A new report by the Fraser Institute on pandemic spending found that approximately 40% of federal deficits incurred during the pandemic “had nothing to do” with Covid-19.
From 2020 to 2021, around 60% of deficits posted related to healthcare spending, transfers and pandemic income support.
“Canadians may be surprised to learn that a significant percentage of Ottawa’s huge spending increases during COVID, which produced large deficits and much more debt, had nothing to do with the pandemic,” Fraser Institute senior fellow Livio Di Matteo said in a press release.
“As a result of Ottawa’s massive spending increase during the pandemic, the federal government will have a larger footprint in the Canadian economy now and for many years to come.”
The report is titled Storm Without End: The Economic and Fiscal Impact of COVID in Canada and it investigated federal and provincial pandemic spending.
Broken down further the federal government boosted spending by 73% to the tune of $644.2 billion in 2020-2021. A year later that spending declined by 21% to $508.2 billion.
Debt also grew by 41.4% reaching $1.15 trillion in 2020-2021, ballooning even further the following year by 12.4% to a whopping $1.3 trillion.
Fraser Institute called the trend a “permanent, long-term increase” to federal spending habits.
Despite the massive growth in spending and debt, the federal Liberals have committed to massive new undertakings including a $2.5 billion sales tax rebate for low-income earners and $700 million to develop a dental-care plan promised to the NDP.
Prime Minister Justin Trudeau told Canadians last month that his government’s new spending proposals would not impact inflation.
“We are retaining fiscal firepower and at the same time ensuring that those who need support don’t get left behind,” said Trudeau.
“(This spending is) sufficiently targeted that we are confident they will not contribute to inflation.”
This claim was immediately contradicted by some of Canada’s largest banks.
“It seems sensible to assume that this will add to pressures on measures of core inflation,” said Scotiabank economist Derek Holt to investors.
“Any belief that it will ease inflationary pressures must have studied different economics textbooks.”