Evidence of meeting #4 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was infrastructure.
A video is available from Parliament.
3:35 p.m.
Liberal
The Chair Liberal Wayne Easter
We'll call the meeting to order and welcome our witnesses. Pursuant to Standing Order 108(2), these are the pre-budget consultations for the 2016 budget.
I welcome the witnesses here this afternoon. Thank you for coming on relatively short notice. As you're well aware, it's a pretty tight time frame, and we're doing our best to hear a number of witnesses.
We'll start with Andrew Jackson from the Broadbent Institute. You have the floor.
3:35 p.m.
Andrew Jackson Senior Policy Advisor, National Office, Broadbent Institute
Thank you, Chair.
The Broadbent Institute is an independent, non-partisan organization that promotes progressive change based upon social democratic values and ideas. We've advocated for strong action by the federal government to counter growing economic and social inequality, and for a planned transition to a more innovative economy and sustainable environment.
The government plans to introduce some progressive social spending measures that we support, including the proposed Canada child benefit, which will deliver high benefits to all but the most affluent families with children, and increases to the guaranteed income supplement to deal with rising rates of seniors poverty. However, these proposed changes to the GIS exclude couples, and would leave 634,000 seniors living in poverty. A recent study released yesterday underlines the importance of both expanding the CPP and increasing the GIS.
We think that the government's agenda is inadequate or insufficiently ambitious when it comes to such important areas as child care, EI reform, and funding for first nations communities. In our view, there's a contradiction between furthering a progressive social agenda and the new government's promised fiscal plan to continue to reduce public debt as a share of GDP. This will significantly constrain new spending, especially at a time of very sluggish economic growth.
While welcoming the new tax rate for the top 1% and the elimination of family income splitting, the key problem is that the government does not propose to increase overall federal fiscal capacity. Indeed, the so-called middle-class tax cut will cost $3 billion per year, while primarily benefiting higher income earners and providing only very limited economic stimulus.
Sustainable increases to social spending and public services require new sources of revenue. We urge the government to consider modest increases to the corporate income tax and to close tax loopholes for the top 1%, such as excessively favourable treatment of stock options. The government should modify or reverse the ill-advised tax cut for the so-called middle class. Targeted programs are much more effective than tax breaks for the wealthy in building a more innovative and productive economy. Influential economist Mariana Mazzucato argues that strategic government leadership, public investments and research well in advance of immediate commercial opportunities, and direct support for strategic corporate investments are critical to building innovative economies.
We believe that there's also a vital federal government leadership role in building a more environmentally sustainable economy. A recent joint report with the Mowat Centre called for a green Bank of Canada and concrete measures to promote greater energy efficiency and greater use of renewable energy.
We support the government's proposal to increase investments in physical and environmental infrastructure, such as public transit and basic transportation. This will give a badly needed short-term boost to growth and job creation, and it will help to raise long-term business investment and productivity.
An independent study commissioned by the Broadbent Institute last year by the well-respected Centre For Spatial Economics shows that there are overall benefits to Canadians from investments in basic infrastructure in the order of $2.46 to $3.83 per dollar spent. The study further found that the long-term impact on government finances would be, at worst, marginally negative, or even positive, due to increased revenues from a larger and more productive economy.
The economic outlook for 2016 is dismal, with growth expected to fall well below 2%, and unemployment expected to remain above 7%, but growth and job creation could be significantly boosted by a well-designed public investment stimulus twinned with major increases in income transfers to lower income Canadians, such as through enhanced unemployment benefits.
We hope that the government will consider more progressive tax changes to fund a larger and more sustainable increase to social programs.
Thank you.
3:35 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much. We have your full brief here, Mr. Jackson.
Turning to the Canadian Federation of Agriculture, we have Scott Ross. Mr. Bonnett must be tied up in a snowbank.
February 17th, 2016 / 3:35 p.m.
Scott Ross Director of Business Risk Management and Farm Policy, Canadian Federation of Agriculture
He is. I want to extend his regrets. He tried to get in from the Soo today and was caught up due to the weather.
