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2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
www.policymagazine.ca                         January—February 2021

               Canadian Politics and Public Policy

        2021—The Year Ahead

$6.95                                                Volume 9 – Issue 1
2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
Clean energy,
off the grid.
Made by
bold research.

A sustainable way to
transport clean energy
across Canada and the
world
One big barrier to a low carbon
economy? The lack of a safe,
affordable way to transport clean
energy. McGill researchers are
developing new ways of storing
and generating clean energy with
reusable metal powders. This
technology can help us power
remote communities, electrify the
transport sector, and trade clean
energy across the world.
                                    Jeffrey Bergthorson and Keena Trowell
2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
In This
                                                  Canadian  Politics Issue
                                                       2 From
                                                  and Public      the Editor / L. Ian MacDonald
                                                             Policy
                                                             2021—The Year Ahead
    Canadian Politics and                               3 	Kevin  Lynch and Paul Deegan
                                                            Brace Yourselves: The Tests of 2021
       Public Policy
       EDITOR AND PUBLISHER                             6        Jeremy Kinsman
                                                                 Global 2021: A Saner, Less Fragmented World
          L. Ian MacDonald
      lianmacdonald@gmail.com
         ASSOCIATE EDITOR
                                                        9	
                                                          Dan Woynillowicz and Eric St. Pierre
                                                          How a New Bilateral Bromance Could Enhance Climate Action
           Lisa Van Dusen
    lvandusen@policymagazine.ca                         12 Kevin   Page
                                                            Fiscal Policy and the Post-COVID Recovery
       CONTRIBUTING WRITERS
          Thomas S. Axworthy,
   Andrew Balfour, Yaroslav Baran,
                                                        15	Dr. Tim Evans
                                                             Can the Delivery of COVID-19 Vaccines Match the Speed of
    James Baxter, Derek H. Burney,                               their Discovery?
Catherine Cano, Stéphanie Chouinard,
   Margaret Clarke, Rachel Curran,
     Paul Deegan, John Delacourt,
                                                        17	John Delacourt
                                                             An End to the Annus Horribilis? Team Trudeau’s Year Ahead
   Susan Delacourt, Graham Fraser,
    Dan Gagnier, Helaina Gaspard,
  Martin Goldfarb, Sarah Goldfeder,
                                                        20	 Geoff Norquay and Yaroslav Baran
                                                              Erin O’Toole’s 2021 To-Do List: Broaden the Base
    Patrick Gossage, Frank Graves,
     Jeremy Kinsman, Shachi Kurl,                       23 Robin V. Sears
                                                            Canada’s 2021 Political Forecast: Less Trump Noise,
      Brad Lavigne, Kevin Lynch,
 Leslie MacKinnon, Peter Mansbridge,                             More Sabre Rattling
  Carissima Mathen, Elizabeth May,
  Velma McColl, David McLaughlin,                       25        lizabeth May
                                                                 E
                                                                 The Greens’ Annamie Paul—Ready to Make History, Again
    David Mitchell, Don Newman,
 Geoff Norquay, Fen Osler-Hampson,
       Kevin Page, Robin V. Sears,                      America 2021
     Vianne Timmons, Brian Topp,
       Lori Turnbull, Jaime Watt,
         Anthony Wilson-Smith
                                                        27	
                                                           Sarah Goldfeder
                                                           In Between What Was and What Could Be America
             WEB DESIGN                                          on the World Stage
             Nicolas Landry
        policy@nicolaslandry.ca                         29       Lisa Van Dusen
                                                                 Joe Biden’s New Role: Humanist-in-Chief
      SOCIAL MEDIA EDITOR
         Grace MacDonald                                31       John Weekes
                                                                  Canada’s Goal: Re-engaging the World on Trade
   gmacdonald@policymagazine.ca
 GRAPHIC DESIGN & PRODUCTION
         Monica Thomas
                                                        Canada and the World
    monica@foothillsgraphics.ca
                                                        33       Stéphanie Chouinard
                                                                  Revising the Official Languages Act: Will History Repeat Itself?
                  Policy
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2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
Everyone
has the right to live free
from harm and discrimination.
That’s why the United Nations Declaration on the
Rights of Indigenous Peoples (UNDRIP) is so important.
It’s time to move forward—together.

        Assembly of         Learn more at
        First Nations       SupportUNDRIP.ca    #SupportUNDRIP
2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
2

                              From the Editor / L. Ian MacDonald

                              2021—The Year Ahead
    W
               elcome to our special issue,    our capacity for creative, collaborative   da. Our own Associate Editor Lisa Van
               2021—The Year Ahead. For        longer-term thinking.”                     Dusen, herself an experienced Wash-
               openers, and to state the       Foreign affairs writer Jeremy Kinsman      ington hand, looks at the challenges
    obvious, it’s impossible to look at the    was at the table in an era when Cana-      facing Joe Biden and Kamala Harris
    year just beginning without looking        da’s voice as a middle power mattered      as they step into “the metaphorical-
    at the one we’ve recently completed:       in the world. He pointedly asks: “Do       ly ransacked Oval Office.” And John
    2020—The Year of the Pandemic.             we still have the stuff, the will and      Weekes, Canada’s chief negotiator on
                                               ability to be a key player again?”         the first NAFTA, points out that much
    The year that changed everything.
                                                                                          of the Canada-US bilateral comes
    The year of the virus that swept ashore    Pandemic or post-pandemic, climate         down to trade, trade, trade.
    worldwide and killed over a million        change remains an even larger threat
    and a half people before Christmas.                                                   Back home, noted fiscal authority
                                               to the world’s health, economy and
                                                                                          Kevin Page looks at the federal spend-
    The year that changed the way we           environment. Dan Woynillowicz and
                                                                                          ing envelope going into Budget 2021.
    live and the way we work. The year of      Eric St. Pierre look at environmental
                                                                                          And McGill’s Dr. Tim Evans, Execu-
    the mask and social distancing, The        issues between Canada and the US as
                                                                                          tive Director of the federal health task
    year we discovered the difference be-      well as the global conversation.
                                                                                          force, weighs the challenges of getting
    tween working from home and hav-           With 2021 considered a likely election     vaccines into the arms of Canadians.
    ing to work from home. The year of         year in Canada, we offer a package on
    the Zoom call. The year of the virtu-                                                 In Canada and the World, Stépha-
                                               the positioning and prospects of four
    al school class. The year of postponed                                                nie Chouinard writes of the Trudeau
                                               parties, not from the perspective of
    weddings, cancelled funerals and fore-                                                government’s promise in its throne
                                               pundits but from the vantage point of
    gone grad dances. The year of ex-                                                     speech to update the 1969 Official
                                               some of the most experienced opera-
    hausted health care workers and se-                                                   Languages Act, noting it’s not clear
                                               tives. John Delacourt looks back at the
    niors abandoned in long-term care                                                     what that means for minority French
                                               pandemic and the events of 2020 as a
    residences. The year, as it ended, with                                               and English-speaking communities.
                                               formative experience for the Liberals,
    vaccines on the horizon.                   who “can take stock and be hopeful.”       Lori Turnbull writes of the game of
    And the year of government, present        For the Conservatives, longtime strat-     parliamentary chicken going on be-
    in our lives with emergency relief pro-    egists Geoff Norquay and Yaroslav Ba-      tween the Liberals and the opposi-
                                               ran write of Erin O’Toole’s need to        tion over the government falling on a
    grams to help workers without work,
                                               lead a united party by sidelining some     non-confidence vote and contends it
    businesses suddenly out of business,
                                               of the “SoCon” voices of intolerance,      endangers the constitutional conven-
    and families with no means of keep-
                                               and making a home for moderate Pro-        tion that the government either has
    ing a roof over their heads. The year
                                               gressive Conservatives.                    the confidence of the House, or not.
    fiscal frameworks became redundant,
    with record deficits and debts as a per-   On the NDP, onetime national direc-        And Conservative foreign affairs critic
    centage of output.                         tor Robin Sears notes that for a fresh-    Michael Chong looks back at his par-
                                               man leader, Jagmeet Singh been an ef-      ents, post-war immigrants to Cana-
    And the year of the defeat of Donald
                                               fective presence in a minority House.      da from Hong Kong and the Nether-
    Trump and his replacement by a nor-
                                               How he plays the balance of power          lands, as an example of Canada as a
    mal person, Joe Biden.
                                               card is a big question going into the      beacon of hope and freedom.

