How Does Canada’s Coronavirus Stimulus Plan Compare to the CARES Act?

Canadian PM Justin Trudeau encouraged citizens to “do your part” in stopping the spread of the virus (Source)

In late March, the United States Congress passed the $2 trillion CARES Act in response to the COVID-19 pandemic. Among its provisions are loans to companies whose profits have been affected by the crisis and, most notably, a $1,200 direct payment to most American adults. It was a rare act of bipartisan compromise in Washington, requiring careful work to ensure that it was acceptable for all sides. To see how well the CARES Act holds up, the best strategy may be to compare the U.S. response to that of other countries. Notably, Canada passed its own $107 billion CAD ($75 billion USD) relief bill the day before the American stimulus was approved in the Senate. It stands in contrast to the American plan in many key respects.

The act includes a number of measures to support individuals, businesses, and industries. One notable policy is a Canada Emergency Response Benefit of $500 CAD ($350 USD) per week for up to 16 weeks for workers who have lost their jobs due to COVID-19. But the government hopes to stop this from being necessary in the first place. The Canada Emergency Wage Subsidy will temporarily cover up to 75 percent of an employee’s wages in sectors that have seen a major drop in revenue, so that businesses will not be pressured to lay off workers.

Business expert Tara Benham told Yahoo Finance that this reflects on a divide in how countries have responded to the economic threat COVID-19. Some, like Canada and Britain, have focused on subsidizing workers, while the U.S. and Australia have given direct aid to corporations with the hope of stabilizing the economy. It is worth noting that wage subsidies have also caught on throughout much of Europe. Even Australia, whose initial response was similar to that of the U.S., has come to embrace the policy. This move has come from governments across the ideological spectrum. Despite some initial provisions that gave new powers to the Canadian government, the members of the Conservative Party largely joined the ruling Liberals in supporting the Canadian relief bill.

Indeed, the U.S. would seem to be the exception in this case. Its government has been criticized by organizations like Human Rights Watch for doing comparatively little to protect workers. The primary aid for average Americans, the $1,200 stimulus checks, is widely seen as insufficient. Why the U.S. has not taken the same steps as other countries is unclear, but it likely relates to the long-standing perception of American politics as more capitalistic and business-friendly than those of Canada or Europe. The Canadian unemployment subsidies have faced some criticism due to their cost, and this would likely be even greater if such a thing was proposed in the U.S. Still, the full consequences are yet unclear. Despite everything, Canada has not been exempt from a surge in unemployment. Time will tell which approach will best help the economy weather the pandemic.