Evidence of meeting #91 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was know.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

7:30 p.m.

Conservative

Jim Flaherty Whitby—Oshawa, ON

Going back a few years, we had the G-20 in Canada, as you know. Out of that came what the G-20 people refer to as the Toronto commitments, which were two important commitments. One was to reduce deficits by half by 2013, and the other was to move toward balanced budgets by 2016. Some countries are moving in that direction, and some are lagging a bit.

One of the big challenges we have in the framework group, which as you said is co-chaired by Canada and by India—and we've been asked to continue co-chairing it by the G-20 presidency for next year, which is Russia—is an accountability mechanism. What we've been working on—which I recommended to the other members of the G-20 on the weekend, and they accepted it, and it's in the communiqué—is that we will have a set of accountability measures so we can look at what countries are doing and how well they are complying with those commitments.

The whole idea is that the G-20 represents most of the large economies in the world and that we will move together toward more fiscally responsible government. That's important so that we avoid some of the very difficult situations we have seen in some of the southern European countries.

7:30 p.m.

Conservative

Mark Adler York Centre, ON

Thank you.

You also mentioned earlier that we can't be complacent, and of course we can't, notwithstanding the fact that we have the number one economy in the G-8, and the strongest job growth. We're recognized by the OECD, the IMF, and the World Economic Forum as having the best financial system and the best job growth. Forbes said we're the best place to be doing business.

Today, Mario Draghi, the ECB president, spoke in Frankfurt about the four pillars of the European Union economy. He had some fairly optimistic things to say about the European Union.

How do you see the European Union, and of course the forthcoming fiscal crisis, the fiscal cliff, in the U.S.? If a shoe drops, how will that affect us here in Canada?

November 7th, 2012 / 7:30 p.m.

Conservative

Jim Flaherty Whitby—Oshawa, ON

The American situation is relatively straightforward. The calculation of the shock to the U.S. economy is 4% to 5% of real GDP. That's the American assessment of what will happen if they let the fiscal cliff happen without any adjustment. I have more faith in self-interest taking hold at some point and people realizing that this would be very unwise. It would hurt a lot of people in the United States. It would also hurt us and we would go into a recession not long after because still 75% of our trade is with the United States and there would be sharply reduced demand of course.

With respect to Europe, we've been pressing Europe for a long time, the eurozone countries, and sometimes we've created a chill in the room by not going along with everybody. I think it's having some effect. For the first time the leaders of the eurozone met following the IMF and World Bank meetings in Tokyo three and half weeks ago and actually set a deadline for setting up the legislation for the supervisory body for their banking system in Europe. It is to be done by the end of this year. Then the leaders of the eurozone instructed their finance ministers to get the implementation done. Their finance ministers are meeting on, I believe, November 12. There are some steps happening with some deadlines in the eurozone.

7:35 p.m.

Conservative

The Chair James Rajotte

Okay, thank you.

Thank you, Mr. Adler.

Mr. Mai, go ahead.

7:35 p.m.

NDP

Hoang Mai Brossard—La Prairie, QC

Thank you, Mr. Chair.

Thank you, Mr. Minister, for joining us today.

You know that the Governor of the Bank of Canada said this summer that there were issues regarding money referred to as dead money—which consists of over $500 billion sitting in private companies' coffers. You also talked about that.

I want to quote what you said:

We've done a lot through the tax system to encourage Canadian executives, business people, to start utilizing some of the capital they have on their balance sheets. At a certain point, it's not up to the government to stimulate the economy, it's up to the private sector, and they have lots of capital.

Now that we know that about $525 billion is sitting in those coffers and is not being reinvested in the economy, could you explain to us why your budget and your measures failed to fix that problem?

7:35 p.m.

Conservative

Jim Flaherty Whitby—Oshawa, ON

Actually they have. If one is interested in jobs and growth we have more than 820,000 net new jobs in Canada since the end of the recession in the summer of 2009. That's easily measured. It's accurate. It's respected around the world. The Canadian brand of fiscal responsibility and monetary responsibility is very strong.

7:35 p.m.

NDP

Hoang Mai Brossard—La Prairie, QC

Do you agree that there is over $500 billion currently sitting in private companies' coffers and that this money is not being reinvested in the economy?

7:35 p.m.

Conservative

Jim Flaherty Whitby—Oshawa, ON

I appreciate the question. I think the operative word there is “was”. We have actually seen some increase in capital expenditures by Canadian corporations. We've seen some acquisitions. We've seen more activity. We've seen that the special provisions with respect to incenting the purchase of manufacturing and processing equipment have had some positive effect. As the year has gone on, I'm more encouraged by the level of business investment by Canadian businesses.

7:35 p.m.

NDP

Hoang Mai Brossard—La Prairie, QC

I just want to provide you with some context. You and the Governor of the Bank of Canada talked about that issue this summer.

I would also like to come back to the fiscal cliff in the United States. I think my colleague Mr. Adler mentioned that. Unless I am mistaken, you said today that, if we were faced with a similar budget issue, you would be open to certain stimulus measures.

Since you also praised the committee's work when it comes to pre-budget consultations, could you tell us what kind of stimulus measures you were thinking about, in terms of programs or anything like that?

7:35 p.m.

Conservative

Jim Flaherty Whitby—Oshawa, ON

First of all, I'm not envisaging anything right now. What I said before and I say again is we are a pragmatic, sensible government. If our economy goes into recession because of an external shock from the United States or the eurozone, or both, we will take steps to stimulate the economy. What we have done before we will do again, and you know what we have done before.

We would not do exactly the same thing again. We've learned, I think, some ways to do things better from our experience during the great recession, but we are not going to stand by and have the Canadian economy slip deeply into recession with high unemployment.

7:35 p.m.

NDP

Hoang Mai Brossard—La Prairie, QC

I also agree. During pre-budget consultations, many people called for the government to invest in infrastructure. I think all the committee members think that could stimulate the economy and create jobs here.

However, we may like to hear more ideas regarding this. We would also like you to talk more specifically about your budget or the Budget Implementation Act.

There is a tax credit for clean energy generation equipment. We asked the officials how much money was earmarked for that. They said about $4 million would be set aside for clean and renewable energies. I know you said there were no subsidies for oil, but organizations such as the David Suzuki Foundation and the Climate Action Network Canada are saying that $1.4 billion in subsidies is provided for fossil fuel.

7:40 p.m.

Conservative

The Chair James Rajotte

Please ask your question.

7:40 p.m.

NDP

Hoang Mai Brossard—La Prairie, QC

Yes.

Do you think we should invest more in green energy—in other words, maintain the investments—and not only $4 million?

7:40 p.m.

Conservative

The Chair James Rajotte

Briefly, Minister.

7:40 p.m.

Conservative

Jim Flaherty Whitby—Oshawa, ON

We are encouraging clean energy investments in two ways. One, we take away the tax benefits of fossil fuel production. Any of the tax advantages they have are gone. Then we help with the new investments they're dealing with, with clean energy. We are expanding the incentive; well, last year we did expand the incentive to include equipment that generates clean electricity, using waste to create heat. We have further provisions for a broader range of bioenergy equipment in this bill.