House of Commons Hansard #8 of the 40th Parliament, 3rd Session. (The original version is on Parliament's site.) The word of the day was budget.

Topics

The House resumed from March 4 consideration of the motion.

The Economy
Government Orders

10 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I would like to share my time with my colleague, the member for Mississauga South.

The first thing I would like to say is the fact that we are having this debate really underlines the fact that prorogation was not necessary.

While of course the economy is important, this issue that we are debating now in a kind of take note debate is not something that leads anywhere. It was originally started as a fill-in between the throne speech and the budget. Now because the government apparently has nothing better to do, no legislation, no real agenda, we are continuing on this merry path.

It looks as if the government has no legislation, no ideas, and just a well rested government after three months of holiday. Otherwise we would have legislation; we would have something meaty. All this recalibration and what does it lead to? A debate that right now leads nowhere.

I do not understand why the government had to prorogue. I do not understand why this recalibration led to nothing whatsoever in terms of any new agenda.

Nevertheless, as finance critic I would not deny that the economy is important. Indeed, it is probably job one. Therefore, I am happy to discuss it even though, as I said, a government which really had recalibrated, a government that really had anything in the way of new ideas would have some legislation and something more substantial before the House at this time.

I thought I would begin, because it is timely, with the release yesterday of the report by the Parliamentary Budget Officer and the amazing reaction of the Minister of Finance in the House in question period yesterday.

I have the report of the Parliamentary Budget Officer. On the very first page he says that his budget projections are based on the same private sector economic forecasts that the budget was based on. He takes those forecasts as a given and from there devises the budget projections.

What did the finance minister say in the House yesterday? He said that this Parliamentary Budget Officer did not believe these 50 eminent economists who made their private sector forecasts, which was absolutely totally wrong because as the Parliamentary Budget Officer himself said on page 1, his forecasts of the budget were based on precisely the same private sector GDP forecasts, as the finance minister used. He attacked virulently the Parliamentary Budget Officer, but on precisely the wrong erroneous grounds.

Let me talk about the substance of this report by the Parliamentary Budget Officer, not the fictitious allegation that he did not accept the private sector forecasts. He did.

This is a two-step process. In step one we take the economic forecasts, and the finance minister and the Parliamentary Budget Officer are on precisely the same page in that respect. In step two we translate those economic forecasts into the budget forecasts. There are many steps between the economic forecasts and the budget forecasts.

One of the complaints of the Parliamentary Budget Officer is that there is a lack of transparency on the part of the finance minister because he does not tell us what is inside that black box, what assumptions he makes in translating the economic forecasts into the budget forecasts. There is all sorts of room for little tricks and we do not know what he is up to.

That is one of the problems the Parliamentary Budget Officer had and that is why he asked for greater transparency on the part of the government and the Department of Finance, so that people would know how they get from the economic forecasts to the budget forecasts.

In general terms, the Parliamentary Budget Officer made three points, all of which indicate that the government looks at these matters with rose coloured spectacles.

Point number one, how many times have we heard the Prime Minister or the Minister of Finance say that Canada is leading the way, Canada did much less badly than any other country? That happens not to be true. The Parliamentary Budget Officer took data from the IMF, he looked at the severity of the recession in all G7 countries, and he found that Canada was in the middle of the pack.

Canada is not leading the way. We all want Canada to lead the way, but we on this side, as well as the Parliamentary Budget Officer, also want to be telling the truth. The truth is that we are not leading the way. We are in the middle of the pack and so it is time the government stopped boasting and telling things that are not true with regard to Canada's position compared to other G7 countries.

The second point the Parliamentary Budget Officer made was that it was not true that the risk was way down. He used various methods to show that the risk to the forecasts going forward remained high. The risk has not diminished immensely since some months ago. So contrary to what the government says, there is still a huge amount of risk out there and a huge amount of uncertainty with regard to the forecast for the budget.

The third way in which the government is excessively rosy according to the Parliamentary Budget Officer is that the Conservatives are being too rosy in making their deficit forecasts. Even though he accepts the same private sector forecasts as the government, the deficit after year four is not $2 billion as the government says, but is more likely to be $12 billion according to the Parliamentary Budget Officer. Also Don Drummond, chief economist at TD Bank, on television yesterday concurred. He said he was much closer to the Parliamentary Budget Officer's number than he was to the government's number.