I'd first like to introduce the Canadian Federation of Agriculture. We're an umbrella organization comprising provincial farm organizations and national commodity organizations representing over 200,000 farmers from coast to coast to coast. As an industry, Canadian agriculture is at the heart of an agriculture and agrifood sector that contributes over 6.7% to Canada's GDP, one in eight Canadian jobs, and well over $50 billion in wages and salaries across over 200,000 businesses.
I'd like to speak to four key areas today, which we've laid out in the brief which we provided you with in advance. These four areas are key to creating a policy environment conducive to continued success and growth in Canadian agriculture.
The first item I'd like to speak to is the issue of industry succession. With the average age of farmers now over 54 years and many looking to retire in the next decade, we're looking at approximately $70 billion in farm assets changing hands over the next 10 years. Estimates suggest that 75% of Canadian farmers look to retire over this period. This poses a significant potential for disruption to the industry.
At CFA over the past few years, what we have done is to work in collaboration with accounting firms across the country that have agricultural interests on developing a suite of low-cost and cost-neutral proposals that would focus on facilitating the intergenerational transfer of family farms while creating opportunities for new entrants to the industry. Family farms still represent 98% of all Canadian farms, and there are a number of positive aspects to this operating model that we would like to see continued in the agriculture industry.
Our requests can be broadly categorized under two main pillars, the first being broadening the definition of family “member” within the Income Tax Act, recognizing that farm families are comprised of a broad set of relations, more so than just parent and child.
The second point to note is the issue of “anti-avoidance” legislation, which we continue to see causing unintended consequences for agricultural operations due to structural changes in the industry. We have seen an increase in farming corporations—larger farms, due to consolidation and economies of scale, that now support multiple families—and because of this, we continue to see new barriers in place preventing flexible transfers from one generation to the next for family farms.
In particular, subsection 55(2) and section 84.1 of the Income Tax Act pose problems for joint sibling ownership as well as the use of holding companies when farm families look to transfer from one generation to the next. We were encouraged last year to see a private member's bill, Bill C-691, introduced by Emmanuel Dubourg, now the parliamentary secretary for the national treasury. It was looking at this issue of section 84.1 and addressing the use of holding companies for small and medium-sized enterprises. We encourage the reintroduction of that draft legislation.
These measures aren't meant to introduce new benefits or new provisions to the Income Tax Act, but rather to recognize that structural changes in the industry have left existing provisions with reduced utility for farm families looking to transfer from one generation to the next. Farm family children are no longer necessarily expected to stay on the farm. With multiple families supported by larger operations, we continue to see the broader subset of family relations looked at as the potential next best manager for the farm operation in the next generation.
The second issue I'd like to speak to are the chronic labour shortages that continue to plague the agriculture industry. The agriculture industry is full of high-quality job opportunities and career options with competitive wages and benefits. The industry also offers many lifestyle benefits and a flexibility not available in other industries. Agricultural employers expend extensive efforts to recruit and retain Canadian workers; however, the industry continues to identify pervasive and critical labour shortages as a major constraint and one of the biggest risks facing farm businesses.
To address this issue, we've identified three key requests, the first being increased funding for the collection of regional agricultural labour supply and demand information, both through the labour wage survey as well as the Canadian Agricultural Human Resource Council's ongoing work to develop labour market information forecast models for supply and demand.
The third point is that we would like to see a partnership between industry and government struck to implement CAHRC's agriculture and agrifood workforce action plan by creating a dedicated agriculture and agrifood international worker program and promoting channels to permanent residency for agriculture and agrifood workers.
3:40 p.m.
Liberal
The Chair Liberal Wayne Easter
Scott, could you sum up in 30 seconds or so. I said I'd give you a warning at five minutes.
3:40 p.m.
Director of Business Risk Management and Farm Policy, Canadian Federation of Agriculture
Thank you.
