Can we afford all this? Probably, for now

There's an obvious reason why Finance Minister Bill Morneau sidesteps every question about how big the deficit will be and when he will publish a budget on managing it all.

He just doesn't know, and neither he nor anyone else can see far enough into the future to commit to a spending plan.

Suffice it to say that last week's estimate by the Parliamentary Budget Officer of a $252-billion deficit for 2020-21 was, barring a miracle recovery, likely way too low.

The federal Liberals will need to spend more, and they will need to spend it wisely. The days of spending big are not even close to over, but the days of spending indiscriminately are coming to an end.

The $252-billion estimate covers the expected cost of the income supports and business subsidies that the federal government has already introduced. It also takes into account the big hole in government revenues stemming from the shutdown of most business activity and the simultaneous collapse of the price of oil.

From where we stand now, the PBO figures the deficit is about 12.7 per cent of the country's gross domestic product - the biggest on record. As for the debt-to-GDP ratio that the government uses to assess its ability to repay, right now we're looking at 48.4 per cent - not a record-breaker, but pretty close.

But even though those numbers are dramatic and large, they don't include the recovery efforts. They will be costly, and just as necessary to Canadians' wherewithal as the lockdown was in the first place.

The requests for more are already building up, mainly because all those support measures had expiry dates that are quickly approaching. And while the reopening has gently begun, we are a long, long way from 100 per cent.

The wage subsidy for hard-hit companies comes to an end in June. The Canada Emergency Response Benefit for out-of-work people who can't get Employment Insurance is capped at 16 weeks. We're into week eight of this thing now.

There's no question the economic lockdown will outlast the government programs, and so it's no surprise that calls to extend the supports and make them more flexible are coming from all corners - the Canadian Federation of Independent Business and the Conservatives on Tuesday alone.

Add to that the fact that the federal housing agency, Canada Mortgage and Housing Corp., suggested Tuesday it will need a government injection of capital if it's to keep homeowners solvent through the crisis.

Meanwhile, the government has said repeatedly it is puzzling through how to best set up a concessional lending program for distressed sectors of the economy, such as airlines, oil, and gas, commercial real estate, tourism, and accommodation. The goal is to find a sector-agnostic solution for the country's largest and most troubled companies that won't lead to lengthy government subsidy programs.

If Ottawa says yes to all these things, the extra costs will run in the many billions of dollars and still only take us through the next few months. And it's inclined to say yes - with modifications and new expiry dates and qualifications - because the cost of doing nothing is just so much more. Bankruptcy means permanent damage to the economy. Rushing back to work too soon puts control of COVID-19 at risk.

Recovery is another matter entirely. Nursing the economy back to health as soon as possible will require a hard look at what is needed to return to work while the virus is still active: extra child care with social distancing, extra public transit with social distancing, enough personal protective equipment for all types of workers and anyone out in the public, and pay increases for cleaners and those who are working in high-risk essential jobs.

Plus testing, tracing, and distribution of all the materials required to undertake those at scale.

So it's no wonder Morneau doesn't want to put a predictive dollar figure on all that and commit to a forecast for government revenues and growth. There are too many uncertainties to put together a realistic budget.

But he does need to show that he has a solid plan of some kind - not just the attention to the here and now that he and Prime Minister Justin Trudeau zero in on when the fiscal questions come their way.

Can we afford all this? The smart money says probably, for now, as long as interest rates remain low and as long as the federal support actually bridges the economy to a recovery - and is then withdrawn.

CIBC economist Royce Mendes points out that borrowing money costs almost nothing these days, and once even feeble inflation is taken into account, it's essentially free.

Yes, credit agencies are looking closely at the triple-A rating that allows Canada to borrow at the best rates. But they're looking at everyone around the world, and by comparison, Canada looks better because our debt burden was relatively low to begin with.

As long as the income supports and subsidies are one-offs, "if we're in trouble, everyone else is in even more trouble," Mendes says. "This is the exact moment when you borrow."

Twitter: @hscoffield

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This article was written by Heather Scoffield Opinion from The Toronto Star and was legally licensed by AdvisorStream through the NewsCred publisher network.