Finance Committee on Nov. 3rd, 2010

[Kevin Page]

For the medium term, we've taken the government's assumptions beyond 2014. There's the 6% growth rate for the Canada health transfer and the 3% growth rate for the Canada social transfer--equalization. We've basically taken the government's numbers. But when we do our fiscal sustainability calculations, we do scenarios.

[Paul Szabo, Liberal, Mississauga South, ON]

On the new EI commission--the premiums go in, the benefits are paid out--it's operating at a significant deficit right now. You assume that any deficit they have is rolled into the projections. Initially I think there was a 15¢ increase in EI in the budget in the economic update. We're now down to a 5¢ increase. Even with a 5¢ increase in EI premiums, do you have any idea of the number of jobs that will cost?

[Kevin Page]

We have a rule of thumb on the fiscal cost, but we don't have a rule of thumb on the jobs.

[Paul Szabo, Liberal, Mississauga South, ON]

Do we have an idea how many jobs will be created with a reduction in the corporate tax?

[Kevin Page]

Sir, we don't have numbers like that.

To pick up on the point that Mr. Poschmann raised, a number of international studies look at different tax regimes and the mix. They look at the impact of changing a bracket versus a rate across personal, corporate, and excise taxes, etc.

[Paul Szabo, Liberal, Mississauga South, ON]

What's the biggest adverse risk to the federal government with its projections?

[Kevin Page]

There are a number of risks. If I only get to highlight one, we need to look to the long term. We need to look at aging demographics. We need to look beyond 2015-16 and take an account of aging demographics to really get at the issue of fiscal sustainability. Otherwise I don't think we'll be doing parliamentarians and Canadians justice.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Szabo.

We have two minutes, if you want time, Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

On gross debt, when we compare Canada's debt as a percentage of GDP to other countries, we often compare our debt to unitary states where other levels of government do not carry the levels of debt we're seeing in Canadian provincial governments. It's a particularly germane question, given the timing. We're entering a period of negotiation with the provinces on health transfers, and a demographic shift is going to impose on us significant productivity challenges and increases in health and social costs.

We have an 82% gross debt as a percent of GDP; the U.S. is at 83% gross debt as a percent of GDP. Our gross debt as a percent of GDP is higher than that of the U.K., France, and Germany.

What should we be doing on the federal side to prepare for these negotiations and bring the federal government into a surplus? How concerned are you about the gross debt issue?

[The Chair, Conservative, James Rajotte]

We have 45 seconds, Mr. Brison, so who would you like to respond?

[Scott Brison, Liberal, Kings—Hants, NS]

I'd be interested in hearing from some of the bank economists on the gross debt issue.

[The Chair, Conservative, James Rajotte]

Ms. Webb.

[Mary Webb]

That's definitely the reason for moving toward balance as quickly as possible without interrupting the economic momentum. But while it is serious--and serious in terms of the accumulated deficits that the provinces have racked up that also need to be addressed--in our country net debt makes a lot of sense. There are things such as our Canada Pension Plan, where we have a fully funded national social security framework that continues to grow. That's a huge wedge, and there aren't many countries that have the same type of wedge.

So while I appreciate your concern, there are a few offsetting factors that are critical.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Paillé, s'il vous plaît.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you, Mr. Chairman. I know it is getting late, and so I want to thank our witnesses.

However, since I am by training an economic forecaster—you may say that it has been a long time since I practised that profession—I am used to assessing risks and probability and I can guarantee you that there is no probability at all that aliens are going to abduct Mike Wallace. They don't want him. I'm sure of that.

As he did not understand my remark, others may repeat it for him. I would like to adjourn this meeting on this humorous note that will be translated for Mr. Wallace in due course.

[The Chair, Conservative, James Rajotte]

Okay.

On that note, I want to thank all of our witnesses for being here this afternoon. Thank you for your presentations and your responses to our questions.

The meeting is adjourned.