Finance Committee on May 31st, 2012

[Roxanne Dubois]

In fact, we are still feeling the effects of those budget cuts today. That is one of the main reasons why tuition fees are going up in almost all provinces: there is a significant shortfall. Canada's education system is short of funding, to the point that students are facing situations that are tougher than in the past 10 or 20 or even 30 years.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

Mr. Lee, have you had a glance at CMHC's financial statements for the last year?

[Prof. Ian Lee]

Yes, but I didn't bring them with me.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Would your appraisal be that CMHC's financial statements are positive and the agency is in relatively good health? If we go by its financial statements, would you say it is a well-managed institution at the moment?

[Prof. Ian Lee]

CMHC is making money. Many people attribute that to the mortgage underwriting policies of CMHC. As a former mortgage manager who's very intimate—

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

My question—

[Prof. Ian Lee]

I believe it's due to the bank's due diligence.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

My question related to CMHC's financial health, and you confirm that it is in good financial health.

Canadians are familiar with two particular components of CMHC. The first is social housing; the second is the guarantee program for people who cannot put at least 20% down on a home purchase. In general, the proposal to make the Office of the Superintendent of Financial Institutions responsible for CMHC's assets and securitization activities is not bad in itself. It will eliminate taxpayers' liability for a major organization.

Where I see a problem in the direction you are going is when you talk about privatizing the activities. There are two factors. The first is that the private sector has never considered social housing to be a priority. There are no particular incentives for it to invest in social housing. The other factor relates to guarantees. CMHC occupies that niche because of imperfections in the market. This is somewhat the same as for the student loan program, where the private sector does not guarantee loans to borrowers who might present more of a risk.

That is why I think CMHC meets needs that the private sector could not meet. So how can you think that CMHC is in competition with the private sector?

[The Chair, Conservative, James Rajotte]

A very brief response, please.

[Prof. Ian Lee]

I never advocated the privatization of social housing. I argued that it should never be done by the federal government. Provincial governments are much closer to the people and they should be responsible. Those programs and resources should be transferred.

Very quickly on mortgage insurance, there's a huge difference between mortgage insurance, which is a commercially profitable project, and student loans, which are seen as something that's not so profitable.

Mortgage insurance can be done by the private sector very well. We don't have a government-owned London Life or a Great-West Life or those kinds of companies.

The private sector could do it if it weren't at a competitive disadvantage because the government guarantees 100% of CMHC but only 90% of the private sector. They have an unfair competitive advantage.

[The Chair, Conservative, James Rajotte]

I have Mr. Grady. Please be very brief.

I would just caution members that they should leave enough time for witnesses to answer.

Mr. Grady.

[Patrick Grady]

I just want to make one comment. Because of the large extent of mortgage insurance that CMHC covers, if there were to be a correction in the Canadian housing market, the financial picture of CMHC could look quite different than it does now.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Adler, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Mr. Chair.

Thank you all for being here today. This is a very interesting discussion.

I feel like a hungry dog and you've all kind of thrown this nice juicy bone out there. But since I only have five minutes, I really do have to allocate my scarce resources.

I want to start with Professor Lee.

You spoke a bit about moving the OAS eligibility age from 65 to 67. I feel like we're looking down a tunnel and that light at the end is not the end of the tunnel but a locomotive racing towards us. All informed opinion can, and have, empirically demonstrate that our population is aging and that OAS is a social program for which, in order to maintain sustainability, we need to make adjustments to.

Could you speak to those adjustments that we, as a government, are making and whether they are responsible adjustments and in the interests of the sustainability of this very important social program?

[Prof. Ian Lee]

Just by way of answering your question, I only use data that I call “official” data, from OECD, IMF, StatsCan, the U.S. Census Bureau. I'll be very blunt. I don't trust data from NGOs or unions or professors or corporations or politicians.

[Mark Adler, Conservative, York Centre, ON]

As do we. Good. We're on the same page.

[Prof. Ian Lee]

No disrespect. I only use official data from those official international organizations, such as the OECD, for example. The OECD has studied this in Pensions at a Glance, which they publish every two years, and it is non-partisan. It is funded by Canada and all the other OECD countries.

