Finance Committee on Nov. 6th, 2018

[Ann Decter]

Yes, I think we're done here.

[Pierre Poilievre, Conservative, Carleton, ON]

—with $25,000 or $30,000 a year in EI maternity benefits, when you have to pay four or five employees, you have to pay rent and you have to pay other costs associated—

[Ann Decter]

This argues to the strengthening of the EI system.

[Pierre Poilievre, Conservative, Carleton, ON]

So it's just—

[The Chair, Liberal, Wayne Easter]

Let's not have a debate here. This is a hearing for questions and answers.

Mr. Poilievre, go ahead.

[Pierre Poilievre, Conservative, Carleton, ON]

Right. We'll hopefully get some answers from the next witness, Mr. Cross.

We are now running a $20-billion deficit and this is in an environment that the government admits—through its own financial statements released just two weeks ago—all of the good fortune, all of the luck is going in our favour. We have record-low interest rates, oil prices have doubled, the housing bubbles in Vancouver and Toronto are generating government revenues, the U.S. and world economies are roaring, so all of the factors that are out of the control of the government are going in favour of government revenue. That's why we had a $20-billion revenue windfall last year.

If, in that environment, we can't come anywhere close to balancing the budget, under what circumstances could the government ever balance the budget?

[Philip Cross]

Perhaps you should address the question across the aisle.

The premise is that there are conditions in which deficits are unavoidable—for example, if the economy collapses, like in 2008. Even if you had a balanced budget, you couldn't cut spending fast enough to keep up with the drop in revenues that would occur. I agree with the basic premise that we should be building up surpluses during good times because there will inevitably be bad times.

[Pierre Poilievre, Conservative, Carleton, ON]

On that point—

[The Chair, Liberal, Wayne Easter]

Sorry, Pierre, we're out of time.

Mr. McLeod, we're into five-minute rounds.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

This is an interesting discussion. I'm trying to figure out why the Conservatives are upset that the economy is doing well.

My question is for Leona Irons. I heard you talk about your association and the number of people you represent. I think you said 178, but I didn't hear you mention the Northwest Territories, so I take it the Northwest Territories doesn't fall into this.

[Leona Irons]

No, we've attempted on two occasions to get a champion there and to form a regional association. This past September, we had our national gathering in the Yukon, in the Kwanlin Dun Cultural Centre.

I believe we are enticing some land managers there to be part of our organization, so we're looking forward to forming a regional chapter in the Yukon. However, at this time in the NWT, we don't yet have a champion to be part of that, but we're always reaching out.

We service them as well. We don't turn them away.

[Michael McLeod, Liberal, Northwest Territories, NT]

I think there's a good opportunity for them to get involved because there are a lot of things that are moving forward. I think at the beginning of this government we didn't have any discussions going on and now we have 10 sets of negotiations. We had a huge delegation from the self-government organizations here this morning. They are all quite excited about where things are going.

In the Northwest Territories we have different categories of indigenous governments. Some have settled self-government, some have signed on to modern treaties and some are in unsettled areas, and we have a couple of reserves. It's a real mixed bag.

You talked about this initiative as something that is going to advance reconciliation. Could you maybe elaborate a little more on that?

[Leona Irons]

Adding land to reserve, expanding the reserves, gives potential for economic development opportunities. It all comes hand in hand, acquiring lands for betterment, for natural resources.... Now when we add land to the reserve it's under the Indian Act at first, so settlement lands in NWT would be different. But it does have the potential to increase the social well-being of our people so that we have access to more lands and natural resources.

[Michael McLeod, Liberal, Northwest Territories, NT]

This morning I heard one of our grand chiefs talk about signing on to a self-government policy where they had to opt out of the Indian Act. He said it was very nerve-racking. A lot of people were critical and a lot were nervous. I see part of what you're talking about is looking at opting out of 33 sections of the Indian Act. Did you face some of those challenges, some of that feedback from your member organizations where people pushed back on the whole notion of trying to opt out of the Indian Act? There are some people who feel really strongly about that.

[Leona Irons]

They do. From a technical point of view it's challenging. It's challenging to manage land under the Indian Act, let alone your own policies and procedures under your code. Ultimately, it's a political decision. In our organization, when politicians make the decision to go that way we just have to find ways to cope and be able to be ready for that from a technical standpoint. I can't address any more on that issue.

