Evidence of meeting #58 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was projections.
A recording is available from Parliament.
February 15th, 2011 / 11:10 a.m.
Prof. Ian Lee
Correct.
I don't know anybody in the economics profession who suggests any central banker is not a public servant.
11:10 a.m.
Prof. Ian Lee
I am answering your question.
11:10 a.m.
Prof. Ian Lee
They are public servants, as far as I'm concerned.
11:10 a.m.
NDP
Thomas Mulcair NDP Outremont, QC
No, they're not, because the Federal Reserve has a completely different nature. I think this underscores the fact that you're here making statements holus bolus that support your preconceived notions about the economy and you can't even back them up with facts.
11:10 a.m.
Prof. Ian Lee
Mr. Mulcair, with respect, I quoted a lot of research today. You said that my opinions--
11:10 a.m.
NDP
Thomas Mulcair NDP Outremont, QC
No, you quoted somebody from the Federal Reserve in the United States--
11:10 a.m.
Prof. Ian Lee
That's correct.
11:10 a.m.
NDP
Thomas Mulcair NDP Outremont, QC
--and then you went on to say that this was proof that this was objective information because this person was a public servant with no take. I put it to you that the Federal Reserve Bank of the United States is not the public service in the same way the crown corporation that is the Bank of Canada is, and I think your underpinnings for your own assertion are simply false--
11:10 a.m.
Prof. Ian Lee
I simply don't agree with you.
11:10 a.m.
NDP
Thomas Mulcair NDP Outremont, QC
--as are a lot of the other things you stated before this committee--
11:10 a.m.
Prof. Ian Lee
I just disagree with you. I'm sorry.
11:10 a.m.
NDP
11:10 a.m.
Prof. Ian Lee
I do disagree. They're part of the public service.
11:10 a.m.
NDP
Thomas Mulcair NDP Outremont, QC
No, these are questions of fact and law. You're talking through your hat.
11:10 a.m.
Prof. Ian Lee
We'll have to disagree, sir.
11:10 a.m.
Conservative
The Chair Conservative James Rajotte
Okay, we'll have to let that be a point of disagreement.
Mr. Pacetti, please, for a five-minute round.
11:10 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chairman.
Merci aux témoins.
Mr. Hodgson, going back to your statement, you're thinking that within, I guess, four or five years, eventually the government is going to have a balanced budget.
I asked a question of the Parliamentary Budget Officer, but we ran out of time. It looks as though the government is going to benefit from an increase in revenues. I think it lucked in, or lucked out, however you want to put it.
But it's on the expense side where I have a problem. The expenses have been going up just as much as revenues have, taking out the stimulus money. You seem to have no problem in terms of this government's being able to get its expenses under control. I don't see that. I don't see how it has been able to do it up until now, in the four or five years it's been in power, and how it's going to do it. It is so irresponsible; we can't even get projections. It's ashamed of its own projections. We can't get it to give us backup for small items such as spending on F-35s and prisons. So I don't see how you can tell me that you have full faith in this government's being able to keep its expenses under control for the next five years.
11:10 a.m.
Senior Vice-President and Chief Economist, Conference Board of Canada
I don't believe I said “full faith”. I believe I said that I liked the framework that was put in place in the last budget but will be looking for a detailed plan now, going forward over the next four years, to ensure those projections are actually met.
I was at the Department of Finance for 10 years. I know what it's like to actually do a plan and then not respect it. I was there in the late eighties, early nineties. So I've seen previous budget rounds.
I share your concern that if you put in place a budget that is very much founded upon expenditure control, you've got to do what you say you're going to do.
On the revenue side, I would agree that.... Over the last 10 years we've seen, frankly, an explosion of revenues at the high-income levels from both corporate income tax and, principally, personal income tax. The tax multiplier really changed over the last three to five years. We've had two exceptional years. Frankly, I expect that the multipliers Finance is using as its baseline are going to be a little bit conservative, that there will be some upside in terms of revenue intake. But that's still to be proven.
11:10 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Again, on the revenue side, I think what happens is you go through cycles. When the cycle is up, we can all say they've done a great job. But the problem is when the cycle comes down, all of a sudden we just blame it on the recession and not on the fact that the government has probably made some bad decisions. That's my point.
You're downplaying the fact that, yes, you can say after five years there's going to be a trillion dollars being spent, but in the next five years there's accumulated deficit that's going to be happening. On the fifth year, if you are off by even 1% or 2%, you're going to be off by another $10 billion. So let's not trivialize the amounts. In the five years, that trillion dollars that's going to be spent.... It's not that $10 billion that's going to be lost on that fifth year. You're going to be accumulating deficits over the next five years. So the $10 billion is not the trivial part.
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Senior Vice-President and Chief Economist, Conference Board of Canada
I believe that in response to an earlier question I actually agreed with you. That $10 billion is a huge amount to add to a national debt. That's a huge burden to put on my kids to pay down the road.
On your earlier point, though, you have to separate between the structural and the cyclical when it comes to revenues. The cycle is what happened at the end of 2008-09, when we saw a collapse in both personal income tax and corporate income tax revenues, which added at least $20 billion to the—
11:15 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Yes, but with that there was a decision to decrease the GST. That is also a factor. That, again, is a decision made by the government.
11:15 a.m.
Senior Vice-President and Chief Economist, Conference Board of Canada
The ability to reform the taxes was entirely in the hands of the government and, frankly, this committee. I'm on the record as offering a whole array of views on the kind of tax reform I'd like to see.