The last two items I'd briefly like to speak to involve agricultural investments. This is speaking to the continued increase of requirements placed on producers because of climate change and trends in retail food markets that have posed increased investment requirements on farm operations without an associated premium in the market.
On this note we'd like to see changes to the AgriInvest program, which are laid out in your brief, that would facilitate more on-farm investment, as well as an increased emphasis on rural infrastructure spending in the new government's commitments.
The final piece I'd like to briefly touch on is the duty relief program. The duty relief and drawbacks program administered by CBSA was not designed for agricultural goods and does not provide adequate safeguards to address the potential diversion into the domestic market when dairy, poultry, and egg products are imported into Canada for further processing and subsequent re-exportation.
What we would like to ask is that dairy, poultry, and egg products be excluded from the duty relief and drawbacks program by making an exception similar to the one that exists for fuel and plant equipment. This exclusion should be included in the budget to ensure its timely implementation. It would solve inconsistencies where participants evicted from Global Affairs Canada's import to re-export program for not respecting the rules are allowed to apply under the duty relief and drawbacks program.
Thank you.
3:40 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Ross.
We'll turn to the Canadian Federation of Students.
Ms. Arte, welcome. The floor is yours. Please see whether you can keep to five minutes.
3:40 p.m.
Bilan Arte National Chairperson, Canadian Federation of Students
Good evening. My name is Bilan Arte, and I am the national chairperson for the Canadian Federation of Students.
The Canadian Federation of Students is Canada's largest and oldest national student organization, representing more than 650,000 students across the country. Our organization advocates for an accessible, affordable, high-quality, and public system of post-secondary education for our country.
Our budget recommendations focus on how to make education more affordable for students and address mounting student debt in Canada. Ensuring that all people in this country are able to pursue higher education and training must be part of any significant, stable, long-term recovery for our economy. The OECD has highlighted that participation rates will have to grow significantly, if Canada is going to address our changing labour market demands and an aging workforce.
In its most recent Global Economic Competitiveness Report, the World Economic Forum ranked Canada 13th in ability to compete economically with other countries around the world, a decline from 10th place in 2009. In its explanation, the forum noted that Canada's disjointed and inefficient post-secondary education system was one of the main reasons for the slide. Over that same period, Canada's ranking for higher education and training had dropped from 9th to 19th.
Unfortunately, the cost of post-secondary education continues to be downloaded to students and their families, despite the significant public rate of return on investments in post-secondary education. In 2013 economist Hugh Mackenzie found that real return on current public investments in education ranged from an annual rate of 3.6% in Saskatchewan to 6.2% in Ontario.
As a result of high tuition fees, student debt has increased substantially. Average public student debt is now estimated to be over $29,000 after an undergraduate degree alone. When that debt is paired with rising tuition fees, it's easy to understand how we've arrived at a situation in which young people in Canada today collectively owe $19 billion to the federal government alone, not including the billions more that they owe for provincial and private loans. In fact, the amount owed to the Canada student loans program is increasing by nearly $1 million every day.
The long-term impacts of carrying such debt include delayed participation in the economy, inability to invest or save for retirement, starting a family later in life, and aversion to taking on further financial risks, such as starting a business.
Credit agencies and major banks are now warning that student debt has reached unstable levels. As of September 2014 more than 200,000 Canadians were unable to make any payments on their government student loans.
We also recognize that the realities of skyrocketing tuition fees and crushing student debt disproportionately affect communities that are already significantly marginalized because of their socio-economic background in today's society, including indigenous and racialized communities. These are communities that feel the pressure of financial barriers most acutely and are often so debt averse that they may choose to not even attend post-secondary.
In conditions such as these, how could we possibly expect students and graduates to participate fully in the economy?
Students are putting forward a vision that would work to address the root cause of student debt.
First, the government should implement a federal post-secondary education act modelled on the Canada Health Act and create a dedicated cash transfer of $3.3 billion for post-secondary education, primarily by redirecting existing government funding for inefficient post-secondary education-related tax credits and savings schemes.