In other words, according to the government's own planning, according to the Parliamentary Budget Officer, according to Don Drummond, the government is lowballing the deficit estimates and it is much closer to $12 billion than it is to $2 billion.

In summary, the government is exaggerating Canada's relative position in terms of doing well. The government is exaggerating the reduction and uncertainty over past months, and is lowballing the deficit according to what a prudent, rational forecaster or economist would conclude.

One should acknowledge that the Parliamentary Budget Officer has enormously more credibility on anything to do with economic forecasts than does our finance minister. We just have to go back to November 2008 when with that highly discredited economic statement by the government, we may recall that the finance minister was predicting nothing but surpluses; surpluses forever and then he went to a $25 billion, $32 billion, $56 billion deficit.

The Parliamentary Budget Officer, and I must say virtually every other economist in the land, knew full well in November of 2008, when the recession had already begun, that we were heading into deficits. So the forecasting record of the Parliamentary Budget Officer is far superior to that of the Minister of Finance and therefore he should take note. He should listen to what the Parliamentary Budget Officer says rather than lashing out at him on the basis of arguments that are simply erroneous.

I would conclude by saying that the Parliamentary Budget Officer is a great asset to our country in order to ensure the government is honest in its economic prognostications. Rather than lashing out at this person, similar to the way the government lashed out at Linda Keen, the head of the Nuclear Safety Commission, the way the government lashed out at Richard Colvin, the civil servant, the way the government lashes out at any public servant, any officer of Parliament who dares to disagree with it in any regard, instead of that the government should take note of the wisdom of the Parliamentary Budget Officer.

The Economy
Government Orders

10:05 a.m.

Conservative

James Lunney Nanaimo—Alberni, BC

Mr. Speaker, I was quite surprised that the finance critic for the Liberals started off by chastising the government for not having something better to debate today than Canada's economy, but I was glad that he did come around to acknowledging that the economy actually is important. It is certainly important to Canadians, many of whom are looking for jobs right now and we are doing our best to help them with that.

Is the finance critic annoyed about having to debate the economy because it is Friday and he had something better to do, or is he annoyed about having to debate the economy because the Liberals have no idea how to improve the economy other than to raise taxes and spend, spend, spend?

The Economy
Government Orders

10:10 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I am not sure it helps the unemployed people and those suffering from a weak economy to hear such ridiculous questions. That does not really get to the bottom of the issue.

My point was, of course, I am happy to debate the economy. I am an economist; that is my subject. It is important. But my point is that if the government had really done anything substantive in its so-called recalibration, we would not just be standing here on a Friday debating, we would be debating actual actions taken by the government, legislation.

With a three month holiday, we would think that the government would have had time to produce a plan and action that it could put before Parliament and debate rather than listening to these silly questions which will not do any good whatsoever to the economy. It would have been much better if the government really had, during this period of prorogation, developed a plan such that there were concrete measures before the House today.

The Economy
Government Orders

10:10 a.m.

NDP

Jim Maloway Elmwood—Transcona, MB

Mr. Speaker, the government maintains that the economy is strong, but try telling that to the 800,000 workers who are on EI and are about to run out of benefits. There are no jobs for those people to go to.

The government says the economy is going to grow by 2.6% this year. It has to do at least that because the working age population is growing by over 1% a year. So in fact, the budget's own unemployment projections show the jobless rates are actually going to increase this year from 8.2% to 8.5%. The government's solution is further tax cuts. The government thinks that somehow is going to grow the economy and create jobs.

I would like to ask the hon. member this. How effective does he think the tax cuts are going to be?

The Economy
Government Orders

10:10 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, Liberal members are on record as saying we would certainly not raise taxes. We believe that the current tax situation is favourable.

I would point out that the hon. member mentioned jobs. Does the hon. member know that in May 2006, just a couple of months after the government came to power, there were more private sector employee jobs than there are today, after today's job numbers? In the four years since the government has been in power, we have lost net private sector employee jobs.

I know the government is very happy because there has been a surge in public sector jobs, but we on this side of the House, and I would say most economists, think that private sector jobs are essential for the sustained growth of this economy. The government should be aware that as of today there are fewer private sector employee jobs than there were just a couple of months after it took power.