    W
               hatever the new normal          budget. For the Greens, former lead-       And columnist Don Newman looks
               may be, the year ahead          er Elizabeth May writes that the par-      ahead to a Canadian election and pre-
               may result in a different       ty made the right call in choosing An-     dicts who’s going to win and why.
    normal. And we’ve brought together         namie Paul as her successor.               Finally, in Book Reviews, Anthony
    a group of outstanding writers to help     Looking at America 2021, former            Wilson-Smith reviews Margaret Mac-
    us think about it.                         State Department officer Sarah Gold-       Millan’s War: How Conflict Shaped
    To begin, Kevin Lynch and Paul Dee-        feder writes that Team Biden will be-      Us. And Derek Burney looks at Peter
    gan enumerate policy and social chal-      gin from a well-formed institutional       Baker and Susan Glasser’s The Man
    lenges confronting Canadians in            outlook on the US global leadership        Who Ran Washington a bio of James
    2021. As they write: “These will test      role, and its relationship with Cana-      A. Baker.

    Policy
2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
3

Then Vice President Joe Biden, weeks before leaving office in 2016, with Justin Trudeau in the PM’s former Centre Block office. Biden takes office as
President in January 2021 with the US, Canada and the world in a very different place with the pandemic and a new post-Trump political era. Adam
Scotti photo

Brace Yourselves: The Tests of 2021
Where 2020 was a year of shocks, 2021 will be a year of Kevin Lynch
tests. Tests of international collaboration, of policy inno- and Paul Deegan

                                                                                                      A
vation, of systemic integrity and of societal resilience. We       year ago, most Canadians
have experienced the previously unthinkable in so many             had never heard of a novel
                                                                   coronavirus. Yet, COVID-19,
negative ways recently, that if we can meet the challenges a particularly virulent virus, dom-
of the next year, our sense of the possible might just take inated our lives and livelihoods in
a turn for the better.                                       2020 and will continue to shape
                                                                                                      them throughout 2021. Its toll on
                                                                                                      public health, economies, govern-
                                                                                                      ment finances, businesses, and fam-
                                                                                                      ilies will last for decades.

                                                                                                      We had been warned. On May 15,
                                                                                                      2017, the cover of TIME magazine
                                                                                                      blared, “WARNING: WE ARE NOT
                                                                                                      READY FOR THE NEXT PANDEMIC”.
                                                                                                      A second “black swan” crisis in just
                                                                                                      two decades points to the need for bet-
                                                                                                      ter contingency planning and greater
                                                                                                      resiliency built into our core health,
                                                                                                      financial, and economic systems. We

                                                                                                                     January—February 2021
2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
4
    should not forget these lessons as we
    look ahead. Canadian governments
                                                        Canadian governments and Canadians face a
    and Canadians face a number of                      number of must-tackle challenges in 2021.
    must-tackle challenges in 2021. These       These will test our capacity for creative, collaborative,
    will test our capacity for creative, col-   longer-term thinking, and whether we can raise our policy
    laborative, longer-term thinking, and
    whether we can raise our policy game
                                                game to emerge stronger and more resilient.
    to emerge stronger and more resilient
    in an uncertain and interconnected
    post-COVID world.

    The first test for all governments is       European producers to Canadians are        face a troubling drop in longer-term
    to control the COVID-19 pandemic.           firming up, we are experiencing a sig-     real growth to 1.2 percent according
    Without flattening the COVID curve,         nificant second wave of the pandem-        to Bank of Canada estimates, due to a
                                                ic, leading to renewed lockdowns in        wicked combination of poor produc-
    the recovery will be planked.
                                                various parts of the country and in-       tivity performance, weak capital in-
    While newly developed vaccines hold         creasing pressures on the health care      vestment, slow labour force growth
    the promise of controlling the virus,       system. The slower the execution of        and lasting scarring from the pandem-
    it is the execution of the vaccination      the vaccination program, the slower        ic recession. That implies stagnant
    program itself that holds the key to        the economic recovery and the great-       per capita incomes, or even worse for
    success—delivering a two-dose vacci-        er the economic and social costs. We       segments of the population. As for-
    nation to 38 million Canadians, across      should have been better prepared, par-     mer Senior Deputy Governor Carolyn
    immense geography and various juris-        ticularly after Canada’s experiences       Wilkins said recently, “Businesses are
    dictions, and in lockstep with other        with SARS in 2003 and H1N1 in 2009.        investing less because of the pandem-
    countries. Canada’s less-than-stellar                                                  ic, and that puts a lid on how much

                                                T
    record to date with widespread rapid                                                   potential the economy has to grow.”
                                                       he second challenge is a growth
    testing and contact tracing elicits con-
                                                       strategy for the recovery and       Rebuilding    Canada’s      potential
    cern on the execution front. Add to
                                                       beyond. The economy will not        growth will require a clear plan to
    this the fact that the newly developed
                                                return to pre-pandemic levels until        improve our competitiveness, en-
    vaccines are neither licensed for pro-
                                                2022, and that assumes a vaccine-as-       courage productive investments and
    duction in Canada nor guaranteed for
                                                sisted rebound combined with a shift       create a Canadian global advantage.
    earliest delivery in the government’s
                                                in government spending from income         Governments cannot solve all prob-
    vaccine purchase arrangements, and
                                                and liquidity support to growth- en-       lems, but they can help create the
    the execution risks rise.
                                                hancing measures. Beyond the imme-         conditions to make the private sec-
    As Canada’s plans to distribute these       diate challenge of recovery, which is to   tor more successful. We are at one of
    vaccines from American, British, and        get back to pre-COVID levels, we also      those pivotal moments.