The lack of a national vision has resulted in a significant disparity in tuition fee levels and per student funding across the country, with students in Ontario paying almost three times more than students in Newfoundland and Labrador. Canada's students are calling on the government to ensure that merit and not geography determines whether someone can go to college or university.
This act would be accompanied by a fifty-fifty cost-sharing model to eliminate undergraduate tuition fees, making sure that provincial governments are also held to account, not only to ensure that the transfers they receive from the federal government for post-secondary education are spent on just that, but also to reward provinces that come to the table with adequate funding to support universal access to post-secondary education.
We're also recommending that in order to stop the federal student loan debt from increasing, government should act immediately to increase the accessibility of post-secondary education by redirecting the $750 million currently allocated in ineffective education-related tax credits and savings schemes into the Canada student grants program. This simple solution would double the already limited funds for the Canada student grants program. Such a change would have a significant impact on students' ability to both get an education in the short term and contribute meaningfully to Canada's economy and society in the long term.
We believe access to post-secondary education is the greatest social equalizer at this government's disposal, helping to address cycles of poverty in already impoverished communities that don't have the funds today to start saving for the next generation of Canadians.
Furthermore, for indigenous communities in Canada, access to post-secondary education must be recognized as a treaty right. Funding for the post-secondary student support program must be immediately increased and matched with enrolment.
By implementing these recommendations, this government can increase the ability of young Canadians to obtain financial security and reach life milestones. Allowing more people of all ages to obtain additional training or retrain in emerging fields will allow Canadians to drive our economy forward.
Public education is a public good and needs to be funded as such.
I certainly have appreciated the opportunity to address this committee today. I'm more than happy to answer any questions on any of the items that I've mentioned or any of the items that are included in the full submission before you.
Thank you.
3:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you.
Turning to the Institute for Research on Public Policy, Mr. Tapp, the floor is yours.
3:50 p.m.
Stephen Tapp Research Director, Institute for Research on Public Policy
Thank you very much, Mr. Chair. Thanks as well to the committee for extending the invitation to be here today.
I would like to focus my remarks on three key messages. These are that the new government's first budget should first, establish its fiscal credibility; second, provide short-term support for the economy; and third, build Canada's longer-term economic potential in a way that's fiscally sustainable. But first, let's back up for some context.
In the slow recovery from the financial crisis, growth in Canada and abroad has been disappointing. The falling commodity prices since mid-2014 have been the latest setback. This is a major shock for Canada. It's primarily felt through weaker terms of trade, a lower Canadian dollar, reduced domestic income, and less resource sector activity. Canada's economy already had some excess capacity before this shock, and this is going to delay its return to its full potential.
In other words, without new policy measures over the next few years, the Canadian economy will not perform as well as it could.
As this painful and slow adjustment unfolds, policy-makers are looking for the right response to support the economy. This is going to require carefully weighing the benefits and risks of additional actions against the status quo.
Accommodative monetary policy has already helped out, but lowering interest rates further will provide little economic stimulus and risks overheating housing markets, excessive household borrowing, and broader financial stability concerns. Instead of cutting rates again or expecting the economy to quickly self-correct, well-crafted fiscal measures are a better option for several reasons. First, the federal government has fiscal room available. Second, it seems that monetary policy would accommodate new fiscal measures. Third, the opportunity cost of long-term government borrowing is near historic lows. Finally, the ongoing restraint on spending at the federal level over the past five years means that there are likely spending needs built up in some areas.
While these fiscal actions admittedly carry several risks, which include the fact that programs and budget deficits are easier to start than to end, the evidence of robust short-term fiscal multipliers is mixed, and larger deficits will inevitably raise debt charges, I think these risks can be managed. But this involves managing expectations.
