A neglected aspect of stimulus
Much of the debate about economic stimulus has been on infrastructure (picture the Hoover Dam, as Stephen Gordon comments). But there is more! One neglected area is around income support, including EI, the CCTB, GST credit and provincial social assistance programs. Below is the quick synopsis from the CCPA’s alternative economic and fiscal update, and thankfully, the Caledon Institute has released a paper that draws essentially the same conclusions and has much more detail for the geekily inclined.
EI benefits are a highly effective stimulus as they quickly replace income for recently unemployed workers, who are very likely to spend the proceeds. The EI program could be strengthened by increasing the number of weeks for which an unemployed worker can collect benefits; increasing the replacement rate from 55% to 70% of earnings, and the ceiling for maximum benefits from $435 per week to $600 (equivalent to the inflation-adjusted maximum back in 1996); and reducing the number of hours of paid work required to qualify for EI benefits.
Other income transfer programs could be expanded, including the GST credit, the Canada Child Tax Benefit and the Guaranteed Income Supplement (for seniors). Each of these transfer programs is already designed to provide the maximum benefit to families with low incomes. Because social assistance is provided by the provinces and funded in part by the Canada Social Transfer, the federal government should also increase
this transfer to bolster provincial income support programs.