Evidence of meeting #20 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was program.
A recording is available from Parliament.
Conservative
Garth Turner Conservative Halton, ON
Do you? You made a categorical statement that we can't afford income tax cuts and that there's no economic benefit. So I'm asking, does that money, the $5 billion from the GST cut, for example, end up in individual savings or in individual investments, or does it go into consumption?
Economist, Canadian Centre for Policy Alternatives
It goes abroad, as well, in some cases.
Economist, Canadian Centre for Policy Alternatives
I think every action you take will have costs and benefits.
Conservative
Garth Turner Conservative Halton, ON
You have made categorical statements to us in your presentation. You can back them up or you can't back them up, one or the other. Do you know where that money went?
Economist, Canadian Centre for Policy Alternatives
Well, yes, it's true that people who pay GST and entities like corporations that pay GST get money back. The question is, what do they do with it?
Conservative
Garth Turner Conservative Halton, ON
We're not talking about corporations; they can input tax credits to counter the money they spend. We're talking about the GST as a consumption tax paid by the end-user. The end-user, when GST goes down, must have more money. Where does the money go?
Economist, Canadian Centre for Policy Alternatives
I think you're trying to take credit for the fact that some people do get money from the GST.
Conservative
Garth Turner Conservative Halton, ON
I'm asking you a question. You've made a categorical statement. Back it up.
Economist, Canadian Centre for Policy Alternatives
I'm sorry. I don't think we're communicating.
Liberal
Economist, Canadian Centre for Policy Alternatives
My point is that with the fiscal surplus that looks to be there, even including the recent data, I think the government is in great trouble if it cuts taxes. There may be some benefits, but there are also some drawbacks to any of those tax cut measures.
Liberal
The Vice-Chair Liberal Massimo Pacetti
Thank you, Mr. Turner.
Ms. Wasylycia-Leis, you have six minutes.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Well, I think Garth didn't really leave the witness the chance to answer any of those questions. I'd like to direct my questions, as well, to Ellen Russell and suggest to her that in fact she's hit a nerve with the Conservatives.
It's interesting that Garth Turner is a little upset that Ellen Russell would use the term the “Harper government” when in fact, in his own blog two days he ago, he referred to the “Harper administration”. Our own Minister of Finance, Jim Flaherty, has actually used the words the “Harper government” in a communiqué on several occasions. So obviously the concern is deeper than that, and it has to do, I think, with an unwillingness to accept some very direct advice from a credible source.
I might point out to Mr. Turner that it was his party that joined with us under the Martin government to express concern about inaccurate forecasting expressed through The Fiscal Monitor, which now suddenly becomes the bible for the Conservatives. It's an interesting about-face, Mr. Chair, which I think has to be addressed. In fact, we all recognize that we do not have an independent forecasting body in the government today. We have tried to deal with that by bringing four independent forecasters, including the Don Drummond group, including CCPA, including two other reputable sources, together to this table to give us accurate information. That has worked over the last year--the Conservatives were very happy with those results.
Now, what Ellen has suggested is that we perhaps should get back to some sort of independent advice for this committee so we can do our job. That suggestion has been made. In fact, I have a letter to the chair asking this committee to revisit that proposal, which the Conservatives initiated with the NDP in the Parliament leading up to the last election.
So I think it's only incumbent upon us to ask Ellen Russell if she could enlighten this committee on this general issue of forecasting surpluses. What do we trust? How do we get to the real numbers? How do we do something as a committee, while we wait for Bill C-2 to be implemented, that will take us a tiny step in the direction of some sort of independent forecasting capacity?
Ellen.
Economist, Canadian Centre for Policy Alternatives
Well, I guess if The Fiscal Monitor was the only thing you ever needed, there wouldn't ever have been reason for any initiative towards getting independent forecasting advice. So yes, we can't assume that problem is dealt with just because The Fiscal Monitor is out or because there is a different party in power.
I'm also going to share my time, because I know it's brief. While you were asking the question, my colleague was rifling through the documents to get some further information for you.
Mathieu Dufour Economist, Canadian Centre for Policy Alternatives
The point we are trying to make here is not that tax cuts don't give money to anybody. It's that the money it gives does not help towards some of the stated objectives, that is, increase in productivity. Corporate tax cuts don't translate into more investment. We have data on this, if you want.
On the personal tax cuts, actually, personal consumption is going down, because the tax cuts are structurally part of a system whereby spending decreases and wages decrease, as well. The tax cuts actually don't follow the decrease in wages, so ultimately, personal consumption is also going down in the process. In fact, people overall have less money, even though tax-wise they do pay a little less. They have a lot less to spend in the first place, but they spend a little less on that particular tax when they get to the counter.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Thank you.
As a follow-up to this whole topic, Ellen, you mentioned the importance of having some kind of judgment or assessment, when we do give tax breaks, to see whether they work.
When we raised this last week with the business tax reform group and asked them if they didn't think a cost-benefit analysis would be useful, Mr. Larson, with his group, said no, we should not have a cost-benefit analysis when it comes to corporate taxes; they should just be handed this money and we should take our chances. Yet when it comes to individual programs, we're going to see in the next little while the Conservative government outlining their $2 billion cuts to programming for this year, and they're going to use arguments about not having cost-benefit analyses and proven results.
Why do we have this double standard? Isn't it important to have some kind of assessment of where tax breaks are going and what they're doing?
September 25th, 2006 / 1:10 p.m.
Economist, Canadian Centre for Policy Alternatives
Absolutely. The treasury's dollars are precious, and you wouldn't want to be spending them without some sense of documented benefits coming out of that. You don't have a lot of room to play with. Why would you use what little room you have to do something when you're really not sure what the outcome will be?
Liberal
The Vice-Chair Liberal Massimo Pacetti
No. Thank you, Ms. Wasylycia-Leis.
Mr. Paquette, you have five minutes.
Bloc
Pierre Paquette Bloc Joliette, QC
Thank you.
I'd like to go back to my previous question.
As you know, the Canada Social Transfer is distributed on the basis of population, rather than need, unlike the system used for the Canada Assistance Plan.
If it came to the point where we decided to split the transfer in two, between post-secondary education on the one hand, and social programs on the other, would it not be advisable to ensure that that part of the transfer is based on need, rather than population?