[The Chair, Liberal, Wayne Easter]

Thank you. Thank you, all. We're getting tight on time. We'll go to three-minute rounds because that's all the time we have.

We have two more questioners, Mr. Poilievre and Mr. Fergus.

[Pierre Poilievre, Conservative, Carleton, ON]

As I was saying in my previous questioning, the economic factors the government cites for the strong global economy have nothing to do with government policy. The oil price is global. The interest rates are semi-global, at least continental. The growth in the U.S. and world economies are obviously out of the control of this government and housing bubbles in given jurisdictions are things that governments cannot control. In fact, they could very easily—all of those factors—disappear at any time.

Government members trying to take credit for those factors are like the rooster who takes credit for the sun going up just because he crowed when the sun came up. All of these factors could be gone at any time. If they are and if a recession arrives, as it did suddenly and unexpectedly out of the United States in 2008, what would Canada's fiscal position look like, Mr. Cross, entering that recession, given that we start out under the best circumstances with a $20-billion deficit?

[The Chair, Liberal, Wayne Easter]

Just before you answer, Mr. Cross, the bells are ringing. We are a long distance away from Parliament this time so I would just suggest, if we get permission, that we run down the clock on this panel and probably go to the vote. We have 27 minutes.

Mr. Cross.

[Philip Cross]

Right. I think it's a risky position. On the surface it looks like the debt-to-GDP ratio.... The federal government's debt-to-GDP ratio is at 40% or 50%. A lot of people look at that and think we're in a good position, but if you look at the overall indebtedness of government in this country it's much closer to the U.S. and the EU, as I was alluding to in my opening statement. Just focusing on the federal government's finances ignores that we have the most decentralized federation amongst the major industrial nations. You cannot look at federal debt in isolation from provincial for reasons I mentioned in my introduction.

[Pierre Poilievre, Conservative, Carleton, ON]

You're an economist. You were the chief economic analyst for Statistics Canada. I want to ask you about the irony of the government's rhetoric. They use of a lot Keynesian rhetoric, which suggests that they want to engage in countercyclical fiscal policy. Spend more in the bad times, they claim, and then, according to Keynesianism, you're supposed to spend less in the good times.

We've seen how they've been spending over the last two years while the world economy has been going strong. They say their fiscal anchor is federal debt to GDP. If the GDP were to drop as a result of a financial crisis or some other unforeseen problem, and if they were actually going to stick with their so-called anchor under those circumstances, would they not be then in a circumstance where they would be forced, ironically, to cut the deepest during the worst recession?

[Philip Cross]

Very much so, and I think that didn't happen in the 2008-09 crisis because the government at that time had a lot of capacity to borrow. As we were watching that crisis unfold, we were aware that there were instances, particularly in Britain—and there was some hesitation even in the U.S.—where the bond market appeared to be balking at financing government debt.

It could happen that in the middle of a recession, just when the government needs to borrow the most, the bond markets could stand back and say, “Whoa, we're not giving you any more money.” At that point, governments are going to be in a very difficult situation, as Greece found itself in 2015.

[The Chair, Liberal, Wayne Easter]

Mr. Fergus, you have the last series of questions.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you, Mr. Chair.

As an MP from Quebec, I was very interested in Mr. Cross' comments when he commented on the provincial governments of Ontario and Quebec. I'm not in a position to comment on what I presume happened in Mr. Cross' provincial government. However, I can certainly talk about the situation in Quebec.

You said that the former Quebec government was made up of people who weren't as capable of managing the economy as those who formed the new government. So I ask you this: what deficit did the previous government inherit in 2014 and what deficit did it leave when it lost in 2018?

I hope you'll recognize that, after one of the worst governments in terms of public financial management, the previous government had to show extraordinary discipline to become one of the best governments in terms of deficit and financial management. However, this government wasn't made up of business people, but of people from all walks of life. Why then did you strongly criticize the former Government of Quebec?

[Philip Cross]

I'm sorry if you understood that. I had to say that, compared to the Ontario government, the Couillard government's policies were certainly better and better able to support businesses.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

We fully agree on that.