Rebuilding a Hobbled Economy While Answering to Ethics Issues Daunting tasks for the PM and his government

By Angus Gillespie

The Canadian government has not faced such a daunting health crisis since the outbreak of the 1919 Spanish flu and by extension has not faced such a dire economic crisis since World War Two.

The federal deficit is projected to soar beyond $345 billion this year, and that’s assuming no further major healthcare or economic disasters, which is anything but certain given how the first seven months of the year unfolded. Financial analysts have offered a grim foreboding that the economy might never be back to so-called normal levels – at least not in any of our lifetimes. Dramatic hyperbole? Perhaps, but given the extent of damage that has been done it certainly isn’t beyond the realm of possibility.

The magnitude of this constantly-expanding debt cannot be overstated. These are the types of deficit figures that would normally be posted by a country 10 times the population of Canada. But make no mistake, those countries are in no better situation themselves.

The pandemic health and economic is a crisis like no other in the past century. On top of that the Trudeau government is facing its third major ethics scandal since he became prime minister in 2015, prior to which he promised a new kind of politics for Canada.

Aid to Provinces

The unprecedented economic shutdown, sparked by the need to limit spread of the highly contagious virus, resulted in the government rolling out $212 billion in spending on income replacement and scientific research, business loans and grants to vulnerable Canadians.

Among the assistance measures: the wage subsidy, where the government covers 75% of an employee’s salary (with a ceiling of $847 per week); and the Canada Emergency Response Benefit, a $2,000 per month benefit for Canadians earning less than $1,000 per month (CERB) because of the economic shutdown. More than eight million eligible Canadians have received the CERB since it began four months ago. Individuals are entitled to six payments for a total of $12,000. Assistance has also been provided for students who were unable to work summer jobs to help pay for tuition at college and university.

The federal government will be assisting the 10 provinces and three territories with $19 billion in financial aid as a means of helping to kick-start regional economies. Ontario will get the lion’s share of the funding, receiving $7 billion.

Prime Minister Justin Trudeau says the funding will help provinces and municipalities prepare for a potential second wave of the coronavirus, including acquisition of more testing capabilities and personal protective equipment. A percentage of the funding will also go towards supporting municipal transportation.

Canada’s largest airline company is asking the federal government to consider easing COVID-19 travel restrictions in countries where the risk of infection is low.

Air Canada believes taking a science-based approach is the most logical way in which to proceed. The company outlined its feelings in a letter sent to several federal ministers, while also noting that something has to open up soon if the airline industry is to survive.

Canada has made no change to its quarantine restrictions since mid-March despite improvements in containing the spread of the virus in this country. Some countries have also been far more successful than others in controlling outbreaks.

On the economic front The Bank of Canada is keeping its benchmark overnight trendsetting interest rate of 0.25%.

The decision to hold the status quo at the Bank is the first rate decision under Tiff Macklem, who recently took the helm as the Bank’s governor following the conclusion of the seven-year term by Stephen Poloz.

Following a media conference by Macklem it appears obvious The Bank has no intention to change the rate any time soon with such uncertainty not only in the Canadian economy but also on a global scale.

“It’s going to be a long climb out,” says Macklem. “We are being unusually clear that interest rates are going to be unusually low for a long time.”

The central bank is now expecting Canada’s economy to shrink by 7.8% this year with a rebound of at least 5% next year and 3.7% in 2022.

Federal Deficit

The national deficit is on track to reach levels not seen since World War Two. The massive red ink is now projected to reach $345 billion, due in large part to massive economic aid and stimulus plans provided to Canadians and businesses during the global COVID-19 pandemic.

In December, 2019, the federal government projected the deficit for fiscal 2020-21 would be about $28 billion. Since, then it has risen by a staggering $315 billion and continues to spiral out of control. The national debt will exceed $1.2 trillion by the end of the fiscal year, up from $765 billion in the previous fiscal year.

With unemployment rates set to remain high into 2021, the government is also projecting a $71 billion decline in tax revenue, including a $40.8-billion loss in income taxes. In excess of $231 billion in health and safety measures as well as on direct aid to Canadians and businesses has been allocated to this point.

“We need to invest in an economy that is greener and more diverse,” says Federal Finance Minister Bill Morneau. “This pandemic has identified clear gaps and it’s giving us a chance to reset. We witnessed the ways in which people were falling through the cracks… In the coming months, we will need to come to these problems with dedication, compassion, and ingenuity.”

But the opposition parties say out of control spending without firm directives on how to rebuild then it does nothing to assist in rebuilding a shattered economy.

A WE Problem

Yet another ethics probe is looking to determine whether the Trudeau government engaged in a conflict of interest by awarding WE Charity a contract to administer a $900-million grant program to student volunteers amid the novel coronavirus pandemic.