                                                                                           A third challenge is the glaring ab-
    Canadian Real GDP Forecast                                                             sence of a fiscal anchor from the gov-
                                                                                           ernment’s policy playbook. A fiscal
                                                                                           anchor is not something that waits for
         7                                                                                 better times—it is something that is a
         6                                                                                 prerequisite for sustained better times.
         5                                                                                 Federal debt will have risen an as-
                             5.5%
         4                                                                                 tounding 75 percent between last year
         3                              4.0%                                               and next year according to the Fall
                                                  3.0%                                     Economic Statement 2020. This debt
         2
                                                                                           burden, which future generations will
         1                                                   2.0%      1.7%
                   2020                                                                    bear, comes at both a cost and a risk.
         0
                              2021      2022      2023       2024      2025
         -1                                                                                The debt servicing cost is manageable
         -2                                                                                while interest rates are at abnormal-
                                                                                           ly low levels because of the pandem-
         -3
                                                                                           ic recession, but they will gradually
         -4
                                                                                           rise as growth returns. The risk is that
         -5       -5.7%
                                                                                           international financial markets begin
         -6                                                                                to lose faith in our ability to manage
         -7                                                                                our fiscal affairs—after all, how much
                                                                                           confidence should they place on a fis-
    Source: BMO Economics

    Policy
2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
5
cal projection of a drop in the deficit      gas emissions from oil sands opera-        an income issue, it is an opportuni-
from nearly $400 billion this year to        tions, allowing time for the province      ty issue with unequal access to dig-
under $100 billion by 2022 without           to diversify its economy and become        ital skills and broadband, and it is a
any fiscal constraints. To avoid this,       a global clean energy leader. This is      health issue which the pandemic has
and its caustic effects on growth and        where new thinking and a new narra-        laid bare. As Binyamin Applebaum of
confidence, the government should            tive is so desperately needed. As Gross    the New York Times has written, “The
articulate a credible fiscal anchor for      argues, “Eliminating unpopular en-         distribution of wealth and income
these uncertain times.                       ergy sources or technologies, like nu-     has a meaningful influence on the
                                             clear or carbon capture, from the con-     distribution of opportunity, on the
A related challenge is fiscal federal-                                                  mechanics of the business cycle, and
                                             versation is short-sighted. Renewable
ism: provincial fiscal situations are                                                   on the pace of innovation.”
                                             electricity generation alone won’t
not good, some are dire, and all be-
                                             get us there—this is an all-technolo-
lieve that increased federal transfers                                                  During the COVID crisis, many low-
                                             gies-on-deck problem.”
are in order, particularly since the                                                    er-wage workers were overrepresent-

                                             C
federal government has loudly ar-                                                       ed in essential roles in the retail and
gued it has unused fiscal firepower.                 anada-US relations are a chal-     health care sectors where working
The health system clearly has to be                  lenge that always looms large      remotely is not an option. Women
better prepared for future pandem-                   over Canada’s foreign and          and minorities were overrepresented
ics, and this will take money, part-         trade policy priorities, and never more    in service-sector job cuts due to the
nerships and surge capacity. And,            so than during the chaotic Trump           pandemic. Inequality is becoming as
with the Liberal government signal-          presidency. While the Biden adminis-       much a blocker to economic growth
ling new policy ambitions in areas           tration will be a welcome change for       as it is an unacceptable social reali-
of provincial or shared jurisdiction,        most Canadians, it will come with un-      ty in advanced western economies.
the price tags to encourage provincial       resolved issues—including pipelines,       This is a challenge that Canada can
buy-in will be lofty. This combina-          Buy America, softwood lumber tariffs,      lead on, both at home and abroad,
tion of provincial fiscal gaps and fed-      Huawei involvement in 5G networks          but feel- good rhetorical bromides are
eral policy plans will only place more       and national security exemptions—          not a plan.
upward pressures on federal transfer         that will all continue to affect the Ca-
                                             nadian economy.                            There are decades where nothing
spending, and reinforce the need for
                                                                                        happens and there are weeks where
a fiscal anchor.                             Now is the time to reach out to the        decades happen. This saying seems
There is no question that we need to         Biden administration, which will be        particularly apt to describe what has
transition to a low carbon, greener          struggling in the fraught political af-    transpired during the pandemic. And
economy. But, as Samantha Gross of           termath of the election, on how we         we will continue to be tested, but the
the Brookings Institution has argued,        can work together to solve common          focus will shift from the immediate
“Those pushing to end fossil fuel pro-       issues, not present a list of “asks” and   crisis to the recovery and beyond.
duction now are missing the point            concerns. This could include upgrad-       The longer-term challenges before
that fossil fuels will still be needed for   ing NORAD’s 1980s-era North Warn-          us in 2021 will also demand a much
some time in certain sectors.” The re-       ing System in the Arctic; ensuring         more innovative and cooperative ap-
ality is that energy is our biggest ex-      that both countries have an adequate       proach to policy-making—both at
port earner, and a major source of val-      supply of critical goods ranging from      home and with our allies.
ue-added growth, well-paying jobs            personal protective equipment to
                                                                                        Having been caught flat-footed, the
and tax revenues. The challenge is           pharmaceutical compounds; invest-
                                                                                        questions we need to ask ourselves
how to sustain a robust Canadian en-         ing in next-generation North Amer-
                                                                                        today are do we have the necessary
ergy sector and make real progress on        ican energy grids and clean energy
                                                                                        strategic planning skills within gov-
climate change. It is not an “either or”     production; expanding environmen-
                                                                                        ernment, the right incentives for pri-
choice, it is about achieving both.          tal co-operation; and engaging China
                                                                                        vate-sector expansion, and the col-
                                             together, with allies, where we have
This is not just an Alberta problem,                                                    lective will and wisdom to “build
                                             common purpose.
it is a pan-Canadian issue—both eco-                                                    back better”?
nomically and politically. Why can’t         The International Monetary Fund
                                                                                        Contributing Writer Kevin Lynch was
we reduce carbon dioxide emissions           (IMF) has identified income inequal-
                                                                                        formerly Clerk of the Privy Council and
in the oil sands through the deploy-         ity as an impediment to the recovery
                                                                                        Vice Chair of BMO Financial Group.
ment of Generation IV Small Modu-            in most countries, including Cana-
lar Nuclear Reactors to meet the steam       da. The challenge of inequality has        Contributing Writer Paul Deegan, CEO
and heat requirements of Alberta’s           risen significantly during the pan-        of Deegan Public Strategies, was a public
heavy oil industry, which are current-       demic, with ongoing social, econom-        affairs executive at BMO Financial
ly met by carbon intensive fuels? This       ic and political impacts. The IMF has      Group and CN, and served in the
would dramatically limit greenhouse          highlighted that inequality is not just    Clinton White House.

                                                                                                     January—February 2021
2021-The Year Ahead - Canadian Politics and Public Policy www.policymagazine.ca - Policy Magazine
6

    The G7 in Toronto in 1988, when Canada was not only host, but an influential player at the table. (L to R) European Commission President Jacques
    Delors and G7 leaders Ciriaco De Mita; Margaret Thatcher; Ronald Reagan; Brian Mulroney; François Mitterrand; Noboru Takeshita and Helmut Kohl.
    Colin McConnell, Toronto Star Photograph Archive, Courtesy of Toronto Public Library

    Global 2021: A Saner,
    Less Fragmented World
    Canada has spent the past four years wedged between an Jeremy Kinsman

                                                                                                      D
    unrecognizably belligerent United States and an unpro-          onald Trump’s exit from the
    ductively belligerent China. Provided the economic dam-         White House wins our dis-
    age from the COVID lockdown doesn’t produce geopolit- another rupted    and divided world
                                                                     chance to get its collective
    ical consequences that make 2020 look good, a new US act together to meet existential glob-
    administration and a fresh appreciation of both democ- al challenges.
    racy and multilateralism present a new opportunity for Only 20 years ago, Canadian diplo-
                                                            macy was at the front end of the post-
    Canadian leadership in 2021.                            Cold War effort to design and anchor
                                                                                                      new inclusive norms for internation-
                                                                                                      al governance. Do we still have the
                                                                                                      stuff, the will and ability, to be a key
                                                                                                      player again?

