This article was originally published by the Toronto Star.
The federal government will soon roll out a major economic package to deal with the unprecedented emergency of COVID-19.
Unlike most recessions, the point of the stimulus should not be to get people spending. Rather, it needs to support people’s incomes, so that we can come together to keep people safe and fight the pandemic.
Governments will also have to look ahead, to a second package, to get consumers out and spending again, once it is safe to do so. And they have to start thinking now about a third stage of economic policymaking, to help businesses and individuals adapt to and thrive in a fundamentally reshaped global economy.
A good first step was taken with the announcements on Friday that focused on the financial sector and business lending. But much, much more needs to be done for the millions of workers who get paid by the hour, and for sectors with many businesses and low margins — tourism, arts and culture, food, and retailing, to name a few.
The immediate need is to put money in the pockets of people and businesses. They need cash, but they also need to be discouraged from spending it. And they need to stay home.
The quicker we get them money, and enough of it, the easier it is for all of us to accept the drastic measures needed to keep the economy on lockdown — allowing public health and other authorities to do their jobs.
Practically speaking, there are a few options. Individuals could receive cheques from the Canada Revenue Agency, with lower income earners getting proportionately more, to a maximum amount. Workers who face reduced or eliminated shifts could receive a top up on Employment Insurance.
And payroll taxes could be cut for individuals and/or employers, to a maximum number of employees per organization. This could be retroactively based, putting more money in people’s pockets now.
The key is speed and attention to vulnerable people and businesses that live paycheque to paycheque, or week to week.
Governments should also work with business, union and community groups to quickly establish places and trusted organizations where Canadians can donate funds, which could be matched 2:1 (one dollar each from government and business for every dollar from the public), for emergency community purposes. This will make even more resources and attention available for the most vulnerable.
The second phase will only begin when we and the world have succeeded in flattening the curve of contagion. Once we have done so, and once we can gather in numbers again, we will need to ramp up consumer spending. And we will need extra support for workers who put themselves at risk, or were pressed into higher levels of service (to their customers or patients) during the pandemic.
The pent-up demand will help stimulate the economy on its own. Policies such as a temporary GST/HST cut and accelerated infrastructure spending will help further. It’s in this period that we can begin to execute those public policies that shouldn’t be forgotten in any crisis — namely policies that contribute to a greener, climate-change-fighting economy and policies that reduce inequality.
Finally, in the third period, we will need to decide what to do with a significantly changed economy. That will likely mean significantly diminished international movement, lasting health and health system impacts and other big shifts.
Will remote work become a more permanent feature of the working lives of many professionals? Will gig economy and shift workers in low-margin sectors need even more protection? How can we become more economically resilient and sovereign?
Policymakers will need provisional answers well in advance of this third phase.
All of these measures will serve to increase trust, prepare us for economic transition and put money in the pockets of Canadians and their employers. But just as in health care, the economic security of Canadians will demand an overreaction, not an underreaction. And we have no time to wait.