Canada's economy and economic performance depend on global developments that we don't fully control. Therefore, budget 2016 should be upfront about what fiscal policy can deliver in the near term, particularly on cost-shared infrastructure spending. The last round of fiscal stimulus showed that we shouldn't overestimate how quickly these projects can get going. New announcements will mostly hit the ground after the 2016 construction season, and that's okay. In this regard, shovel-worthy should take precedence over shovel-ready. After all, the main rationale for infrastructure is not short-term economic stimulus, but improving Canada's longer-term economic potential, and that takes time.
Six of the last seven budgets have revised down the consensus GDP forecast. This budget in 2016 would be prudent to explore these prevailing downside risks in detail. For example, consider a scenario where oil prices stay flat at about $30 a barrel over the government's mandate. What would that look like for the government's finances and for the economy? Reporting such a scenario could illustrate the challenges that we face, how oil prices impact the federal finances, and alternative policy scenarios.
It's also important to be transparent in this first budget. Including more internal analysis and technical details will help build fiscal credibility. Finance Canada's analytical capacity could be augmented by publishing staff working papers and encouraging researchers to present their findings externally.
The government has stated two fiscal policy targets. An important one is to reduce the federal debt-to-GDP ratio each year. This rightly shifts the focus away from the annual nominal budget balance. However, rather than requiring yearly reductions, it may be more manageable to establish a medium-term target range for the debt ratio—similar to how we do inflation targeting, try to stay within a band over the next five years.
Whichever medium-term target is used, it should be complemented with a longer-term fiscal target that would rely on sustainability analysis and look ahead several decades.
Looking beyond budget 2016, there are many complex issues that will require attention. Allow me to highlight just one. Eventually the Canadian federation will probably need to raise revenue as a share of GDP. If so, this will need to be done carefully to avoid unduly restraining growth. The government has already expressed interest in intending to review tax expenditures. This is a worthwhile exercise, but I think the scope should be broadened to review the entire tax system to make it more efficient and more equitable.
To conclude, after several disappointments, Canada's economy is adjusting to a major shock. The outlook is weak and highly uncertain. Downside risks prevail, and the economy will probably operate below its productive capacity over the next few years.
To manage these risks, expectations should be tempered, and the macro policy approach should be adjusted in Canada. Fiscal policy needs to be more active, with well-designed fiscal measures that would help cushion the adjustment and ease the burden on monetary policy.
In the short term, timely and targeted automatic stabilizers, which would include unemployment benefits and federal stabilization transfers to resource-rich provinces, should be allowed to work, and some should be temporarily strengthened.
Any new discretionary measures should aim to improve Canada's economic potential over the medium term. They should be funded as part of a longer-term plan that preserves fiscal sustainability.
Thank you very much, Mr. Chair.
3:55 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Tapp.
“Shovel-worthy” is a word I never heard until yesterday, but now I've heard it half a dozen times, and it makes sense.
We'll now turn to Mr. Wright from the RBC Financial Group.
Welcome.
3:55 p.m.
Craig Wright Senior Vice-President and Chief Economist, RBC Financial Group
Thank you.
Thank you, everyone, for your time today and for your time generally. I appreciate the work you do.
In the context of pre-budget discussions, we were involved in pre-budget meetings with the minister last Friday—Chatham House Rule, so I can tell you what I said but not what anybody else said—and in fairness and for consistency, I thought I'd repeat the message I delivered to the minister on Friday of last week.
Our view on the Canadian economic outlook is a theme we've been on for some time and it looks like it will be with us for a while: an uncertain, uneven, and underwhelming recovery.
The uncertainty we're reminded of on a daily basis. We're seeing movements in markets, that used to be big moves for a month or a quarter, taking place almost on a daily basis. I do think fear is overtaking fundamentals. We think the fundamentals will eventually carry the day, but obviously there are risks that fear will eventually become a fundamental that contains growth prospects.
We are looking at some of the bigger worries like China, like oil prices, and the U.S. recovery, a little less worrisome than what we're seeing priced in for market. We do think China will manage to contain the crisis. Global growth will be in that 3% to 3.5% range. It should support global trade and should also support global commodity prices.