                                                                                                      We have a stake in successful interna-
                                                                                                      tional cooperative outcomes. It needs

    Policy
7
robust outreach diplomacy. Cana-
                                                 We have a stake in successful international
da can’t just fall into line behind Joe
Biden’s more congenial US leadership             cooperative outcomes. It needs robust outreach
and hope for the best.                    diplomacy. Canada can’t just fall into line behind Joe Biden’s
The world has vastly changed in 20
                                          more congenial US leadership and hope for the best.
years. Optimistic assumptions were
crushed by events whose residue still
disrupts. The jihadist attacks of Sep-
tember 11, 2001 re-cast global pri-

                                          M
orities, fed enduring terrorism, and
prompted the long Afghan war and                    ost countries now impa-          serves that “the world order has (so
                                                    tiently endure an overlong       far) endured because it is in every-
the disastrous and divisive US/UK
                                                    and dysfunctional US tran-       body’s interest.” But that general in-
invasion of Iraq that spewed refu-
                                          sition, anticipating the remedial          terest has to be translated into com-
gees into Europe. Borders stiffened
                                          succession of Joe Biden, a welcome         mon purpose, and it doesn’t come
and populist nationalism gained
                                          multilateralist.                           easily. Two decades ago, as the dean
traction, bolstered by ubiquitous so-
                                                                                     of G8 finance ministers, Paul Martin
cial networks that polarized publics.     But expectation of restoration comes       argued convincingly that the world
With the encouragement of Russia,         with a hedge. Germany, as an im-           needed a more inclusive forum to
nativist populists vilified globaliza-    portant example, had since the war         negotiate trade-offs on critical glob-
tion and liberal democracy. Mean-         viewed the US as its key ally, protec-     al challenges. It became the G20.
while, China continued its remark-        tor, and democratic mentor before          But it isn’t working. Notions that a
able and inexorable rise in economic      Trump turned the privileged relation-      democratic G7 enlarged to include
stature, shifting the global balance      ship into what Germans came to call        India, South Korea, and Australia
of power, with an increasingly na-        the US “catastrophe.” The US repu-         would provide a more inclusive but
tionalist posture.                        tation for can-do competence plum-         effective forum than either the G7
                                          meted as the world witnessed with a        or the G20 begs how to engage Chi-
Barack Obama’s election in 2008 had
                                          “mixture of concern, disbelief, and        na. The increasingly fractious rival-
lifted hopes of a reprise of construc-    schadenfreude,” a “leaderless Ameri-       ry between China and the US for
tive internationalism. But the finan-     ca slip into a deep pandemic winter,”      economic primacy is apt to define
cial cataclysm he inherited laid bare     per CNN’s Brian Stelter. Chancellor        our age.
an unfair system that privileged capi-    Merkel’s observation that “the times
tal over ordinary people’s welfare.       we could rely on the US are some-          A rare US bipartisan consensus con-
                                          what over” won’t now be archived           cludes that China has gamed inter-
The world’s mood trended to pes-                                                     national trade rules, bullies neigh-
simism and identity-based nation-         just because of a close election.
                                                                                     bours, and represses human rights
alism, including in the UK. The US        Trump leaves behind a polarized US
                                                                                     in Xinjiang and Hong Kong. Can-
elected as president a disruptive na-     which could reverse direction again.
                                                                                     ada, other democracies, and Chi-
tionalist who wrought carnage on          Even though the incoming Biden             na’s neighbours agree. Incoming US
international cooperation and insti-      team is reassuringly experienced, pos-     Secretary of State Antony Blinken
tutions. Pledging to “no longer sur-      itive, and outward-looking, it will face   knows the resolution of key global
render the country to the false song      an obstinate partisan opposition, the      issues needs agreement between the
of globalism,” Trump tore up foun-        overwhelming domestic priority to          US and China. He has previewed the
dational agreements in the name of        manage the pandemic and econom-            bilateral relationship as a composite
“America first,” upending 75 years of     ic recovery, and the many unexpect-        of components that are adversarial,
US international leadership.              ed things that land on the president’s     competitive, and also, where possi-
                                          desk. US allies share German worries       ble, cooperative, recognizing that
Just how scorched he left the institu-                                               on global warming and the pandem-
                                          about the extent to which the new
tional landscape was clear when the                                                  ic, China is an essential factor. The
                                          administration will have much room
increasingly deadlocked G20 met vir-                                                 US will resist calls to “de-couple”
                                          for range and transformative am-
tually on November 21, under the                                                     western economies from China’s
                                          bitions in foreign affairs. So, others
inauspicious rotating chairmanship                                                   and won’t endorse an allied Cold
                                          need to maintain creative momen-
of Trump ally Saudi Arabia. Trump                                                    War “containment” strategy. But
                                          tum to reform and reinforce interna-
mocked hopes of concrete progress                                                    the Biden administration will move
                                          tional cooperation. Will Canada be in
on the agenda, trashing the notion                                                   warily and firmly. Other countries
                                          the front rank?
of global warming, and skipping the                                                  need to engage China on multilat-
critical session on the global pandem-    Princeton University international         eral issues. Canada needs a realistic
ic to play golf.                          relations theorist John Ikenberry ob-      and open-eyed approach only possi-

                                                                                                January—February 2021
8
    ble after resolution of our debilitat-   tions of our world. We badly need        But crisis response has been excellent,
    ing hostage dispute.                     like-minded solidarity groups to gal-    notably in procuring PPE, and evacu-
                                             vanize institutional reform and pos-     ating Canadians during the pandem-
    Of course, our main bilateral prior-
                                             itive outcomes for such essential UN     ic. Work to save NAFTA and craft the
    ity is our critical relationship with
                                             activities as peacekeeping, humani-      ground-breaking CETA with the EU
    the US. Canada has, in the Biden ad-
                                             tarian aid, poverty, migration, and      was outstanding.
    ministration, a partner on whom we
                                             public health, including immedi-
    can count for civil discussion and
                                             ately the COMAX coalition of over
    negotiation based on shared facts
                                             100 countries to assure equitable af-
                                                                                               As to our creative
    and evidence. But it will be no plea-
                                             fordable COVID-19 vaccine distri-                 policy capacity, the
    sure cruise: US political themes are
    inward and protection-ish. We need
                                             bution, in which Canada should be        perception in the foreign
    to remain in campaign communi-
                                             a protagonist.                           affairs community is that it
    cations mode toward all levels of        Ottawa has been working with             atrophied under recent
    the US, to temper impulses to “buy       like-minded internationalist coun-       top-down governments
    America,” and to lift the US view        tries to try to unlock some key mul-
    of the benefits of the North Ameri-
                                                                                      centralized in PMOs and
                                             tilateral issues. On trade, the Otta-
    can partnership.                         wa Group initiative of middle-power
                                                                                      leaders with narrower
                                             countries to revive and reform the       international aims.

    O
             ther regions are organizing.    World Trade Organization is mak-
             Asian countries including       ing progress. But it will need a wid-
             China, Japan and Austra-        er buy-in from the great powers.
    lia, representing one-third of global    More broadly, then-Foreign Minis-
    GDP have created the tariff-cutting      ter Chrystia Freeland encouraged the
    “Regional Comprehensive Economic         formation of the Multilateral Alliance   We need to revive the creative ca-
    Partnership.” Canada must succeed in     group that brings together Canadian,     pacities of the Foreign Service and
    Asia. Looking ahead, our Comprehen-      German, French and other partners        re-energize our international public
    sive Economic and Trade Agreement        seeking ways to re-build trust and       diplomacy. The world also sees “the
    with the EU could become the tem-        purpose in multilateral fora. One ex-    other North America” through inter-
    plate for a comprehensive North At-      emplary success stands out as a mod-     acting with multitudes of Canadi-
    lantic economic partnership between      el of international governance—the       an scientists, entrepreneurs, scholars
    the European Union and North Amer-       Arctic Council, an innovative, bot-      and students, artists, humanitarian
    ica as an expansion of NAFTA.            tom-up consensus-based organiza-         workers, military, firefighters, and
    Canada needs to work every day           tion of the eight circumpolar states     innumerable family ties. Including
    abroad to strengthen opportunities       and Indigenous peoples that guides       public consultation in the policy
    from a diversity of partnerships, in-    the sustainable development and          process is essential.
    cluding to build support for glob-       shared custody of the world’s High
    al multilateral reform. Twenty years     North in line with the UN’s interna-     The pandemic makes it emphatical-
    ago, Foreign Minister Lloyd Axwor-       tional legal norms.                      ly clear we are all in the same global

