Finance Committee on May 15th, 2019

[Rachel Bendayan, Liberal, Outremont, QC]

That's excellent. Thank you very much.

Mr. Cox, thank you for coming here today and presenting statistics in your opening remarks. I was very interested to hear that 88% of Canadians read newspapers in some form every week. I did also see another statistic, that since 2010, in the newspaper industry alone 20,000 jobs have been lost. To me, that is a worrying figure, and I imagine that trend continues. Although you mentioned that the tax credit that was put forward in the budget will preserve our newsrooms in the interim, in this transition period, as you called it, although nobody has a crystal ball, I wonder if you can give us a sense of how long this transition period will last. I'm a bit concerned about the industry.

[Bob Cox]

The program itself is envisioned to be for five years, and I felt that was an appropriate period of time for the transition, because of course, there will be news outlets, newspapers, that fail the transition, and you can't give them forever. There does need to be deadline. Deadlines can also focus you and get you moving to where maybe you aren't moving now. I think it's important. I see this as a transitional program and temporary help. I don't like the idea of a long-term subsidy for newspapers that becomes permanent.

[Rachel Bendayan, Liberal, Outremont, QC]

Is the five years proposed appropriate, in your opinion?

[Bob Cox]

In my opinion, yes.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. Richards.

[Blake Richards, Conservative, Banff—Airdrie, AB]

Thanks.

I want to acknowledge Jan Waterous, who's a constituent of mine. I want to thank you for standing up and being the “they”. The project you're putting forward is very ambitious, one that's going to make a big difference for residents and visitors alike, and for the environment as well.

Mr. Stratton, from the Canadian Chamber of Commerce, I think a lot of the criticisms of this budget have been what it doesn't do and what it doesn't contain. Certainly, in looking at your website, you have some of those criticisms.

I want to quote very briefly from the website itself in regard to balanced budgets, “The government must present a concrete plan, with timelines, to return the federal books to balance.” Further on it stages, “When combined with provincial debt, Canada’s debt burden approaches 90% of the value [of] our economy, unsustainable levels over the long term.” There is a quote directly from you, “Playing fast and loose with government finances is a sure-fire way to get Canada into fiscal trouble in the future. Canadians are looking for leadership in fixing this problem sooner rather than later. The longer we wait to fix this problem, the worse it is going to get.”

I want to allow you an opportunity to speak to that and give us your take on, from your quote, why “playing fast and loose with government finances” is an issue Canadians should be concerned about. In doing so, what is the government putting at risk?

[Dr. Trevin Stratton]

Yes, absolutely. I appreciate the question. At the Canadian Chamber of Commerce, with our membership of 200,000 businesses, 450 local chambers of commerce and numerous industry associations, we see the fiscal issue in the context of our Canadian competitiveness globally. I think that one of the issues when it comes to our fiscal position, of course—the other side of the equation being our tax competitiveness as well—is that it leaves little room for us to pursue more large-scale tax reform or the comprehensive review that I was talking about as well.

Similarly, and I mentioned this in my opening remarks too, when it comes to the level of debt that is accumulating, that is money that not only could be spent on improving the competitiveness of our business and creating jobs, but it's also money that could be spent on social services instead of paying off interest on our debt. When we're thinking about the medium- to long-term direction of our economy and the sustainability of our government, this is why it's incredibly important, because it has negative ramifications in other areas too.

[Blake Richards, Conservative, Banff—Airdrie, AB]

Sure. I may be able to get back to you in a second, but I want to give Dr. Lee a chance to weigh in on this one as well.

I know that when you were being interviewed following the budget, Dr. Lee, you said:

It confirmed my worst expectations. My biggest criticism of this budget is the criticism I've had with this government running deficits, big deficits when the economy has been going flat out, meaning it's doing very well...this is the equivalent of pouring gasoline on a fire.

I wanted to give you an opportunity to comment on the lack of balanced budgets and the concern you have about the mounting debt that's piling up as a result of the deficit.

[Dr. Ian Lee]

I was invited before the Pearson Institute, I think in January, and I gave a paper on this. I also published an op-ed on this. I fully acknowledge the criticism of critics of my position who say, “Look, the federal government is wealthy, and it's very strong fiscally”, which it is, by the way. It's in a very strong position. They say, “Don't worry about it and don't get your knickers in a knot.” My counter-counter-argument is that while the federal government is in a very strong fiscal position measured as a percentage of debt to GDP and it's declining—this is in the annexes of budget 2019 and budget 2018—the problem is at the provincial level. The PBO has shown that every last government, save and except Quebec, is not sustainable in the medium term.

My second point was that one of these days, in my view and the view of quite a few others, for one or two of the worst provinces—I'm referring specifically to Newfoundland and Labrador and New Brunswick—we're going to see them one night on the national news saying, “We are insolvent.” That's not bankrupt, because a province cannot go bankrupt, but they can be insolvent, and all that is, let me say, is the inability to pay your dues as they become due because the bond markets say they're sorry, but they're not going to buy your bonds anymore because you're too high a risk.

