Throne speech: A leap into the unknown without a parachute

MONTREAL, Sept. 23, 2020 /CNW Telbec/ - According to a Montreal Economic Institute analyst, the measures announced today by the federal government in its throne speech will not pave the way for a solid economic recovery after months of severe, generalized lockdown of the Canadian economy.

On the contrary, while the deficit projected for this year in the recent economic update is already unprecedented, the government is announcing a whole series of new costly programs that could cause it to balloon to even more staggering proportions.

"Unfortunately, far from signalling a return to normal, this throne speech instead confirms that the explosion of public spending will continue," says Miguel Ouellette, Economist at the MEI. "Up until now, it could be argued that much of this spending was inevitable, but this is a deliberate choice. They are counting on a rapid global economic recovery, interest rates that will remain low indefinitely, and programs whose effectiveness at stimulating growth is questionable. From a financial point of view, it's a leap into the unknown, without a parachute," adds the economist.

Among other things, Ottawa is planning to spend additional sums on subsidies to so-called green technology companies, as well as on the extension of programs for the unemployed.

"The government has to come to the aide of the private sector without discriminating between different sectors of activity," says Mr. Ouellette. "Rather than spending public funds for people to stay at home, companies have to be encouraged to rehire their employees."

"As for subsidies for green technologies, the experience of Ontario and of numerous other countries and regions around the world shows just how costly and risky these investments can be, for little return," says the economist. He points out that subsidies distort the energy market, raise prices for consumers, and generally do not create as many jobs as expected, and that their effects on the economy too often end up being negative.

"Especially worrisome is the fact that the government is giving no concrete sign of any intention to return to budgetary balance," says Miguel Ouellette. "The country already lived through this in the 1970s, and it took two decades to get public finances back under control. The fundamental laws of economics have not changed since then," concludes the researcher.

As it does each year, the MEI will update its Quebec Debt Clock once the provincial budget is officially presented, and for the first time, we will also launch a federal debt clock this fall. We invite you to consult our website for the latest figures.

The Montreal Economic Institute is an independent public policy think tank. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

SOURCE Montreal Economic Institute