National Debt Skyrockets Even Higher With CERB Extension

Economic recovery will require a policy oriented toward balancing the budget, expert says
June 23, 2020 Updated: June 24, 2020

Concerns over the government’s ability to balance the books once the pandemic is over have been exacerbated by the extension of the Canada Emergency Response Benefit (CERB) for another two months.

Experts are saying that the government needs to come up with a way to balance providing aid to those who need it with working toward reducing costs—and therefore borrowing—as much as possible.

The Fraser Institute’s Jason Clemens has done the math and says the costs could be dire depending on how policies are implemented going forward.

“We don’t have a clear estimate of the additional costs since the federal government hasn’t provided a fiscal update or a budget,” he tells The Epoch Times.

“[The Parliamentary Budget Officer] is reporting a net cost of CERB at $53.4 million before the extension. The peak monthly cost is reported at a little over $17 billion, but there’s been a clear reduction as workers moved to the Canada Wage Emergency Subsidy. We’re clearly talking about more than $20 billion, though, for the eight-week extension.”

Announcing the CERB extension last week, Prime Minister Justin Trudeau explained that although the economy is slowly opening up, there are still people who won’t be able to go back to work for a while longer. He also said that the number of people willing to go back to work is disproportionate to actual job availability.

The initial 16-week CERB payment period was set to end July 4. The extension means that payments of $2,000 a month will continue into early September. Employees who make more than $1,000 a month are no longer eligible for the benefit.

In its report on estimated spending for 2020, a group of experts at the Fraser Institute note that per-person federal program spending could reach “an estimated $13,226 in 2020, by far the highest level in the history of the country.” Economist Jack Mintz, in an analysis put forward in an op-ed in the Financial Post last month, noted that “Canada’s debt burden is $3.2 trillion.”

Clemens says it must be recognized that current circumstances have been adversely affected by the state of federal finances pre-pandemic, and that a proper recovery will require a policy oriented toward balancing the budget.

As this relates to CERB, he says more targeted assistance is crucial to mitigating costs, and this might mean being stricter as to who is eligible for the benefit.

“[One] example is the lack of household income as a filter for CERB eligibility. It means a significant number of school-aged children (under 24 years of age) living with their parents in households with reasonable income are eligible for CERB,” he says.

“Should CERB cover households with an income over $100,000 when the applicant is 21 and in school full time? Indeed, there are a surprising number of young people in this category whose monthly income has actually increased markedly under CERB. That doesn’t strike me as a wise or even reasonable use of public resources.”

The CERB extension could also create a disincentive for Canadians to return to work as the economy reopens, say some business groups and economists, as well as the Conservatives and Bloc Quebecois.

In a memo for the C.D. Howe Institute, Saskatchewan’s former minister of finance and social services Janice MacKinnon writes that there’s no real incentive for people to return to work.

“In fact, it can be argued that the proposal to reduce the monthly amount of other income that can be earned by CERB recipients from $1,000 to $500 lessens the incentive to work,” she writes.

MacKinnon says that a “phase-out for CERB” would make more sense, as there are existing programs that could do a better job of making assistance more targeted and encourage a return to work.

Recipients of the extended CERB will have to sign an attestation form acknowledging that the government is encouraging them to find employment, consult the government’s online job bank, and accept a reasonable job offer. In addition, workers are expected to return to work when their employers deem it reasonable to do so.