The Economy
Government Orders

10:10 a.m.

Bloc

Roger Pomerleau Drummond, QC

Mr. Speaker, the member from Markham—Unionville gave us a brilliant analysis of Canada's current economic situation, pointing out that both it and the future are much less rosy than the Conservatives would have us believe.

I generally agree with his intelligent criticism of the Conservatives' positions. I would, however, like to know where the Liberals' ideas, figures and agenda are to combat the crisis.

The Economy
Government Orders

10:10 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I thank the member for his comments.

As I told the House a number of times, we have concrete proposals and ideas. I will mention only two.

First, we proposed three measures to boost employment among young people in the manufacturing, forestry and high-tech industries. We made these proposals, but the Conservatives did not listen.

Second, we proposed three concrete policies for pensions; a supplement for the Canada Pension Plan, among other things.

I have other examples, but I do not have the time. I gave two concrete examples, namely, jobs and pensions.

We have ideas and proposals to offer.

The Economy
Government Orders

10:15 a.m.

Liberal

Paul Szabo Mississauga South, ON

Mr. Speaker, we initially came to the House to debate the first piece of legislation the government put on the table, which it re-calibrated, the Canada-Colombia free trade bill, a bill that we will not be debating today because the government is not ready to deal with a straightforward trade bill and start talking about how we will move forward in terms of advancing the economy.

It goes to the question of whether Canadians can believe that it was necessary to prorogue Parliament so the government could renew and refresh the agenda. Apparently not because only one bill, other than the budget document, is on the table, and the budget was coming anyway. It was no surprise that this had to happen. It goes to the question of whether we can believe what the government says. Canadians were very upset about the prorogation and I do not think the government really gets it.

Accountability is a very important aspect and trait of people with honesty and integrity. Without honesty and integrity there can be no accountability. In my profession as a chartered accountant, one is accountable when one can explain or justify one's actions or decisions in a manner which is truthful and plain, as well as clear, concise and correct. If one adopts that definition of accountability, one will find that the government does not meet the test and has not met the test in so many ways.

I will give an example. On page 5 of the throne speech, which can also be found in his budget speech to Parliament, the finance minister stated:

Balancing the nation’s books will not come at the expense of pensioners...or by raising taxes on hard-working Canadians.

That is kind of interesting. Just two days ago in this place, the transport minister said, “Cutting taxes creates jobs, more hope and more opportunity”. However, if the government raises taxes—

The Economy
Government Orders

10:15 a.m.

Richard Harris

It kills jobs.

The Economy
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10:15 a.m.

Liberal

Paul Szabo Mississauga South, ON

The member is quite right, it kills jobs.

We know what the government said. It said that it would not raise taxes or penalize pensioners, but what did it do? Starting April 1, a couple of weeks from now, employment insurance premiums for employers and employees will increase by almost 9%.

I remember being in this place when a direct question was asked about the raising of taxes and the Parliamentary Secretary to the Minister of Finance said that EI premiums were not taxes. The government does not think they are taxes. I think Canadians know that a payroll tax is a tax. They know it is money coming out of their pockets.

There will be an immediate 9% increase, 15¢ on the current $1.73 per $100 of earnings, and it will continue. In fact, cumulatively over the five years of this budget, it is projected to be about $19 billion. Can anyone imagine? That is quite a large number to suggest that it is doing wonderful things without raising taxes but it represents more than a third of the deficit that it is trying to erase.

What else did the government do? On January 1, 2011, it will be imposing a 31.5% punitive tax on income distributions to income trust holders. That decision was made after it had promised in the 2006 election not to tax income trusts. People believed and trusted the government and yet on the following October 31 the finance minister said that this 31.5% tax would be imposed, that it would be delayed somewhat but that it would happen. That is a 31.5% punitive tax on hard-working Canadians, mostly pensioners.

Do members know what that did to the value of their investments? In one short week it wiped out $35 billion of the hard-earned retirement nest egg of Canadians. What did the government say? It said that it would bring in pension income splitting and that would take care of it.

