What Is Federal Health Minister Hajdu Really Up To?

 

Part of the strength of Canada’s political system is its federal structure and the perennial back and forth between Ottawa and the Provinces.  The fact that regional differences are accommodated within a common framework of shared responsibilities is a strength of our system of government and in normal times the endless bickering is really a sign that everyone is still talking.  However, as the recent pandemic has illustrated, during times of crisis the tug of war can be less productive with both Ottawa and the provinces to blame as they engage in short term politics.

 

Here is an old joke.  The UN Secretary-General commissions a report on elephants from all of the member countries.  The United States hands in “How to Raise Elephants for Fun and Profit,” the United Kingdom sends “Should You Invite an Elephant to Tea,” France sends in “The Love Life of the Elephant.” And Canada? Why it sends in “The Elephant: A Federal or Provincial Responsibility.”  That is funny – well at least to some people. “Vaccines: A Federal or Provincial Responsibility?” That is not so funny to anyone given the current spread of COVID-19 variants and the race to vaccinate.

 

So, what’s up with Federal Health Minister Patty Hajdu? All of a sudden, the Federal Health Minister takes to the media with pronouncements that vaccines are having an impact and that the public is anxious about getting their shot but that the provinces (especially Ontario) are not getting the vaccines out fast enough.  Moreover, the Federal Health Minister now plans to monitor that vaccines are being used in a timely fashion after delivery to the provinces and territories and plans to post weekly figures showing how many vaccines have been delivered, and how many have been administered on a province-by-province basis. According to the Health Minister: “I think this is something Canadians want to know. They want to know how efficiently vaccines are getting out the door, and they are also curious when it will be their turn.”

 

Really? A new type of federalism to add to the lexicon: “Watchdog federalism” with the federal government as a large dog that barks constantly but never bites.  After all, the federal government has left the heavy lifting to the provinces when it comes to vaccine delivery aside from negotiating one of the biggest options contracts in Canadian history designed to vaccinate Canadians many times over – eventually.  Why did the federal government not invoke the emergency powers it has under the constitution to invest in its own emergency vaccine production and distribution network?  The UK apparently was able to ramp up production virtually from scratch in nine months – we will get domestic vaccine production in 2027.  The federal government’s reluctance to invoke the emergency act early on to deal with the pandemic in the end was probably political.  After all, it would be the second Trudeau in Canadian history to have invoked the emergency powers of the federal government and how would that play in the next election?

 

It is likely that an election is indeed in the offing.  One wonders if the Federal government’s response to this crisis would have been different if it had been a majority rather than a minority government.  Its actions in dealing with the pandemic always proceeded with a timidity that one could interpret as being more concerned with political optics than getting the job done.  Its lagging behaviour in dealing with the pandemic at the outset was a factor in its spread and Ottawa continues to lag.  It took almost a year for the federal government – which incidentally under the constitution also has the power of quarantine – to set up a quarantining program for returning air travelers and that program is as porous as everything else. Apparently, about of quarter of returning air travelers have been getting exemptions of one form or another.  That probably explains why all three new variants – UK, Brazilian, South African - have gotten a foothold in Canada – the only country to do so.  Furthermore, the delay in March in federally procured vaccine supplies arriving provided a one-month lag in vaccinating ahead of the variants allowing for their foothold to grow.

 

The supply of vaccines has now finally begun to increase. The federal response now? Delivery is a provincial responsibility and they are going to monitor and constantly point out provincial shortfalls rather than do something constructive like send in the military to help vaccinate. Unfortunately, Canadians have the attention span and memory of a fruit fly and if repeated often enough will come to believe that any failures during the pandemic were all the province’s fault – just in time for the next federal election.

 

Despite spending hundreds of billions during COVID, we seem to have little to show for it...

 

As the pandemic moves into 2021, it’s important to reflect on how Canada is dealing with its impact. After a summer that included a semblance of normality, the fall and winter have brought a resurgence that’s taxing our ability to cope. As the second wave unfolds, various new lockdowns (with substantial rates of non-compliance) have been imposed, testing international air travellers on their return has begun nearly 10 months after the start of the pandemic, the vaccine rollout appears to be unfolding in slow motion, hospitalizations are rising and death tolls are creeping upwards.

The current sentiment seems to be that while Canada may have made a few mistakes along the way, we’ve been doing relatively well and deserve a pat on the back. Yet despite spending hundreds of billions of dollars at the federal and provincial levels with combined budget deficits approaching $500 billion for 2020-21 and the largest deficit-to-GDP ratio of any developed IMF country, we seem to have little to show for it.

The virus is surging in our major cities, we lag behind in administering vaccines to the point where many spent a long time in freezers. And the virus still runs rampant through many long-term care homes.

One wonders if in the end, the disjointed, confused and slow response to the pandemic was partly the result of the current interpretation of Canada’s federal system by its leaders.

Federalism is a system of government where units are able to be both independent and coordinate and should accommodate regional preferences with the economies of scale and political direction of a larger country. The Canadian federation has been held up as a model for the world given our standard of living, the freedom of our population and the stability and diversity of our political system.