The U.S. we see as a decent growth story. We have 2.5% growth in the U.S. Importantly for Canada, we don't export to U.S. GDP; we export to sectors of the U.S. economy, and those sectors are the ones that are performing well: autos, housing, and equipment and software. We're seeing the strength in our major trading partner, and that's taking place in the context of a more competitive Canadian dollar. We think we're past the lows in the Canadian dollar, but we do see it still remaining in that 70¢ to 75¢ range as we move through the year. That will provide ongoing support for exports.
When you look at the shock to the economy, the shock is obviously in the energy sector. The energy-dependent provinces are moving down the growth rankings, and in those that are export dependent, U.S. and currency helping the way, we do see that transition taking place. Exports are nearly 10% up on a year-over-year basis. That transition is taking hold. The consumer will grow, we think, in line with income. We'll get the added lift from debt, because the debt-to-income ratio is at elevated levels, and we do have a placeholder. When you look at our growth forecast for Canada this year, we're at 1.8% and the Bank of Canada is at 1.4%. I think consensus is probably a bit below that, but we have put in a placeholder for fiscal stimulus now. Not all deficits are created equally. We are aware, and we're holding a spot. We'll reassess the growth outlook when we get the budget details later, probably in March, I guess.
When we look at the fiscal stimulus, as Stephen has suggested, monetary policy has done a lot of the work. Monetary policy is aimed at smoothing out the cycles. It won't reverse the cycles. We're at the point where we need more economic policy, fiscal policy more generally, and that will raise the speed limit for the economy over the long term, which is growing the economic pie we all share.
In terms of focus, everything we see should be looked at through the lens of productivity-enhancing investment. Infrastructure fills the gap short term, but also bodes well long term for productivity. It does tend to have a higher multiplier, so the more bang for your buck than you get from some other programs. Shovel-worthy is obviously an issue. When do you get it into the economy? We'd rather see a good decision rather than a rushed decision. We will see, we think, fiscal stimulus. We do hope it's focused on the infrastructure side.
With respect to the fiscal plan, we've become accustomed to a medium-term plan of fiscal consolidation with a zero out there at some point. It sounds like that zero is looking less likely, but the hope is that it's still part of the plan.
Targeting a debt-to-GDP ratio is less than ideal. You have some control over debt; you have no control over GDP. It isn't ideal, but it does seem to be what we're hearing as the new commitment or the new anchor for fiscal policy. When you have a debt-to-GDP ratio at 31%, and to keep it moving lower, if you have 4% nominal growth, that suggests you can run deficits in the $25-billion to $30-billion range and still manage to keep that debt-to-GDP ratio drifting lower. We would push for something less than that. As Stephen suggested, successful fiscal policy is timely, targeted, and temporary. I'd focus on the temporary component.
Thank you.
4 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Wright.
Via video conference, we'll turn now to Mr. Slomp from the National Farmers Union.
Welcome.
4 p.m.
Jan Slomp President, National Farmers Union
Thank you.
The National Farmers Union would like to thank you for the opportunity for this pre-budget consultation.
The NFU is a voluntary, direct membership, non-partisan national farm organization made up of thousands of farm families from across Canada who produce a wide variety of commodities. The NFU works toward the development of economic and social policies that will maintain small and medium-sized family farms as the primary food producers in Canada. Based on the situation left by our previous government, we want to echo the Prime Minister words that it is time for real change.
For budget 2016, we would like to present the following recommendations. We should set the stage for growing forward 3. We recommend a real change from past policy, particularly by aligning the vision of agriculture with the principles of food sovereignty and supporting agriculture's efforts to mitigate and adapt to climate change. The budget should support the next generation of family farmers by establishing universal pharmacare.
The 2016 budget should redirect all agriculture research funding toward public and independent third party research in the public interest and reinstate funding to the public agricultural research institutions to allow them to recover and rebuild their capacity with a new generation of scientists.
Funds should be allocated to public plant breeding to develop varieties that are adapted to Canadian regional climates. We need to help Canadian farmers adapt to climate change in order to do well under low-input, organic, and ecological production practices. The budget should support participatory breeding initiatives and enable new varieties to be released without royalties.