                                             J
    thy was the leading protagonist for                                               boat. But it needs fixing to stay afloat.
    “human security,” a paradigm plac-           oe Biden has pledged to convene      Canadians are globalists. That repair
    ing people at the centre of new              a summit of democracies to ad-       work is rightfully our brand.
    norms of international behaviour             dress democracy’s global reces-
                                             sion and to restore a better example.    Contributing Writer Jeremy Kinsman
    and accountability. With like-mind-
                                             It should reaffirm that universal hu-    is a former Canadian Ambassador to
    ed middle-rank states and interna-
    tional NGOs we formed the Human          man rights are democracy’s building      Moscow, former Ambassador to the
    Security Network to design and pro-      blocks and our commitment to have        European Union, and former High
    mote landmark initiatives to end the     the backs of human rights defenders      Commissioner to London. He is a
    use of anti-personnel land mines,        everywhere, consistently.                Distinguished Fellow of the Canadian
    and to establish both a Responsibil-                                              International Council.
                                             As to our creative policy capacity,
    ity to Protect (RTP) to prevent trag-
                                             the perception in the foreign affairs
    edies such as Rwanda and Srebren-
                                             community is that it atrophied un-
    ica, and an International Criminal
                                             der recent top-down governments
    Court to apply principles of univer-
                                             centralized in PMOs and leaders
    sal justice.
                                             with narrower international aims,
    Today the United Nations system          focused on signaling our virtues, ab-
    is bogged down by the fragmenta-         sorbed by electoral politics.

    Policy
9

How a New Bilateral Bromance
Could Enhance Climate Action
There may be no issue that better illustrates the shared                            ident Joe Biden is as committed to
                                                                                    climate action as candidate Biden was.
interests of Canada and our nearest neighbour than the
need to address climate change. After four years during                             Biden was a compromise candidate
                                                                                    for the Democratic nomination. As
which an American president did everything in his power                             the primary started heating up in ear-
to reverse progress on global warming mitigation, Canada                            ly 2020, climate action emerged as a
                                                                                    key issue among Democratic primary
now has a partner it can work with.                                                 voters and the contenders jockeyed
                                                                                    for position. Based in part on his em-
                                                                                    brace of the Green New Deal, Bernie
                                                                                    Sanders briefly topped the polls and
Dan Woynillowicz                           hicle emission regulations (which are    took early leads in the Iowa caucuses,
                                           harmonized between our two coun-         where he was edged out by Pete Butt-
and Eric St. Pierre                                                                 igieg, and in New Hampshire, which
                                           tries), while others, such as rules to

I
                                           reduce potent methane pollution          he narrowly won. Meanwhile, Jay Ins-
     n the days following the Ameri-                                                lee, the governor of Washington State,
                                           from the oil and gas sector, bolstered
     can presidential election, you                                                 focused his run singularly on climate
                                           opposition to regulating pollution in
     could sense a weary (and wary)                                                 change, laying out the most compre-
                                           Canada on the grounds that it would
relief settle in among most Canadi-                                                 hensive climate platform conceivable.
ans. It had been a challenging four        impact competitiveness.
                                                                                    Kamala Harris laid out a $10 trillion
years, to put it mildly, and now there                                              climate plan and played up her creden-
was at least one reason to look for-                                                tials as a prosecutor who would target
ward with some optimism. This sen-                 Biden was a
                                                                                    big polluters.
timent was even more acute among                   compromise
those Canadians concerned about cli-       candidate for the Democratic             Meanwhile Biden, the establish-
mate change; there was even a sense                                                 ment candidate and frontrunner, laid
                                           nomination. As the primary
of ebullience among those of us work-                                               out a moderate approach to climate
ing to advance climate solutions.          started heating up in early              change that was broadly perceived as
                                           2020, climate action                     a potential drag on his candidacy.
Simply put, Donald Trump’s presiden-
cy had been a train wreck for federal
                                           emerged as a key issue                   But as the primaries wore on, it be-
climate policy in the US, with the de-     among Democratic primary                 came clear that climate change
bris field sprawling northward into        voters and the contenders                wasn’t just going to be a significant
Canada. Trump had his team scour-          jockeyed for position.                   issue for the Democratic base. Opin-
ing for any and every opportunity to                                                ion research published in April by the
roll back and weaken environmental                                                  Yale Program on Climate Communi-
regulations. The result? According to                                               cation, part of an ongoing study of
a New York Times analysis, informed                                                 views on climate change dating back
by research from Harvard Law School,                                                to 2008, found a significant shift in
Columbia Law School and other                                                       public opinion: “Today, the Alarmed
                                           With the arrival of a US administra-
sources, the Trump administration re-                                               (26 percent) outnumber the Dismis-
                                           tion that not only accepts the myriad
versed, revoked and rolled back more                                                sive (7 percent) nearly 4 to 1. In 2014,
                                           threats posed by a changing climate—
than 80 environmental rules and reg-                                                they were tied at 1 to 1. That’s a ma-
                                           to health, the environment, the econ-
ulations, and 20 rollbacks were still in                                            jor shift in the political, social and
                                           omy, and security—but aspires to find
progress as of November.                                                            cultural climate of climate change.”
                                           opportunity in addressing them, Can-
Some of those had a direct impact on       ada once again has an ally and part-     Similarly, research in May target-
Canada, such as the weakening of ve-       ner. Presuming, of course, that Pres-    ing “persuadable voters” conducted

                                                                                                January—February 2021
10
     Global Warming’s Six Americas: Five-Year Trend                                             diplomacy and set the US economy
                                                                                                on a trajectory to achieve net zero
     100%                                                                                       emissions by 2050.
              12%                         Dismissive ▼ 5 pts                            7%
                                                                                                Polling commissioned by the New
                                                                                                York Times just weeks before the vote
                                           Doubtful ▼ 3 pts                            11%
              15%                                                                               seemed to prove-out the thesis that
                                                                                                climate action could be a vote-win-
                                          Disengaged ▼ 1 pts                            7%
                                                                                                ner: 66 percent of respondents were
              8%
                                                                                                supportive of Biden’s $2 trillion cli-
                                           Cautious ▼ 4 pts                           20%       mate plan. In the weeks following
                                                                                                the election, it became clear that
              24%                                                                               young Americans had cast ballots in
      50%                                                                                       record numbers, playing a key role
                                                                                                in handing a victory to Joe Biden,
                                                                                      28%       with early research suggesting cli-
                                          Concerned ▼ 2 pts                                     mate change concerns were a major
                                                                                                driver of this turnout.
              30%
                                                                                                As President-elect Biden began the
                                                                                                transition process, it was abundant-
                                                                                                ly clear he had won a clear climate
                                                                                      26%       mandate—and high expectations to
                                           Alarmed ▲ 15 pts
              11%                                                                               go with it.

