we also know that spring will follow winter."

As a reference tothe pandemic, this can be taken quite literally. The second wave of COVID-19 is still building, Canadians are suffering and significant hardship is still on the way as the weather turns cold. Eventually,things will get better. Brighter days are ahead.

In terms of fiscal policy,Freeland'sfall economic statement was an attempt bothto account for the long winter of our pandemic discontent andto hold out some hope. With that eye to the spring, Monday's fiscal updatesets up a pivotal budget next year onethat, whether it passes or fails,couldbeamongthe mostconsequentialin this country's recent history.

To counter the pandemic,Freelandnow predictsthat the federal government will have to spend $267.3 billion in the current fiscal year to support individuals, businesses and provinces.Another $45.9 billion in aid could be required in the next fiscal year. Before any stimulus to restart the economyis spent,Freelandsaid,the debt-to-GDP ratio would peak at 52.6 per cent.

A deficit debate deferred

Even with the vast sums involved,there have beenrelatively few concrete complaints to dateabout the scope of the government's pandemic spending.The debate going forward is more likely to beabouthow the government's accumulated debt should influenceitsfuture actions though even Conservative leader Erin O'Toole has said he would take another ten years to balance the budget.

Looking forward, Freeland said the federal government will be prepared to spend between $70 billion and $100 billion over the next three fiscal years to pull the country out of the pandemic-induced recession. But the vast majority of that stimulus as well as any new permanent spending will be detailed at a later date.

WATCH: Finance Minister Chrystia Freeland on pandemic spending

Finance Minister gives details of Canada's growth plan during Fiscal Update.

4 years ago

Duration 1:08

Chrystia Freeland says Canada's growth plan will restore employment to pre pandemic levels.

Monday's fall economic statement lays out some broad priorities, all of which were at least hinted at in September's throne speech: creating new opportunities for women, expanding access to early learning and child care, fighting systemic racism, making it easier to find affordable housing, increasing immigration, continuing the pursuit of reconciliation and building a cleaner, greener economy. And this fiscal update does offer a number of "down payments" on new plans to deal with those concerns.

In all, the fall economic statement projects about $15 billion in new spending over the next five years under the heading of "building back better," alongside a smattering of tax changes expectedeventually toprovide about $2 billion in new annual revenue.

'Guardrails' over 'anchors'

To the consternation of fans of "fiscal anchors" a concept that has exploded in popularity over the last nine months Freeland's update stops short of explaining how federal spending willtheoreticallybetied down in the long-term.

Instead, there are comparisons to debt and stimulus spending by other G7 countries and a promise of "fiscal guardrails" to judge how much stimulus spending is needed and for how long. There is also a preemptive argument against moving too quickly to return the budget to balance.

"The experience of many countries following the 2008-09 global financial crisis suggests that economies that withdrew fiscal support too quickly experienced slower growth afterwards," the update reads atpage 99 a sentence that could be read as areference to the post-recession policies of the previous Conservative government.

COVID-19's second wave in Canada,and the prospect of a difficult winter ahead,necessarily complicateany plans to launch that stimulus orbegin building for the long-term.

Details coming in the spring

But there are big things that remain to be explained, such as how much new funding the Liberals might be willing to provide to the provinces for health care an issue that could involve specific commitments for pharmacare and long-term care. On child care, Freeland vowed that next year's budget will "lay out the plan to provide affordable, accessible, inclusive and high-quality child care from coast to coast to coast."

Liberals can argue that they have identified the things that the federal government should be focused on now that such an agenda reflects both the lessons of the pandemic and the needs of the future. But it has yet toexplainhowthose pieces might fit together on the federal balance sheet.

In his response to the fiscal update, Conservative leader Erin O'Toole mostly sidestepped the specifics. He repeated his party's claim that Canada can expect to get access toa COVID-19 vaccine laterthanmany other nations a prediction that soon willbe either borne out or dismissed. Of the larger debate, he mostly spoke of values.

WATCH: Conservative Leader Erin O'Toole on government borrowing

O'Toole tells MPs the federal government's borrowing is out of control

4 years ago

Duration 0:56

Conservative leader Erin O'Toole led the opposition's response to the Liberal government's fiscal update on Monday.

He enthused about "hard work" and "perseverance" and mentioned that his first job in high school had been as a dishwasher and short-order cook. He accused the prime minister of being "paternalistic" toward the provinces. He borrowedStephen Harper'spreferred framingto argue that there is now afundamental conflict of visionsbetween the "somewheres" and the "anywheres."

Those might be powerful emotional arguments for some audiences, particularly when deployed against a famous and cosmopolitan prime minister whose support is based in major cities. But while it's not at all clearhow the Trudeau government will make "building back better" work in practice, it's even less clear what O'Toole's alternative agenda wouldlook like what he would offer the "somewheres" and whether he'll have counter-proposals to what the Liberals eventually offer.

By spring, wecould have clearer pictures of both the state of the pandemic and the Liberal government's post-pandemic agenda. A new Liberal climate plan, for instance, could come before the end of this year.

As a result, alot will be riding on next spring's budget froma stimulusagendadefined by Liberal prioritiestoanother promise of a national child care system. This being a minority government,the fate of this promised plan forapost-pandemicspring will depend on whether it can win the necessary votes in Parliament or, failing that, ageneral election.