They have said very simply that public pensions are unsustainable in the western world, and there are very serious people who have said that, including Governor Carney. I've looked at it.

We're living a lot longer. I want to put this on very quickly, because people quote the life expectancy figure based on mortality over an entire lifetime. When you achieve the age of 65—so all the people who died before you are not part of your statistic any longer—you have a life expectancy of 84, for a female, and 82 for a male. So we cannot, as Greece is demonstrating brilliantly, and Spain and France, continue with policies where we are living 15 and 20 years longer than only 30 or 40 years ago.

The second point, to address your question, is that we are facing looming labour shortages. It is irresponsible to pay people to be unemployed in one part of the country when there are desperate shortages in another part, or just push them out the door into retirement when we need them in the economy to be able to fund people like me, when I retire.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Professor.

I read with great interest a lot of what you've written. I think you're spot on in so many different instances.

I will get to the CMHC and your earlier presentation, but in terms of how we are reforming our focus on free trade agreements—we've done nine since 2006, and we've got a lot in the hopper that we're currently negotiating—and immigration reform, could you briefly talk about the importance of free trade, the importance of engaging other countries in bilateral trade agreements, and the importance of immigration reform?

[Prof. Ian Lee]

I'll start with free trade. I'm much more familiar with that. I've been teaching and researching free trade for, literally, 25 years.

I'm absolutely mystified by people who don't, after this time, understand the importance of trade to well-being and standard of living. This has been known for 300 years, theoretically, from Adam Smith, Ricardo, to the present, and we know it from 300 of years of practice. And I say that because I've had the great fortune of travelling around the world and teaching in a whole bunch of really poor countries, like rural Ukraine and Russia and China and Cuba and Iran. I have seen the impact of countries that are more autarchic, that is to say they're more closed.

I tell my students it's really simple. You want to be poor? Close your economy. And if you want to be wealthy, open it up. I'm speaking colloquially to get my point across quickly. Trade is correlated to a higher standard of living: the more we trade, the better off we're going to do.

So it is absolutely essential that we sign more free trade agreements. I hope we sign free trade agreements with every country in the world.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

You have 20 seconds.

[Mark Adler, Conservative, York Centre, ON]

Okay.

Mr. Fried, I was a little taken aback by your comments that we need to do more in terms of international aid. As you know, we are currently drawing down in Afghanistan, but we've committed to building civil society there. We lost 158 of our soldiers in Afghanistan.

I'm really offended that you have come forward and said that Canada should be doing more in the international scene to help other countries. I think we've done quite a bit. We've doubled our international aid budgets over the last number of years, but we've also lost 158 soldiers in Afghanistan, helping that country to build a civil society.

I really take offence to what you said.

[Mark Fried]

Forgive me if I have offended you. Certainly that was not my intent.

Canada has done excellent work overseas, which is why we would like to see more money put into that budget to continue and expand that other work. Compared to other donors, Canada is still towards the bottom of the pack.

[The Chair, Conservative, James Rajotte]

Thank you.

Ms. Nash, please.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you to the witnesses for being here today.

I want to echo what my colleague said and support Ms. Dubois in terms of its not being the number of pages in a budget implementation act, but the diversity of subject matter. When you have a bill like this that contains so many substantive changes that are rushed through with very little debate by this Parliament, it certainly doesn't have the proper public examination that one would expect in a clear, transparent democracy.

Ms. Dubois, you are a young leader; you are the head of the CFS. You are probably a future leader in some other capacity in the future of this country.

One of the challenges we face is democratic engagement. We've seen a declining participation rate in elections, and certainly young people are disproportionately less likely to vote, yet some of the challenges they face in terms of youth unemployment, student debt, and environmental degradation will disproportionately affect young people.

I wonder if you could try to describe what you take away as a message from this omnibus bill that will make so many substantive changes in so many domains of our country, many of which we won't really fully understand until they are rolled out for some years to come.

Can you comment on that, please?