                                                                                                I
       0%
            2015                                                                       2020          n the midst of the election the
                                                                                                     Biden campaign had signalled
                                                                                                     its interest in appointing a “cli-
     Data from 11 national surveys (N=13,609) from March 2015 to April 2020.                    mate czar” who would drive climate
     Sources: Yale Program on Climate Change Communication and George Mason University Centre
     for Climate Change Communication
                                                                                                action from the White House. Expe-
                                                                                                rience from the Obama administra-
                                                                                                tion informed the Biden team of this
                                                                                                imperative, and so Obama alumni
     by the Global Strategy Group found            bite he would repeat numerous times
                                                                                                teamed up with academic experts and
     that, contrary to previous elections,         throughout the campaign: “When I
                                                                                                former government officials to provide
     climate change was not a liability but        hear the words ‘climate change’ I hear       Biden’s transition team with advice
     an advantage among swing voters.              another word: ‘jobs.’ We can solve our       on how to deliver on his climate agen-
     While not necessarily a top issue for         climate crisis and our economic crisis       da using every department and agen-
     all voters, it was found to be just that      at the same time.” It was a position         cy. Unconventionally but wisely, the
     for the voters Biden would need to            that echoed the approach to the post-        Climate 21 Project shied away from
     win over in November: young people            2008 financial crash recovery, when          prescribing policy advice and instead
     and persuadable Trump voters.                 Biden, as Barack Obama’s vice presi-         focused on delivering “actionable ad-
                                                   dent, oversaw a recovery program that        vice for a rapid-start, whole-of-govern-
     As it became clear that Biden would           combined economic stimulus with              ment climate response coordinated by
     be the Democratic nominee, he                 clean energy innovation.                     the White House and accountable to
     struck a Unity Task Force. Co-chaired
                                                   Biden’s platform included two key            the president,” including memos with
     by former Senator and Secretary
                                                   planks that wove together his cli-           recommendations for 11 White House
     of State John Kerry and Congress-                                                          offices, federal departments, and fed-
     woman Alexandra Ocasio-Cortez, it             mate, energy and economic ambi-
                                                                                                eral agencies, as well as cross-cut-
     merged climate action recommenda-             tions into a plan for a clean energy
                                                                                                ting recommendations on personnel
     tions from leading House and Senate           revolution, environmental justice,
                                                                                                and hiring.
     Democrats, Biden’s primary platform,          modern sustainable infrastructure
     and a cross-section of civil society cli-     and an equitable, clean-energy fu-           Appointments to date suggest that
     mate change and environmental jus-            ture. With a federal commitment of           President-elect Biden got the message:
     tice advocates, to inform Biden’s plat-       $2 trillion over four years, Biden laid      John Kerry, who helped forge the Par-
     form for the general election.                out a vision and numerous goals,             is Agreement, has been appointed spe-
                                                   plans and programs to undo Trump’s           cial presidential envoy for climate—
     This approach united his base, expand-        regulatory rollback spree, re-engage         now a cabinet-level appointment with
     ed his appeal, and informed a sound-          Washington in international climate          a seat on the National Security Coun-

     Policy
11
cil—and asked to help raise global am-                 It was Vice President Biden who visited Canada in
bition for action. Brian Deese, a bril-
liant former climate aide to President                 the waning days of the Obama administration to
Obama, has been tapped to lead the            urge Trudeau to take up Obama’s progressive torch and
National Economic Council. And Jan-           there is significant alignment between the two leaders’
et Yellen, who was chair of the Fed-          climate plans.
eral Reserve under President Obama,
has been nominated Treasury Secre-
tary, hot on the heels of a stint with
former Bank of Canada and Bank of
England governor and current UN en-           tech sector that punches above its         mandates to take action to address the
voy on climate finance Mark Carney                                                       climate crisis. They also now share
                                              weight and whose growth will be fu-
leading the Group of 30, a think tank                                                    the challenge of doing so within the
                                              eled by exports to, among other plac-
of former and current policy makers,                                                     context of pandemic-ravaged econo-
                                              es, the US.
academics and finance executives ex-                                                     mies, and, despite majority support,
ploring how best to shift the global          Domestic pipeline politics in general,
                                                                                         polarized electorates and regional di-
economy toward net zero emissions.            and Keystone XL in particular, mean
                                                                                         visions on matters of climate and en-
It’s clear that Biden means business.         that the federal government will need
                                                                                         ergy policy.
                                              to be seen to champion it with Biden,

A
         t first blush, all of this is won-   despite his commitment to rescind          Prime Minister Trudeau appears
         derful news for Canada and           permits and cancel the project. But        primed to this potential. His govern-
         our climate ambitions, for the       from both a diplomatic and practical       ment’s strengthened climate plan, re-
federal government especially. There’s        perspective, it should hardly be “top      leased in December on the five-year
some hope that the brief 2015-2017            of the agenda,” as Foreign Affairs Min-    anniversary of the Paris Agreement,
bromance enjoyed by Prime Minister            ister François-Philippe Champagne          noted “there is an opportunity to
Justin Trudeau and President Barack           has vowed it would be.                     collaborate with the incoming Unit-
Obama could be rekindled with Presi-                                                     ed States Administration on strong
                                              But we simply can’t afford to get
dent Biden. After all, it was Vice Presi-                                                cross-border climate action that can
                                              mired in a divisive, and now mostly        better position the North American
dent Biden who visited Canada in the          symbolic, debate about pipelines. The
waning days of the Obama admin-                                                          economy, as well as Canadian workers
                                              economic and political winds have          and companies so that they can con-
istration to urge Trudeau to take up          shifted, and clean energy collabora-
Obama’s progressive torch and there                                                      tinue to be globally competitive.”
                                              tion and effective climate action must
is significant alignment between the          be the top priority.                       While seizing this opportunity, and
two leaders’ climate plans.                                                              tackling this challenge, are better
                                              There is, after all, precedent for doing   done in collaboration than isolation,
But while there is undoubtedly plen-          so. In June 2016, President Obama,
ty of scope for collaboration, there are                                                 the reality is that while President-elect
                                              Prime Minister Trudeau and Mexican         Biden will be a much stronger ally for
also some warning signs that require          President Enrique Peña Nieto estab-
prompt prioritization by the Trudeau                                                     Canada than Trump was, his first pri-
                                              lished the North American Climate,         ority will be Americans and the Amer-
government. All of those climate-ac-
                                              Clean Energy, and Environment Part-        ican economy. Canada has managed
tion induced jobs and economic ben-
                                              nership. But by November 2016 Don-         to carve out exceptions and partner-
efits Biden promised? He wants them
                                              ald Trump was President-elect, and         ships to our advantage in the past,
in the US. From zero-emission ve-
                                              the partnership was effectively dead.      and the imperative is that Prime Min-
hicle manufacturing to producing
the batteries that go in them, to ad-         While it needs to be updated—to re-        ister Trudeau do so again—for our en-
vanced biofuels and clean-tech solu-          flect the heightened ambition of new       vironment and our economy.
tions, Biden has “Buy American” on            net zero targets and new opportuni-        Dan Woynillowicz is the Principal
his mind.                                     ties to develop North American sup-        of Polaris Strategy + Insight, a
                                              ply chains for batteries, zero emission    public policy consulting firm focused
Last fall, Canada landed commitments                                                     on climate change and the energy
                                              vehicles and other clean technolo-
from Ford and Fiat Chrysler Automo-                                                      transition.
                                              gies—and may not necessarily include
biles to re-tool their Canadian assem-
                                              Mexico this time around, this collabo-     Eric St. Pierre is the Executive Director
bly plants to produce electric vehicles
                                              rative approach could be coupled with      of the Trottier Family Foundation,
for the Canadian and American mar-
                                              a commitment to keeping the borders        which supports organizations that
kets alike. We have the ability to pro-                                                  work towards the advancement of
                                              open to free-flowing trade.
duce and export a surplus of clean, re-                                                  scientific inquiry, the promotion of
newable power that can help the US            For the first time ever, we have feder-    education, fostering better health,
achieve its 2035 decarbonization goal.        al leaders in Ottawa and Washington,       protecting the environment and
And we’re home to a growing clean             DC who have been elected with clear        mitigating climate change.

