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I don’t know what the net effect of the changes in the various categories might be, and there is no discussion at all of exports. Mendes also claims a “clear correlation,” on the basis of a scatter plot with 10 data points, between the import dependence of various national economies and the size of their fiscal stimulus. I’m not a banker, but that chart and that adjective might tempt me to switch my mortgage away from CIBC on principle if I were a customer.
Even if the data weren’t fishy, weren’t our stimulus measures mostly demand-driven and improvised? Our government never consciously intended to lead the G20 in handouts. When the novel coronavirus reared its head, we mostly just happened to have a government that already adored them.
The exact degree of economic leakage and the disproportionate effects of the pandemic on various sectors are really separate issues that were combined for the purposes of this paper. Mendes makes the point, and it is valid whatever you make of the leakage issue, that the Government of Canada has not yet made any use of the GST as a rebalancing instrument. There is a moment of throat-clearing when he says that “lowering virus counts and making Canadians feel safe” in hard-hit settings like retail would have been ideal targets for early pandemic spending. (Rapid virus testing would have carried an especially large fiscal multiplier!)
With that horse well out of the barn and stomping senior citizens to death, the GST, altered selectively to boost businesses like retail and entertainment, remains as a potential lever for the long winter to come. These industries, Mendes estimates, only account for about a sixth of all GST revenue, and targeted tax relief would have offsetting buoyant effects on other sources of government income.