Prime Minister Trudeau and Finance Minister Morneau have again landed themselves in hot water, resulting in public apologies from them both regarding questionable ethics decisions. Each admits they should have recused themselves from conversations about granting WE Charity a sole-sourced contract to run the now-halted student volunteer program, given their personal connections to the organization.

It turns out that members of Trudeau’s family were paid almost $300,000 over the last four years to speak at WE Charity events, which has become the centre of controversy. A member of Morneau’s family was also involved.
Trudeau’s mother Margaret Trudeau spoke at nearly 30 events and was paid $250,000 in honorariums over the course of four years, beginning in 2016. Trudeau’s wife Sophie Grégoire Trudeau spoke at various events but reportedly received no financial compensation.

Earning far less was Trudeau’s younger brother Alexandre, who was paid about $32,000 for eight appearances. Morneau’s daughter Clare Morneau spoke at several WE events and was also monetarily compensated.

Suffice to say the federal opposition parties have aggressively increased their demands for both Trudeau and Morneau to resign. Both the Conservatives and Bloc believe this could lead to an autumn election if more than just apologies are not forthcoming. However, it really depends on whether or not the Liberals can maintain an alliance with the NDP, which would continue to give them the balance of power required to govern. If not, Trudeau could see his government face a vote of non-confidence and an election called.

Many Canadians are finding it very difficult to believe that Morneau somehow forgot that he hadn’t paid $41,000 in related travel expenses relating to his involvement. Morneau’s memory seemed to improve just prior to his having to speak about his role in the charity and he wrote a personal cheque to cover the costs. A federal finance minister forgot that he owed $41,000 in travel expenses.

WE said in a statement that, while the trips were complimentary, Morneau realized that reimbursing the organization was necessary if for no other reason than optics.

The WE charity, originally known as Free the Children, was founded in 1995 by brothers Marc and Craig Kielburger, who were both teenagers at the time. Craig was named a member of the Order of Canada in 2006 for his years of humanitarian work. The organization offers programs domestically in Canada, the U.S. and U.K. which seek to “educate and empower young people.”

The Kielburger brothers recently testified before the House of Commons finance committee. The WE Charity first began to draw negative attention in June after the government announced the organization had been granted a sole-source contract to administer the proposed Canada Student Service Grant program.

The program was slated to offer payments to students who engaged in volunteer work on community programs during the summer which focused on COVID-19.

The volunteer program was valued at $900 million, and administering the program would have seen WE Charity receive approximately $43 million.

However, on July 3, it was announced that WE Charity would no longer be administering the program, amid allegations that the organization had close ties federal government officials which could constitute a conflict of interest.

Trudeau Testimony

Prior to Trudeau’s testimony on July 30 via Zoom conference, Conservative finance critic Pierre Poilievre noted that Liberal Finance Committee Chair Wayne Easter broke the rules by shutting down a meeting without holding a vote. “The committee Chair cannot adjourn the meeting without the consent of a majority of the members,” says House procedure and practice, 2nd edition. It was clear the Liberals only wanted Prime Minister Trudeau to be grilled for one hour. Opposition members wanted three hours. In the end, he sat for 90 minutes of intense questioning from several sources, but Poilievre in particular.

Trudeau flatly denied any wrongdoing in terms of attempting to influence the decision-making within the organization.

Despite repeated attempted by Poilievre, he could not get Trudeau to provide even a ballpark figure in terms of how much money members of his family had been compensated for their involvement with the organization. Poilievre was exasperated by Trudeau’s avoidance of such a seemingly simple direct question. He then scolded the PM in telling Trudeau that knew he’d be appearing before the committee for at least a month, which was more than enough time to find out the dollar amounts in terms of specific compensation.

Both Trudeau and Morneau admit they should have recused themselves from any involvement due to perception of favouritism in the selection process for a number of decisions that were made within the organization. Members of Trudeau’s family and Morneau’s daughter were both compensated for their participation at various WE events.

Trudeau says WE received no preferential treatment by him or members of his government regarding the now-likely cancelled $912 million student volunteer grant program after he learned the organization was involved.

“WE Charity received no preferential treatment, not from me, not from anyone else. The public service recommended WE Charity, and I did absolutely nothing to influence that recommendation… When I learned that WE Charity was recommended, I pushed back,” Trudeau said.

The prime minister testified that he and his chief of staff Katie Telford first became aware that WE Charity was formally being put forward as the best choice on May 8, just hours before cabinet was to decide on who would administer the program.

“Who are you going to fire?” inquired Conservative MP and ethics critic Michael Barrett. Once again Trudeau did not provide a definitive answer, saying that no two situations are ever the same and different factors would play into whether such a decision would be necessary. For those counting, it’s now zero for three on any types of salient repercussions pertaining to culpable responsibility.