Increased taxes and cuts to Government spending are effective practices when the economy is stable. However, we learned in 2008 and from other major recessions that these are dangerous policies when the economy is weak. If this is the route Calgary takes in dealing with the COVID-19 recession, it will only slow reopening efforts, ensure the death of local businesses and extend the current crisis.
The Calgary government needs additional funds to support the city by maintaining essential services while covering new pandemic management expenses. Previous sources of revenue such as transit fares, parking fees and property taxes have taken a major hit. It may seem like a natural choice to increase taxes and cut or privatize non-essential service jobs to make up the difference.
Unfortunately, these aren’t simply numbers on a page to balance a budget; they’re citizens of Calgary. Cutting these jobs or wages means cutting the household income of people. Increasing taxes raises the cost of living, which will lead to cuts in household spending — and this will hurt the only consistent source of revenue the municipal government has right now.
Additionally, local businesses that are already struggling to stay afloat will lose even more customers, leading to their own cuts and layoffs, further reducing money in the local economy.
What can we do instead?
First, we have to realize no perfect solution exists. Previous recessions showed running a deficit is the best way to deal with a financial crisis long term. However, a city can’t do this. The only way to enact deficit spending is by lobbying higher governments to do it for us, then transfer funds for our use.
The Canadian Government can borrow money to keep our economy alive and appeal to investors thanks to the potential of growing cities like Calgary. This would increase the number of businesses that survive, keep employment rates up, maintain spending and decrease the time it takes to get back to a healthy economy.
Before the pandemic, Calgary was increasing in population and services were expanding to meet that demand. During the quarantine, public services played a major part in teaching and enforcing safety measures. Now, these workers will play a key role in vaccine distribution.
The decisions made today will impact what the city becomes for the next generation. Let’s get it right.