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Speech to the COVID-19 Emergency Response Bill

Honourable senators, the first thing that needs to be said is that there have been more than 25 deaths in Canada due to COVID-19 and families are mourning the loss of their loved ones. Many more are in hospital at various stages of the illness. I know I speak for all of us in sending our sympathies to those who are grieving.

I want to recognize the work of front-line healthcare workers for their tireless efforts in responding to the crisis. They are carrying out their duties under great duress, having to deal with crowded hospitals and clinics, longer shifts, shortages of test kits, beds and equipment, limited supplies of personal protective equipment and, not least, the threat of getting sick themselves.

There are many others going above and beyond the call of duty, not least the folks who put together this bill in very short order and many more who are working on other measures to address the economic fallout from the COVID-19 crisis.

The best way to mitigate the economic crisis arising from COVID-19 is to make sure the health crisis is addressed as fully and as quickly as possible. This means directing essential resources to the health care sector and enforcing public health directives, for as long as is needed, to reduce sharply the spread of the virus. If we restart the economy too early, we run the risk of exacerbating the health crisis, which will only lead to a double-dip economic downturn and likely result in even more damage to livelihoods. This is why the key to the success of the current economic package and all other measures that have been put in place is that they are sufficient to tide the economy over for the duration of the health crisis. I support this package and look forward to a vote very soon to pass the bill so that assistance to Canadians and Canadian businesses can flow immediately.

It is unlikely that this package alone will be sufficient to deal with the crisis. It is not that the bill doesn’t have the flexibility to extend funds and funding periods; it is that we haven’t yet fully embraced all the tools at our disposal to address a crisis that is unlike any we have faced.

In previous financial crises and economic shock, typically due to excessive leverage in one sector, led to so-called contagion effects on other sectors, resulting in a downturn in the economy as a whole. In the current situation, it is not that distress in one troubled sector of the economy is spreading to other parts of the economy. It is, rather, that all sectors are suffering because labour, which is the key factor of production, has to be withdrawn from the economy in order to curb the spread of disease.

The point here, colleagues, is that this is not, in the first instance a financial crisis, and that is good news. Don’t get me wrong; the health crisis will quickly turn into a systemic financial crisis if we don’t respond appropriately. But we can take some comfort in the fact that before the onset of the health crisis, our country’s finances and our financial institutions were strong compared to other countries. We have to take full advantage of that strength to support the economy during this period of suspended production, investment and consumption.

Any economic response package has to address three issues: stemming a decline in economic output; income support; and preserving productive capacity. The bill before us, together with previously announced measures, touches on all three. However, I believe more can be done.

On the question of direct economic stimulus, the government should not hesitate to use its borrowing and spending power on investment projects that produce public goods for Canadians across the country. If businesses are not investing in the future because of uncertainty, the Canadian government should step in and fill that void. We have already seen how the fear of budget deficits resulted in a slower recovery in the global economy and higher unemployment after the financial crisis of 2008. This time around, the economic downturn could be worse, so there is no room for timidity.

Second, on income support, the current approach is to try and target affected individuals using existing tools such as EI and the tax system, with workarounds such as the emergency response benefit that is part of Bill C-13. But the issue is not about workers who qualify or do not qualify for EI, nor is it about those who have to stay at home because of illness or caregiving. The point is that the vast majority of workers should stay home whether or not they are covered by EI and whether or not they are sick. Assistance programs that try to make such distinctions are not only cumbersome administratively, they also run the risk of missing a large swath of affected workers, such as the self-employed who may continue to have some income, but at a much reduced level because of a COVID-19 induced downturn. These individuals are not eligible for support because their income has not been reduced to zero during the 14-day waiting period.

In other words, we should think about the target population for income support as the entire working population, because pretty much the entire working population has been asked to withdraw from economic activity.

If we reframe the problem in this way, there is a case for a temporary guaranteed livable income for all adult Canadians, perhaps as part of a supplementary package of economic measures. Implementing a temporary guaranteed livable income should not be seen as a risky experiment during a time of crisis, as some may be inclined to say. Rather, it should be seen as perhaps the most appropriate means of meeting the goal of income support that is central to any economic recovery package.

Third, on the goal of preventing the loss of productive capacity, Bill C-13 provides some tools for the government to step in and provide direct assistance to specific companies. With the passing of the bill, it will be important for the government to articulate the case for saving some firms and not others, and the principles behind the specific approach taken for each case.

I support the idea that some key businesses and industries should be rescued, but any bailouts should not privilege senior executives, shareholders and bondholders over workers. If the principal objective is to prevent the business from failing, the best approach is for the government to take a direct stake in that business and to provide the direct and indirect sovereign guarantees that are needed for the business to continue operating at a reduced level of activity until such time as conditions improve and the government’s stake can be sold.

One of the biggest challenges for any business will be servicing its debts. The government has already provided relief in terms of delaying business tax, GST payments and the like, with no penalty. Major lenders have also stepped up by allowing deferral of loan repayments, but the interest on these loans continues to accumulate. There is an opportunity now for our well capitalized, well run and highly profitable financial institutions to step up by providing even more relief to borrowers. I challenge them to match the government in waiving interest and principal payments on outstanding loans to businesses for a period of time. This will have the effect of staunching the outflow of cash from many businesses and, to some extent, freezing the business in a state of suspended animation so that it can be brought back to life when conditions improve.

Waiving interest payments for a period of time is the analytical equivalent of laying off workers as a way of slowing the outflow of cash from a business. To the extent that we need to try and keep businesses afloat by reducing labour costs, we should also look at how they can be kept afloat by reducing their debt-servicing costs. If we fail to keep businesses afloat during the health crisis, it will be very difficult to restart the economy when that crisis is over. The result will be that lenders, borrowers, workers, shareholders — all of us — will face an economic situation that is even more dire.

Colleagues, I sincerely hope that this economic rescue bill is the only one we need and that it contains all the measures necessary to stave off a severe economic downturn. But even as we hope for the best, we need to prepare for the worst. That should start as soon as we have passed Bill C-13. Thank you.