The budget should also fund research and assessment of pesticides, including field crop trials on yields, monitoring of soil quality and surface water contamination, and impacts on pollinator populations. Funds should go toward assessment and implementation of farming practices to increase biodiversity and integrated pest management to benefit farmers, and both natural and agricultural ecosystems.
Budget 2016 should take concrete steps to correct the damage caused by the previous government of ending the Canadian Wheat Board single desk. It should establish and fund mechanisms to regulate the grain system to ensure all farmers have an equal opportunity to ship grain, to counteract the power of major grain companies, and to give priority in shipping to small grain companies, producer railcars, and short-line railways.
We ask that the upcoming budget establish a mechanism to develop additional producer car loading sites when requested by farmers, and ensure that the Canadian Transportation Agency has the funding and the resources it needs to enforce the statutory common carrier obligations of Canadian railways under the Canada Transportation Act.
The NFU recommends that the upcoming budget provide support for new and young farmers by lowering the cap on the government's support programs; making effective, affordable financing programs available to new farmers, including micro loans and small grants; providing funding for farm apprenticeship programs and training; and using tax penalties to effectively prohibit foreign investor and absentee farmland ownership.
Supply management provides Canadian farmers with a stable income based on cost of production. Therefore, the government should reject both CETA's and TPP's allocation of parts of Canada's supply-managed commodities' markets to imports and should address the loopholes to stop the dumping of dairy protein products into Canadian markets.
The focus on globalization and trade means that more of the food Canadians eat every day is imported, thus subject to currency exchange rate fluctuations, external political events, and transportation issues.
Today we see food price inflation because grocers must buy imported products using expensive U.S. dollars. Canadian farmers, farm workers, food processors, companies, and consumers would all benefit from reinvestment in Canadian fruit, vegetables, livestock and meat production, and processing capacity that is distributed all across the country.
If you would like the upcoming budget to include measures to safeguard the space for domestic food production for the long term, the budget should—
4:05 p.m.
Liberal
The Chair Liberal Wayne Easter
Jan, I'm going to have to get you to sum up in 20 to 30 seconds, if you can.
4:05 p.m.
President, National Farmers Union
The budget should help Canadian agriculture to contribute to future success of the Paris agreement on climate change. Your budget should provide funding and support to farmers for adapting to climate change, and to contribute to the reduction of greenhouse gases through climate-friendly technology and practices.
The budget should reinstate federal funding for community pastures, and for the prairie farm rehabilitation administration. It should restore funding to the Prairie Shelterbelt Program tree nursery, and re-establish the prison farms. It is very important that we help the farmers weather the financial risks that come with unpredictable weather due to climate change.
I thank you very much.
4:05 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Slomp, and thank you, all.
Turning to questions, in the first round of seven minutes, Mr. MacKinnon.
4:05 p.m.
Liberal
Steven MacKinnon Liberal Gatineau, QC
Thank you, Mr. Chair.
I want to welcome all the witnesses and thank them for their presentations. They have sparked a great deal of thought, both by colleagues from my party and those from the opposition.
I was very happy to see how much they supported the idea of stimulating the economy and establishing key stimulus policies, especially when it comes to post-secondary and agricultural education.
My question is for Mr. Tapp and Mr. Wright.
You alluded to some projects considered to be shovel-ready. How would you define those projects? How do you distinguish them from others? You were talking about temporary or one-time investments. Could you tell us what you mean by that?
4:05 p.m.
Senior Vice-President and Chief Economist, RBC Financial Group
I can start. Thank you.
I had mentioned that to me shovel-ready has taken on a negative connotation. When we think of infrastructure, as I suggested at the outset, we want to think in a context of long-term productivity enhancement. The challenge of fiscal policy stimulus on the infrastructure side is getting it in place when the economy needs it rather than later when the recovery takes hold.
