The total cost of the federal government’s wasteful COVID spending—money that was poorly targeted or sent to ineligible recipients—will eclipse $110 billion by 2032/33, partly as a result of higher debt interest costs, according to a study released Tuesday by the Fraser Institute, an indefpendent, non-partisan Canadian public policy think-tank.
Jake Fuss
“Taxpayers will bear the costs of Ottawa’s wasteful COVID spending for years to come in the form of higher debt and interest costs,” said Jake Fuss, associate director of fiscal policy studies at the Fraser Institute and co-author of Fiscal Waste During the Pandemic in Canada and the United States.
The study finds that Canada’s federal COVID spending—which totaled $359.7 billion—has added $8.3 billion to present-day interest costs on the country’s national debt.
The study said an estimated 25 per cent of Canada’s COVID spending ($89.9 billion) was wasted in the form of overpayments, money being sent to ineligible recipients, and/or those that weren’t in genuine need.
Of the $8.3 billion in annual debt interest costs arising from COVID spending, $2.1 billion of that can be attributed to the wasteful spending. Over the next 10 years, the total cost of the federal government’s wasteful COVID spending will be $111.0 billion, including both the $89.9 billion in wasteful spending and $21.1 billion in ongoing debt interest costs to service the debt from such wasteful spending, said the report.
The study also calculates the cost of wasteful COVID spending in the United States. Including higher debt interest costs, the total wasted spending in the US will total an estimated $1.56 trillion by 2032/33.
Tegan Hill
“Deficit-financed programs during COVID will impose significant costs on taxpayers for years to come, making it all the more important that programs are properly targeted and taxpayers dollars aren’t wasted in the future,” said Tegan Hill, a senior economist with the Fraser Institute and study co-author.
“During the pandemic, governments around the world spent a significant amount of taxpayer money in an effort to support their economies. This was particularly true in Canada, with hundred billion-dollar programs such as the Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Response Benefit (CERB), and in the United States, with nearly trillion-dollar programs such as the Paycheck Protection Program (PPP), Economic Impact Payments, and expanded and extended unemployment programs. Given the significant cost of these programs, it’s important to assess their efficiency or, rather, the degree to which they were excessive, poorly targeted, or simply wasteful,” said the Fraser Institute.
“Canadian COVID programs such as CEWS and CERB were ripe with problems including overpayments, funds provided to individuals and businesses not in genuine need, and excessive amounts of support that went above what was required to stabilize incomes. In the United States, independent analysis found excess unemployment payments, a poorly designed paycheck protection program, and largely ineffective stimulus payments.
“Each country wasted billions in taxpayer money on their COVID responses, which was financed entirely through borrowing. Canada’s federal COVID spending totaled $359.7 billion, of which an estimated 25 percent ($89.9 billion), at a minimum, was wasted. Total federal COVID spending has added $8.3 billion to present-day interest costs and we estimate approximately $2.1 billion of that amount is attributable to wasteful COVID spending. Over the next 10 years, Canada’s federal government is projected to pay $21.1 billion in interest costs attributable to COVID fiscal waste. Put differently, the cost of Canada’s COVID fiscal waste will total roughly $111.0 billion by the end of 2032/33.
“The United States’ COVID spending response came at a price tag of nearly $5.1 trillion and an estimated 25 percent ($1.3 trillion) of that amount, at a minimum, was wasted. At least $28.8 billion of current interest costs are directly connected to fiscal waste in the US during the pandemic. Further, the US government will pay approximately $289.4 billion in interest payments over the next decade due to COVID waste. In summary, the cost of the United States’ COVID fiscal waste will total more than $1.56 trillion by the conclusion of 2032/33.
“Overall, it’s clear that over the long-term Canadians and Americans will face significant ongoing costs to pay for wasteful and poorly targeted government spending during the pandemic.”
Mario Toneguzzi
(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)
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