Canadian government debt and deficit spending: Towards an efficient and equitable economic recovery to the COVID-19 pandemic

Abstract

Since its identification in December of 2019, every nation on this planet has faced a once-in-a-century battle against the coronavirus disease, COVID-19. As countries grappled with their own responses to the pandemic, the Canadian government spent an unprecedented amount of money to provide support to businesses that were forced to close due to lockdowns, as well as citizens who lost their jobs. 2020 saw the largest global economic downturn since the Great Depression because of these emergency measures and similar ones enacted in other countries. Government debt and deficit spending in the Canadian context is increasingly becoming a contentious political issue which warrants an extensive review of literature and past policies to map a path forward. This paper will examine austerity and Keynesianism, two political-economic policy strategies, to address the growing government debt resulting from COVID-19. Given the failures of austerity policies in alleviating economic downturns in recent crises, this paper will argue that the best strategy to address post-COVID government debt is to enact Keynesian stimulatory fiscal policy to produce economic growth. Such a strategy would provide the best economic outcome and avoid the pitfalls of austerity, which often reduces the well-being of society by cutting social programs and promoting class and gendered inequality. The pandemic has exposed shortcomings in the current economic and welfare systems reinforced by neoliberal austerity. These shortcomings have not only been exacerbated by the pandemic, but also risk hindering a more efficient and equitable recovery. This review is aimed at stimulating more research into modern applications of Keynesian fiscal policy to produce better responses to economic crises now and in the future.