                                                                                                      January—February 2021
12

     Fiscal Policy and the Post-
     COVID Recovery
     Governments around the world, including Canada’s, have                                                                         Fiscal policy is the use of govern-
                                                                                                                                    ment spending and revenues to pro-
     spent nearly a year re-orienting their fiscal calculations                                                                     mote growth and the provision of
     around the health and economic Catch-22 of a deadly pan-                                                                       common goods. Economic channels
     demic that could only be contained by a self-induced eco-                                                                      include the allocation of resources,
                                                                                                                                    income distribution, savings and in-
     nomic coma. As COVID-19 vaccines begin to make their                                                                           vestment and aggregate demand.
     way into the bloodstreams of Canadians, the economic re-                                                                       Fiscal policy can be used to stabilize
                                                                                                                                    an unstable economy through built-
     covery could still take many shapes, writes former Parlia-                                                                     in stabilizers (e.g., unemployment
     mentary Budget Officer and Institute of Fiscal Studies and                                                                     benefits; progressive tax systems)
     Democracy founder Kevin Page.                                                                                                  and stimulus measures (i.e., defi-
                                                                                                                                    cit financed measures to strengthen
                                                                                                                                    demand). Fiscal policy was an im-
                                                                                                                                    portant stabilizing influence in the
     Kevin Page                               The International Monetary Fund                                                       2008-09 global financial crisis.
                                              (IMF) is calling for a global coordina-

     H                                                                                                                              G
             istorians debate key turn-       tion of fiscal policy and continued.                                                           overnment capacity to use
             ing points in history—Pax                                                                                                       fiscal policy as an economic
                                              Continued monetary and fiscal poli-
             Romana; the birth of spiri-                                                                                                     stabilizer depends on its fis-
                                              cy support to help vulnerable people
     tual leaders like Jesus and Moham-
                                              and businesses while the pandemic                                                     cal room. The reduction in feder-
     med; the invention of the printing
                                              evolves—avoiding premature with-                                                      al debt in Canada from 66 percent
     press; the renaissance; and many
                                                                                                                                    of GDP in 1995-96 to 28 percent of
     more. Will the 2020 global pandemic      drawal. A synchronized global infra-
                                                                                                                                    GDP in 2007-08 (corresponding re-
     mark an inflection point, the begin-     structure investment push to support
                                                                                                                                    duction in public debt charges from
     ning of a special moment in human        growth, limit recession after-effects                                                 5.9 to 1.7 percent) gave the federal
     history? Can global leaders imagine      (i.e., so-called scarring) and address                                                government of Canada much needed
     a new future? Can countries, public      climate goals. “‘Build back better”’ is                                               fiscal space to support the Canadian
     and private sectors and citizens work
                                              now a global motto.                                                                   economy in both the 2008-9 finan-
     together to address challenges and
     opportunities?
                                              Chart 1: Federal Debt and Interest Charges (% of GDP)
     The year 2020 started with the spread
     of the COVID-19 virus around the         70                                                                                                                                                                    7
     world. It has ended with the roll-out
                                              60                                                                                                                                                                    6
     of vaccines. The pandemic has tak-
     en its toll on human lives—1.6 mil-      50                                                                                                                                                                    5
     lion deaths globally; 13,000 deaths
                                              40                                                                                                                                                                    4
     in Canada. In the Dave Matthew’s
     song “Space Between”, the singer/        30                                                                                                                                                                    3
     songwriter makes the case that life is   20                                                                                                                                                                    2
     about bridging the gaps that lie be-
     tween people. The cooperation of         10                                                                                                                                                                    1
     international pharmaceutical efforts       0                                                                                                                                                                   0
     has highlighted the power of collab-
                                                              1971-72

                                                                        1975-76

                                                                                  1979-80

                                                                                            1983-84

                                                                                                      1987-88

                                                                                                                1991-92

                                                                                                                                    1999-00

                                                                                                                                                                                                2023-24

                                                                                                                                                                                                          2025-26
                                                                                                                                                                            2015-16
                                                                                                                                              2003-04

                                                                                                                                                        2007-08

                                                                                                                                                                                      2019-20
                                                                                                                                                                  2011-12
                                                    1967-68

                                                                                                                          1995-96

     oration bridging gaps. Policymak-
     ers are now coalescing on agendas
     focused on sustainability, inclusion                               Federal Debt (left axis)                                    Public Debt Charges (right axis)
     and resilience.
                                              Source: Department of Finance Fiscal Reference Tables; 2020 Fall Economic Statement

     Policy
13
cial crisis and the 2020 pandemic.                three objectives: infection fighting;       tors are seen to influence the effec-
The fiscal advantage was supported                disaster relief; and support for aggre-     tiveness of stimulus. These include
by a AAA bond rating (i.e., highest               gate demand.                                the economic context, and the tim-
investment grade) from the major                                                              ing, size, composition and duration

                                                  H
agencies.                                                   ow much fiscal stimulus will      of the fiscal stimulus.
                                                            be needed to support de-
Canada unloaded fiscal firepower to                                                           In the 2020 Fall Economic Statement,
                                                            mand in a post-pandemic
support Canadian households and                                                               the government indicated an inten-
                                                  economy is an open question. Cana-
businesses to facilitate social distanc-                                                      tion to use fiscal stimulus to strength-
                                                  dian national accounts numbers for
ing and slow the spread of the virus.                                                         en the post COVID-19 recovery.
                                                  the first three quarters of 2020 show a
Direct fiscal supports in 2020-21 are                                                         Different economic scenarios were pre-
                                                  deep dive, a strong bounce and an in-
estimated at $275 billion (12.5 per-                                                          sented with stimulus values ranging in
                                                  crease in savings. Blanchard’s advice
cent of GDP). Total federal-provin-                                                           the $70 billion to $100 billion range
                                                  is for governments to be ready but
cial-territorial multi-year supports                                                          over a three-year period starting in
                                                  should not commit to a specific level
including tax payment deferrals and                                                           2021. As well, the government indicat-
                                                  of fiscal expansion before the outlook
credit supports are estimated near                                                            ed intention to use labour market indi-
                                                  becomes clearer.
$600 billion.                                                                                 cators—employment rate, unemploy-
                                                  There are downside and upside eco-
How does the federal budgetary defi-                                                          ment, hours worked—as guardrails to
                                                  nomic risks around the post-pandem-
cit go from $39.4 billion (1.7 percent                                                        guide the shape of fiscal stimulus.
                                                  ic economic recovery. The key driver
of GDP) in 2019-20 to $381.6 billion              remains the evolution of the virus. A       One of my favourite holiday movies
in 2020-21 (17.5 percent of GDP)?                 U-shaped recovery for GDP is linked         is “Planes, Trains and Automobiles”’.
Start with $381.6 billion. Take away              to struggles controlling the virus and      In the 1987 film, the principal char-
$275 billion in direct fiscal supports.           the cumulative impact of scarring on        acters, including Jim Neal (played
Take away a $76 billion drop in bud-              jobs and investment. A Z-shaped re-         by Steve Martin) and Del Griffith
getary revenue from the Budget 2019               covery is linked to successful global       (played by the late Canadian icon
projection because of a deep reces-               vaccination and the release of pent         John Candy), struggle to get home
sion. We are left with a deficit of $31           up consumer demand highlighted by           for the holidays. By comparison, our
billion—a number that would not                   recent increases in savings and the re-     new Finance Minister Chrystia Free-
raise eyebrows in financial markets in            turn of investor confidence.                land and newly named Deputy Min-
normal times.
                                                  International research on the poten-        ister Michael Sabia will spend the
Olivier Blanchard, a former Chief                 tial impacts of fiscal stimulus has in-     holidays trying to get Canada back
Economist at the International Mon-               creased significantly since the 2008        to fiscal normalcy. The Finance mov-
etary Fund, makes the case that fiscal            financial crisis and introduction of        ie would be more akin to “Fiscal An-
policy during the COVID19 crisis has              record-low interest rates. Many fac-        chors, Guardrails and Rules”.