I think that given our growth outlook we're not terribly worried about that sort of longer-term pressure on the private sector.
I don't think there'll be a challenge with shovel-ready. We've had such an infrastructure deficit built up over decades that I think there are a lot of projects in waiting that are shovel-right, rather than shovel-ready. These are good projects that are ready to go. They'll still take some time to get in place.
I worry about shovel-ready because ready-to-go may not be what's right for the economy and that's the negative connotation of shovel-ready. But I do think we probably have some good projects ready and willing to be funded and put the work in. I'm sure the minister is getting more advice than he needs.
4:10 p.m.
Liberal
The Chair Liberal Wayne Easter
He's getting a lot of requests for money, that's for sure.
Go ahead, Mr. Tapp.
4:10 p.m.
Research Director, Institute for Research on Public Policy
To pick up on Craig's point on shovel-worthy versus shovel-ready, one of the things I would caution you guys about in general as a committee would be that when we got infrastructure bundled up with fiscal stimulus, I think that was generally a mistake.
There are two types of infrastructure projects that can take place. There are things that can happen in the 2016 construction season. Those are things like routine maintenance projects. But there are also things that need to be done over the longer term, say, in 2017 or 2018, over the mandate of the government. We can call those shovel-worthy.
The point I would make is that because a project is ready does not make it a top-of-the-list priority. I think we should be looking at building growth, and I think we should be setting expectations such that people are not thinking.... For example, when I look back at the economic action plan, I see that the initial allocation in budget 2009 was that half the spending would be in year one and half in year two. That's in the expectation that in the first construction season there's going to be a lot of activity. I'm just looking at the cost-shared projects, the projects that include municipal, territorial, and federal governments, and in fact, 17% of the stimulus spending came out in year one, 69% in year two, and then it was 14%, because we extended it into year three.
My point would be that we learned something from that episode. I'm not saying that the stimulus program that happened was not done well, but it was not done as quickly as people had expected. Expectations were such that it was going to be boom-boom. I think that as long as expectations are set with the public that some projects need to be done quickly—and they can be, and those will support the economy—most of the focus should be on supporting economic growth. I think that's the safe way to play it.
4:10 p.m.
Liberal
Steven MacKinnon Liberal Gatineau, QC
Thank you, Mr. Chair.
Mr. Tapp, you talked about an increase in government revenues as a share of the gross domestic product. Mr. Jackson talked about a possible increase in government revenues. You, and especially Mr. Jackson, even discussed measures that were taken in past years, but that did not have the desired effect.
Could you both share your thoughts on increasing government revenues for the sake of fiscal stimulus, strategic economy and the growth of our economy?
Mr. Jackson, you can go first.
4:10 p.m.
Senior Policy Advisor, National Office, Broadbent Institute
I should say that I agree with my two colleagues about the importance of public infrastructure investments. The study that was done for us by the Centre for Spatial Economics was interesting. What it showed over the medium term was that the increase in business productivity that results from a well-designed program does generate GDP growth, and thus higher revenues down the road. At least in an optimistic scenario, even if you are deficit financing that to begin with, you would be taking care of that deficit you were building up through revenues down the road. I think that's a really important point.
I guess the argument I'm trying to make, and my concern, is that concerns about deficits are going to derail some of the social spending commitments that the government has made, or put them under pressure. I think that if we're going to have sustained spending on social programs, ultimately that has to be financed out of the federal fiscal tax base. Growth alone won't take care of a significant improvement on a social program such as child benefits.
I think the government has said that there would be a review of tax expenditures. I would certainly encourage that. I guess I'd go on the record as being sceptical about the middle-class tax cut. I suspect that's not going to be quickly reversed. The problem with those permanent tax cuts is that they become very difficult to ratchet back once they're in place. I still think there's a case for a corporate tax increase, with the proviso, I would say, that I think there are more effective ways of stimulating business investment than just cutting the corporate tax rate. I would use that to finance other business assistance procedures.
I hope I've answered your question. I missed a bit of it in translation.