It sort of sounded like that might work, except that I did a little a homework and found out that only about 25% of seniors have defined benefit pension plans. Only those kinds of pension plans qualify for pension income splitting. However, of those 25%, if we take out those who do not have a partner to split with and take out those who already are at the lowest marginal tax rate, the percentage of seniors who actually can benefit from pension income splitting is 14.2%. Only 14.2% of seniors will be able benefit even one iota from pension income splitting.

Why was the government not honest with Canadians? Why did it not tell them the truth, that it was going to tax 2.5 million seniors, pensioners, people who have their retirement nest egg all set up and cannot take any more risk, people who do not have pensions, people for whom the income trust was a instrument to allow people to make an investment that would provide them with a monthly cash flow that would emulate a pension?

Those people have been destroyed. Fifteen percent of the income trusts have now been bought by foreign interests. It has cost us $1.5 billion in annual tax revenue because of that. Before the end of this calendar year, many more, if not all of the other income trusts, will be dissolved. That instrument disappears. This is pretty serious stuff. This has to do with integrity and accountability.

What else will the government do? It will raise the air travellers transport tax. Two days ago, the transport minister said that cutting taxes creates jobs, provides more hope and more opportunity but we are raising the taxes on travelling for Canadians.

This goes to a question of character and a question of accountability. The government says that it has a $54 billion deficit that it needs to deal with. The Parliamentary Budget Officer says that the government is being too rosy on its growth rates and on the performance of the labour markets. According to the Parliamentary Budget Officer's analysis, the government will still be short over $10 billion to balance the budget, and yet it is focused primarily on a fiscal deficit. What the government does not mention is that concurrently we have a social deficit.

One of the immediate reactions to the budget came from Alex Himelfarb, the former head of the Privy Council who ran the civil service. He was here a long time. Just to paraphrase his statements, he said that no one can be very clear about what is going to happen over the next five years with regard to eliminating the deficit and that nobody knows whether the budget will succeed over the next three, four or five years. However, what we do know, he says, is that Canada faces huge challenges, for example, the impact of an aging population, social and economic programs, health programs and the tax system. He says that those things will make the numbers really problematic. He is concerned that it will be very problematic for the government to achieve fiscal balance again, which the Conservatives squander every time they get in government. They squander surpluses that are passed on to them.

Mr. Himelfarb went on to say that smaller government and lower taxes were not the answers to meeting the challenges. He said that if we are going to meet our challenges on the environment, climate change and deepening inequities, we will need to do other things.

Will the government meet the challenges on creating a competitive economy? Apparently not. To meet those challenges, Mr. Himelfarb concludes that smaller government and lower taxes will not do it.

We could debate this all we want but the critical issue is that the government said that it would not raise taxes. It has clearly misled Canadians and Parliament because it is in fact raising income taxes on the backs of pensioners and hard-working Canadians.

The Economy
Government Orders

10:25 a.m.

Conservative

Dick Harris Cariboo—Prince George, BC

Mr. Speaker, I am happy the member for Mississauga South ended on that note. He has been here as long as I have and he remembers very well what happened when former Liberal government under Prime Minister Chrétien decided to balance its budget. The first thing it did was slash $25 billion from transfers to the provinces in support of health care and social programs. The Liberals balanced their budget on the backs of the poor and the infirm, and they will never get rid of that shame. I am embarrassed that the member would stand up and act so sanctimonious after the devastating thing that his former prime minister and government did to the poor and infirm in this country. He should be ashamed of himself.

Out of the masses of people who said that this budget was a budget for our time and that it would help lead us out of the recession, it is amazing how the Liberals picked one person who opposed it, as opposed to 25 who gave us rave reviews. I am surprised those members did not use the CBC as one of their supporters.

Is the member prepared to go to the 14% of seniors who are income splitting and tell them that they do not deserve it? Is that what he is saying?

The Economy
Government Orders

10:25 a.m.

Liberal

Paul Szabo Mississauga South, ON

Mr. Speaker, one of the things that Canadians have come to know is that every time the government gets put on its heels it tries to switch the channel.

The Economy
Government Orders

10:25 a.m.

Conservative

Dick Harris Cariboo—Prince George, BC

Hey, we are doing fine.

The Economy
Government Orders

10:25 a.m.

Liberal

Paul Szabo Mississauga South, ON

Mr. Speaker, if the loudmouth member over there would simply--