While Canada’s diversity has meant regional tensions between the federal and provincial governments and perpetual crises and tug of wars over jurisdiction, it’s managed to remarkably stay aloft for more than 150 years. Indeed, one pundit remarked how Canada is a “bumblebee nation” able to fly despite being aeronautically impossible. However, one wonders if the flight of the Canadian bumblebee is more attributable to luck than ability.

Given our high standard of living, we’ve come to think of ourselves as high-flyers, but it increasingly seems that we are mediocre flyers caught up in gusts of wind provided by the historic proximity to a relatively benign and wealthy southern neighbour and our abundant natural resources. Canada’s leaders seem increasingly unable to solve problems. Our governments are increasingly bureaucratic and adept at planning but not at implementation. While quite accomplished at spending large sums of money—especially at the federal level—our governments seem extraordinarily incapable of getting things done themselves or harnessing private initiative. Indeed, when it comes to the private sector, our governments are experts in imposing rules and regulations rather than incentives. When some private companies stepped up to produce masks and hand sanitizer early in the pandemic, their reward was to be bypassed by foreign suppliers when the real money was spent.

During COVID, governments across the country have issued inconsistent and contradictory statements about masks, the rules for gatherings and so on. Consequently, many Canadians increasingly don’t know what they’re supposed to do to stay safe and some may think they’re following the “rules” even when they’re not. We’re told these are unprecedented times—but obviously not unprecedented enough for politicians of all stripes who tell us to stay home while they gallop around the world demonstrating an appalling lack of leadership.

Our federal government intones that health is a provincial responsibility, but there are federal and provincial health ministries and public health agencies and federal health transfers. Health as a provincial responsibility should provide experimentation and flexibility in dealing with the pandemic. But there seems to be little learning going on given that the relative success of the Atlantic provinces has yet to rub off on other provinces.

While the discord of the U.S. experience has not marked Canadian intergovernmental relations, one cannot help but wonder how much “politics” has marked public exchanges. Take the premiers asking for more health transfers or the federal response to the provincial clamour for the federal government to provide vaccines, which was followed by the expression of federal “disappointment” over the lack of quick distribution by the provinces.

Finally, the federal government has used its spending power not to provide early testing and comprehensive quarantine facilities at international airports or ramp up domestic vaccine manufacturing and distribution, but to dispense poorly-targeted transfers. And again, Ottawa has chosen not to do more to tackle the pandemic directly by hiding behind a strict interpretation of provincial jurisdiction over health. This federal government seems to act is if health is a provincial responsibility when necessary, but not necessarily a provincial responsibility. Sadly, all Canadians will pay the price for the failure of our governments.

 

This was first published in the Fraser Institute Blog, January 8th, 2021.

Ontario’s “404 Error”: Is This As Good As COVID Is Going to Get?

Well, it is June 1 and after several months of dealing with the pandemic, Ontario’s daily number of new cases was 404.  Oddly enough, the internet “error” signal as your case number is probably divine commentary on the state of Ontario’s efforts to date on dealing with the corona virus.  It does appear that Ontario has stalled when it comes to reducing the daily number of new cases and after last week’s large gatherings at Trinity-Bellwoods Park and now the demonstrations in Toronto over the weekend, there will likely be another spike in cases about two weeks down the road.  Toronto has already been responsible for a disproportionate number of new cases in Ontario and this will likely get worse.  

 Of the 3,409 cases added to the Ontario total between May 16 and May 23, the Toronto Public Health Unit area added 1,955 of them – nearly 60 percent of the total.  The population of this area in 2016 was 2.7 million out of 13.5 million for Ontario as a whole – a 20 percent share.  So, it appears that COVID-19 in Toronto is occurring at about three times the provincial rate and it does not look like it is going to improve anytime soon.

The crux of the matter is illustrated in Figure 1 which shows the number of daily new COVID-19 cases from January 25^th to June 1^st with a 0.5 bandwidth LOWESS smooth.  The results do not require a degree in statistics or epidemiology to interpret.  We appear to have a reached a daily plateau in terms of the number of new cases.  In terms of the growth rate of total cases, we have not cracked the 1 percent daily growth rate barrier.  Indeed, the best we ever did was May 26^th and 27^th when we got down to 1.1 percent, but the growth rate has inched up since and today was 1.5 percent. By way of comparison, Italy is now down to a 0.1 percent growth rate in total cases. 

 

And speaking of Italy, here is another interesting comparison.  In Figure 2, Ontario and Italy daily cases are plotted since January 25^th and guess what – despite having about 4 times our population and one of the worst outbreaks of Covid-19 in the world, Italy is now at about the same number of daily new cases as Ontario.

 

So, we do have a problem and the problem is Ontario’s disjointed attempts at dealing with the pandemic.  Like much of the country, we moved slowly at the outset in dealing with the pandemic and this still seems to be the hallmark of the Ontario response. Case in point.  Pearson airport today announced new strict health measures for dealing with COVID-19-effective June 1^st including the compulsory wearing of face masks everywhere in the terminal.   Interestingly, these were not announced April 1^st or even May 1^st but June 1^st.  Seriously?  Airports are under federal jurisdiction, why so long in finally announcing and implementing these types of measures?  The federal government is probably too busy rushing funding to one group after another – today it was $2.2 billion for municipalities - as a sort of fiscal atonement for the sin of not being ready for the pandemic and then reacting too slowly when it began.

