Finance Committee on Sept. 27th, 2011

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair.

Of course, when you increase taxes and mandate high wages, you lose corporations to other countries that are more competitive. I think you would all agree with me, Mr. Lavoie. But notwithstanding that, I noticed that Mr. Hodgson, I think it was, identified that the Federation of Canadian Municipalities had identified in 2006 an infrastructure deficit of somewhere around $123 billion. Our government's response to that and to this economic crisis, of course, was to invest somewhere in the neighbourhood of $47 billion, including all the programs, plus municipal and provincial money, of course. They were trying to leverage somewhere in the neighbourhood of $120 billion to $150 billion.

In fact I do want to remind the witnesses today that the program hasn't even ended yet as far as the outpouring of money is concerned. I would say that not all of it has actually been spent. In fact very little of it has, because the bills haven't come in, and I think the program actually continues until the end of next month.

It's fair to say, I think, that all economies are pendulums, and if you hit the pendulum or allow it to slide too far one way or the other you could run into problems such as overinflation or such as not stimulating the economy enough and having a downturn of fewer jobs. Is that fair to say?

[Glen Hodgson]

We don't use the word “pendulum”. We would talk about a business cycle, and the economy is going through cycles.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I understand, but it's fair to say that if you stimulate the economy one way or under-stimulate it in another, that could lead to more problems in the future.

[Glen Hodgson]

If you're talking about poor economic management, absolutely, and that's an example of why Greece has ended up in the mess they're in right now. They had really poorly designed macro policies over a long period of time and it caught up with them.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Absolutely. So in fact not just to remain flexible but to remain sensitive to what's going on in the world is the most important thing we can do as a government. Is that correct?

[Glen Hodgson]

Absolutely--being mindful of all those circumstances. That was the opening comment of many of us.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

One of the things Mr. Schetagne suggested was to encourage private companies to invest more and to stockpile less cash. Are there other things we can do on which the witnesses have ideas, such as, for instance, tax incentives for accelerated depreciation? That obviously worked in the oil sands and other areas across the country.

Have you any other suggestions, Mr. Schetagne, in relation to that?

[Sylvain Schetagne]

Yes. There are different ways to make our country more productive, of course, such as providing help to the manufacturing sector, as I said earlier, and investment credits, for instance, as I've said, for research and development, not only within corporations, but across the country through the university sector, for instance, as well as worker training.

There are some issues about worker training and the renewal of the workforce, although we did capture the issue about the red seal program and mobility between provinces, which I don't think is an issue. But we can go beyond this. Corporations benefit from the kind of infrastructure they have around them, so a bridge that is falling apart is not good, but having enough workers who have the skills and education needed in order to provide productive work is also needed.

There are other things we can do. For instance, in social infrastructure we are facing an aging workforce, and we would like to see more Canadians working. We would like to see more women and more aboriginals working. There are programs such as child care that we can put in place to allow more women to go back to work, to improve labour force participation, and to make sure that companies have workers when they need them.

So it's beyond helping corporations. There are things we can do in terms of public infrastructure that help us make--

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I understand, but to be fair, my question really related to getting rid of the cash that's in the bank accounts right now, and those are the things.... It's about how we can incent corporations to do that, because the money is already there and obviously it's the low-hanging fruit that we could identify in the near future. That was my question.

Mr. Lavoie, my final question is for you. You wrote a book called Money, Income, Production and Wealth in 2007. It's a book that deals with stock flow consistent method. Can you make money after reading that book? I'm just curious, because my stocks are going crazy right now and I can't keep track of things.

[The Chair, Conservative, James Rajotte]

You have about 45 seconds.

[Marc Lavoie]

The book was not about the stock market. Rather, it was about the distinction between flows, income and stocks, meaning debt, capital, and so on.

But to answer the question you put just before this, on trying to get firms to invest for the future, I would say that firms need to believe that there will be aggregate demand, that there is a demand for their products. If that demand is not forthcoming from consumers any more, then, as I said at the beginning in my presentation, it has to come from the government, because it's not going to come from our exports to Europe or to the United States next year.

[The Chair, Conservative, James Rajotte]

Thank you.

I know at least two witnesses have to leave sharply at one o'clock.

We've been having this debate about austerity and being in a period of stimulus and now being in a period of austerity, and I just wanted to clarify, so I pulled up the budget we passed in June. We have a temporary hiring credit. We have extension of the work-sharing program. We have extension of the accelerated capital cost allowance for the manufacturing sector. We have extension of the best 14 weeks in working for EI. We have enhancing the guaranteed income supplement. We have more money for health care workers in the rural areas. We have more money for the industrial research assistance program, more money for Canada excellence research chairs, more money for the federal granting councils. We have 6% increases for health care transfers to the provinces and 3% for education and social assistance for the provinces.

I know two of you are recommending more stimulus. Glen, I know that you are recommending that we stay along the path. But to the other two of you, is this austerity--6%, 3% increases, more money for R and D, more money for the manufacturing sector? Is this austerity?

[Carlos Leitao]

As I said before, when we are talking about government austerity, Mr. Brison said I would make a good politician. This is not the Greek style of austerity by any means.

The timing is also important. If indeed there is a risk that the global economy may slide into a recession in 2012, then at that time we will be well advised to do more of that, to spend even more.

[The Chair, Conservative, James Rajotte]

Mr. Porter.

[Douglas Porter]

From our perspective, this year was not a particularly austere year. To us, this year's budget, 2011, was really more of a transition from stimulus to restraint. So no, I wouldn't say that this year was particularly austere at all. We were expecting some modest restraint. I'm not sure that I would necessarily call it austerity.

[The Chair, Conservative, James Rajotte]

Can I then just put the two of you on the spot? Because I know where the other three stand.

With respect to the $4 billion out of the $80 billion of strategic review on fiscal policy, would you advise the Government of Canada to continue with its strategic review of that $80 billion to find $4 billion in savings over the next four years? Yes or no?

[Douglas Porter]

I don't have a problem with $4 billion in savings. I would suggest that if the global economy truly stumbles, we might want to reallocate that into something else down the line. But I certainly don't have a problem with finding savings where they can be found at this point.

[The Chair, Conservative, James Rajotte]

Mr. Leitao.

[Carlos Leitao]

Neither do I. No problem. But again, be prepared to spend more in 2012 if need be.

[The Chair, Conservative, James Rajotte]

If need be. Okay.

I want to thank all of you. I apologize again for the late start of the session. It was a very informative session and I want to thank colleagues and thank our witnesses for being here.

We will see you on Thursday.

The meeting is adjourned.