Trudeau government spending billions to make people better off than before recession
We recently analyzed almost $82 billion in COVID-related spending—specifically CERB, the student assistance benefit (CESB), and one-time payments linked to Old Age Security (OAS), the Guaranteed Income Supplement (GIS) and the Canada Child Benefit (CCB)—concluding that up to $22.3 billion (or 27.4 per cent) was potentially being wasted due to poor targeting of assistance.
Moreover, almost half of the $22.3 billion went to Canadians who were made materially better off financially than they were before the recession.
For example, there are 985,200 CERB-eligible (meaning they earned at least $5,000 in the previous 12 months or in 2019) dependent children (ages 15 to 24) living in households with at least $100,000 in income in 2019. The total CERB cost, which doesn’t include the recently announced four-week CERB expansion, of this potential group is $11.8 billion. If we narrow this group to only those who earned a maximum of $12,000 in 2019, which means their average monthly income at least doubled under CERB, the potential cost is $7.1 billion.
Now consider that Ottawa created another separate program for young people ineligible for CERB due to a lack of earnings in 2019. The Canada Emergency Student Benefit (CESB) provided a $5,000 benefit over four months to eligible students. There are an estimated 324,900 CESB-eligible students living in families (as dependents) with household incomes of at least $100,000. Again, most of these CESB recipients are materially better off now than they were in 2019 because CESB payments exceed their earnings. The potential cost to taxpayers for these payments is $1.6 billion.
There are also an estimated 177,700 CERB-eligible spouses living in households with $100,000 in income (2019) who earned more than $5,000 but less than $12,000 in 2019, which again means their monthly income at least doubled under CERB. The potential cost of this group is $2.1 billion.
That’s a total of $10.8 billion in taxpayer money potentially being sent to Canadians with questionable need and who actually saw their monthly income increase substantially compared to when they were working pre-recession. This price tag represents almost half (48.4 per cent) of the aforementioned $22.3 billion in potential waste due to Ottawa’s poor targeting of assistance.
And remember, this is happening at a time when some Canadians—single parents, for instance, who have lost their jobs—are likely not receiving sufficient support, and when the federal deficit will likely exceed $350 billion with a national debt topping $1 trillion.
The Trudeau government could have avoided these situations, where individuals were made better off with COVID-related assistance, by simply linking the benefit with the individual’s previous income. And for young people deemed dependents, a simple question about household income, and how (or if) it’s been affected by the recession, would have helped prevent cash transfers to Canadians with questionable need.
Sound policy during a recession entails stabilizing incomes to stabilize the economy. That doesn’t include making some people better off—by a substantial margin—while others receive inadequate assistance. The key to both policies is targeting assistance and using public resources more wisely and prudently.
Subscribe to the Fraser Institute
Get the latest news from the Fraser Institute on the latest research studies, news and events.