Table 1: Fall Economic Statement 2020 ($ billions)

                                                                                     PROJECTION
                                               2019-2020 2020-2021      2021-2022    2022-2023     2023-2024    2024-2025   2025-2026
Budgetary revenues                                  334.1      275.4        335.9        357.8         377.3        398.5       417.3
Total expenses, ex net actuarial losses             362.9      641.6        441.5        396.4         410.1        423.4       438.4
Net actuarial losses                                 -10.6      -15.4        -15.6        -12.1        -10.5         -6.0        -3.9
Budgetary Balance before stimulus                    -39.4     -381.6      -121.2         -50.7        -43.3        -30.9       -24.9
Planned stimulus                                                         $70 – to – $100 billion over 3 years
Federal debt before planned stimulus                721.4     1,107.4     1,228.5       1,279.3      1,322.6      1,353.4     1,378.3
Percent of GDP before planned stimulus
Budgetary Revenues                                   14.5       12.6         14.4          14.6         14.7         14.9        15.0
Program expenses                                     14.6       28.5         18.1          15.2         15.0         14.7        14.5
Public debt charges                                    1.1        0.9          0.9          0.9          1.0          1.1         1.2
Budgetary balance                                     -1.7      -17.5         -5.2          -2.1         -1.7        -1.2        -0.9
Federal debt                                         31.2       50.7         52.6          52.1         51.6         50.6        49.6
Source: Department of Finance, 2020 Fall Economic Statement

                                                                                                            January—February 2021
14
     Chart 2: Debt-to-GDP Ratio Under Discretionary Spending Alternative Scenarios

      (%)                                     LOW INTEREST RATES                                                                                                        HIGHER INTEREST RATES

      60
      55
      50
      45
      40
      35
      30

                                                                                                                                                                                                                                                          2030-31
              2019-20

                        2020-21

                                  2021-22

                                            2022-23

                                                      2023-24

                                                                2024-25

                                                                          2025-26

                                                                                    2026-27

                                                                                                2027-28

                                                                                                          2028-29

                                                                                                                      2029-30

                                                                                                                                2030-31

                                                                                                                                          2019-20

                                                                                                                                                    2020-21

                                                                                                                                                              2021-22

                                                                                                                                                                        2022-23

                                                                                                                                                                                   2023-24

                                                                                                                                                                                              2024-25

                                                                                                                                                                                                        2025-26

                                                                                                                                                                                                                  2026-27

                                                                                                                                                                                                                            2027-28

                                                                                                                                                                                                                                      2028-29

                                                                                                                                                                                                                                                2029-30
                              Baseline                          1% Spending                                         3% Spending                     4.5% Spending                                        4.5% Spending + 5% Revenue

     Source: IFSD calculations

     There is a genuine intellectual debate                                                   face of aging demographics. On the                                                             have a permanent impact on
     around fiscal discipline in a post-pan-                                                  other hand, provinces are not sus-                                                             deficits. Fiscal analysis should
     demic environment.                                                                       tainable, largely because of assump-                                                           accompany the setting of fiscal
     On the one side, some argue that in                                                      tions regarding health care spending                                                           guardrails (e.g., estimates of the
     a low-interest rate environment there                                                    growth.                                                                                        output gap, cyclically-adjusted
     is a “‘get of jail free” card for running                                                                                                                                               budget balances, spending and
                                                                                              It is said that discipline is about
     up large debt to support households                                                                                                                                                     tax multipliers)
                                                                                              knowing what needs to be done,
     and businesses during a lockdown to                                                      even if you do not want to do it. Can-                                                 c	Long fiscal sustainability
     protect and support growth. Debt-to-                                                     ada will need a fiscal planning frame-                                                    analysis should be tabled with
     GDP should fall with primary budget                                                      work with discipline or risk passing                                                      the budget.
     balances and interest rates lower than                                                   on higher unnecessary debt to future
     the growth in the economy.                                                                                                                                                   2	Set a fiscal anchor. It should be a
                                                                                              generations; not being able to sup-
                                                                                                                                                                                     prudent level of debt relative to
     On the other side, some argue that                                                       port Canadians in the next recession;
                                                                                                                                                                                     income.
     higher debt will eventually be paid by                                                   and potentially losing a hard-earned
                                                                                              AAA credit rating.                                                                  3	Set fiscal rules. These are
     higher taxes. They argue it is voodoo
                                                                                                                                                                                     operational targets consistent
     economics to assume interest rates                                                       There is lots of good advice on fiscal                                                 with the fiscal anchor including
     will stay low for long and that public                                                   discipline from international organi-                                                  primary balances (program
     investment will pay for itself. High-                                                    zations. Are we able to implement it?                                                  spending, less revenues);
     er debt will limit fiscal room for fu-
                                                                                              1	Outline a fiscal strategy. How will                                                 discretionary spending growth;
     ture generations and create economic
                                                                                                 fiscal policy be used to support                                                    and public debt interest charges as
     instability risks. Fiscal consolidations
                                                                                                 economic recovery and long-term                                                     a percent of GDP.
     are costly—a lesson learned in Cana-
     da in the 1990s.                                                                            structural policy shifts (e.g. climate                                           4	Establish escape clauses.
                                                                                                 change)? How will corrective                                                        Fiscal policy needs to adjust if
     Finance scenarios and work by IFSD                                                          fiscal measures (e.g. spending                                                      assumptions are substantially
     suggest Canada is headed for a much                                                         restraints and tax increases) be                                                    altered.
     higher debt-to-GDP ratio over the                                                           introduced over the medium-term
     medium term—likely in the 50 to                                                                                                                                              5	Use the Parliamentary Budget
                                                                                                 as economic conditions improve.
     55 percent range. This is well above                                                                                                                                            Office to provide support for
     the 30 percent debt-GDP ratio in the                                                       a	Investment spending should                                                        Parliament on the enforceability
     pre-pandemic period. On a positive                                                            be defined. Non-investment                                                        of the fiscal anchors, guardrails
     note, these debt numbers are well                                                             initiatives should not be deficit-                                                and rules.
     below debt loads of most advanced                                                             financed in a post pandemic
                                                                                                                                                                                  Contributing Writer Kevin Page is the
     countries. PBO analysis suggests this                                                         period.
                                                                                                                                                                                  founding President and CEO of the
     level of federal debt with the current                                                     b	If fiscal stimulus is required,                                                Institute for Fiscal Studies and
     fiscal structure (i.e., before initiatives                                                    a performance framework                                                        Democracy at University of Ottawa
     highlighted in the 2020 Speech from                                                           should be established. Stimulus                                                and was previously Canada’s first
     the Throne) could be sustainable in                                                           programming should not                                                         Parliamentary Budget Officer.

     Policy
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