I think a glimmer of hope is from the news reported in Italy that Dr. Alberto Zangrillo, the head of the San Raffaele hospital in Milan apparently has claimed that ““the virus clinically no longer exists in Italy”, provoking a furore in Italy. “The swabs performed over the past 10 days have showed a viral load that is absolutely infinitesimal in quantitative terms compared to those carried out a month or two months ago.”  Essentially, the virus has begun to mutate and has become less lethal.  As for Dr. Zangrillo – he looks like a pretty solid researcher type to me given his Google Scholar page.  Of course, this has been challenged by health experts and I certainly would not rush out into the street to demonstrate in public celebration. Nevertheless, Italy has been ahead of the curve with respect to the severity of the illness and if this is true, then it is a glimmer of hope. We could use a lucky break from the lack of initial awareness and plodding approaches of both the Ontario and Federal governments.

Canada's Response to COVID-19

In response to the COVID-19 situation, Canada is about to undergo a pretty major economic shock comprised of both an aggregate supply shock - given the disruption to supply and production chains - and an aggregate demand shock - as consumer and business spending dries up.  This is unprecedented and the ultimate effects on price and output will depend on the proportionate size of the leftward shifts.  And of course, when things in the global world economic order get tough, you can always count on "team players" like Russia or Saudi Arabia to make things worse as they have with their oil production squabble. This will provide the final push to conditions that were already driving a potential Canadian slowdown given the length of the business cycle, and the impact of trade restrictions and disruption with both the US and China.  Ironically, those elements in Canada who were trying to shut down the Canadian economy with transportation and production blockades only a few short weeks ago, will get their wish in ways they could not possibly imagine.

This shock is mainly to expectations and confidence on the part of consumers, investors and business.  Anything that requires non-essential consumer spending - restaurant meals, tourism, travel, and leisure activities - will be hit the hardest.  Essentials in sectors such as food and supplies will do better.  Many personal services will also be hit hard in the immediate term.  Online services and shopping especially with delivery service will get a boost. At the same time, this is an "animal spirits" driven crisis and once it appears the COVID-19 situation is under control, there will be a fairly rapid resumption of activity and pretty quick bounce-back from any recession in Canada.  The longer-term is more interesting.  Just as 9-11 changed global trade, travel and interactions in many ways, this too may result in changes in travel mobility especially.  The openness of borders that marked the second age of globalization from the 1990s to the present may fade.

From a health economics perspective, Canada is a highly developed economy with an excellent health care system.  Moreover, in the aftermath of SARS in the early 21st century, there was substantial investment in public health infrastructure so in general it is very well prepared.  However, like other countries, the danger from COVID-19 is that despite the fact that most people have mild symptoms, that small proportion that has more severe illness is large enough to overwhelm the health-care system - particularly the supply of acute care beds and respirators. Here Canada is less prepared than most.  Despite being one of the largest health care spenders in the OECD, it has one of the lowest per capita amounts of hospital beds and physicians in the OECD.  A case in point, Italy has much higher bed and physician numbers per capita than Canada and it is still being overwhelmed.  Canada's hospital system in particular has been at capacity for years and there really is no slack.  A major question that must be answered once COVID-19 is under control is where did all the health spending money go?  How can one be one of the biggest spenders on health in the developed world and yet be at the bottom for indicators such as hospital beds and physician numbers and often only mid-ranked on many health indicators? There should be a reckoning here.

In response to COVID-19, there has been a pretty unprecedented response on both the fiscal and monetary policy side from our federal government and the Bank of Canada.  Ottawa is about to open the spending taps with stimulus and supports, which will undoubtedly include money for the provinces to spend on health.  There will be large deficits and this is a time where deficits are called for though it should also lead to the question as to why deficits have been so large to date in the absence of a downturn or crisis.  Interest rates have dropped dramatically and by mid-April will probably drop even more.  In many respects, this is the right thing to do given the immediate crisis but there are limits to what all of this can accomplish. 

In the end, this downturn is an "animal spirits" driven crisis that is being driven by expectations and uncertainty.  All the king's spending and all the king's horses will not have an effect if people are afraid to venture out and spend. Put another way, you can lead a horse to water but you cannot make it drink if it is afraid to leave the barn.   The biggest stimulus to the economy is confidence that governments and health authorities know what they are doing and are getting the situation under control - a drop in infection rates would be the clearest indicator of this. 

Announcing measures like enhanced screening at airports and points of entry followed by news stories of people getting off planes on international flights in Vancouver or Toronto with nary a query is not a recipe for boosting confidence.  Where are the screening staff at Canadian border entry points making sure everyone is asked questions about where they have been and taking temperatures?  What is being done to boost the supply of beds and respirators?  Getting the situation under control ultimately requires more than spending announcements and moral suasion.  It also requires evidence of effective action.  These are not regular times. Words are not enough.