At that moment, the provincial debts are going to be part of the national government's debt, so we should be looking at a consolidated balance sheet of both the federal and the provincial debt. Then, when you do that, the Government of Canada is not looking so good. I mean, it's not looking terrible but it's looking nowhere near as strong as when you look at it on a stand-alone basis, where I think it's 29% debt to GDP. When you fold in or aggregate in the provincial governments, it's running up around 85% to 90%, and that's getting into a much less healthy range.

My point was that we're squandering scarce resources unnecessarily when the economy is going flat out, tilt. We're going out very strongly and there's no need to put stimulus onto an economy that doesn't need stimulus.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I thank the witnesses for being here today.

My first question is for Professor Lee.

As you know, and as many surveys have shown, Canadians are proud of their free, public and universal health care system.

Following the logic underlying your description of the universality of a drug insurance program, are you suggesting that we should have a health care system that is not public, free, or universal?

[Dr. Ian Lee]

If I understood your question, I think you're asking whether a targeted pharmacare program would contradict our universal general health care system.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Not exactly.

The question was, if you, by the same logic that you used to attack the universality of a pharmacare program, agree that we should not need a public universal—

[Dr. Ian Lee]

I'm sorry. I see.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

—and free health care system.

[Dr. Ian Lee]

It's an excellent question, and I've been asked it several times: Am I not contradicting myself? My response has been the following.

Every major poll I've looked at over my adult lifetime in Canada—I've lived here all my life—shows that support by Canadians runs literally 85% to 95% for public health care. Purely on a practical level, it's pointless to even discuss that, because Canadians won't countenance an American-style system or some form of privatization. That's my first answer.

To unpack that a little more, the trend in our social programs...and you know this from Quebec, where Premier Couillard introduced a much greater degree of targeting. He did this with tuition, with day care. Universality is really expensive; it uses up a lot of resources. You're squandering scarce resources on people who don't need help.

I do not need help. I'm a professor. I'm like every professor in this country. We are very well paid. I'm not supposed to say that. I'm supposed to tell you that we're on the edge of starvation, but we're not. We're very well paid.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I understand very well, and I think that most Canadians agree that it is better to use a health card than a credit card when one goes to the hospital to get the health care one needs. It should be the same for medication. When we are given medication at the hospital, it is free. When we leave it, that medication should remain accessible so that we can continue with the treatment we need. I think most Canadians feel that way, but you are entitled to your opinion.

I would like to talk about another subject, namely assistance to the news media. I don't know, Mr. Cox, if you're aware of the testimony of officials on this issue. Clearly, when they came to defend the bill, they had few answers for the committee on how the mechanism will recognize journalistic organizations that are eligible for the assistance referred to in the bill.

What these officials told us was that we had to wait until the nature of the assistance was revealed in future announcements; that an expert panel would be set up to establish eligibility rules; and that another committee would then make the final decision on the eligibility of these organizations. In your opinion, is that enough, and do you think it is appropriate to give the government a blank cheque in this way, allowing it to pass the bill before anyone know the details regarding the panel and the subsequent committee?

[Bob Cox]

I don't know that it's a blank cheque. I think that really, it depends.

We've been urging the government to set up an independent panel that will determine the eligibility criteria and assist with the implementation. It's envisioned in the budget that there will be some kind of arm's-length agency that will administer the program. For me, that's enough, although we do need to move along in that process.

I trust that if a panel is truly independent and the criteria are well thought out and fairly administered, the program can succeed. However, that does have to happen.

That's why we would like to see the panel named, because we think it's key to making the program work. The government has said that they're not going to come up with the criteria. They're not going to tell us who is in or who is out. It will be up to an independent panel to determine that.

The key is that the panel get established now. That's really what we're impatient for. I think that is supposed to happen, according to the legislation as I understand it.

[The Chair, Liberal, Wayne Easter]

Okay, we'll have to leave it there.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair, and good afternoon everyone.

I'll start off with Mr. Stratton from the Canadian Chamber of Commerce.

I've been on this committee—it feels like since the beginning of time—since the last election. It's been fabulous. As someone who grew up in small-town British Columbia but had the privilege of becoming an economist by training and also of working on Bay Street and Wall Street for over 20 years, I probably read every economics report that comes out on a daily basis from three or four of the banks.

This week, we had A.T. Kearney come out with their competitiveness report. We came in at number two—I think it was behind Japan—in terms of confidence in where you would want to invest currently. They looked at positives and negatives, and they ranked us number three in terms of competitiveness in the world. We switched places with Germany. We were number two last year and number three this year, but we came up from number five and even below during the Harper time, during the Conservative years, because we've implemented many measures to improve our competitiveness.

With regard to our competitiveness—which concerns me because it creates jobs, investment and productivity—we brought in the accelerated investment incentive. We have a lower marginal effective tax rate per dollar of new investment in Canada than they do in the United States—four points lower—and one of the most highly skilled and educated workforces in the world. We've brought in three budgets that invest in Canada and Canadians.

I'm just curious because we had Kevin Milligan here last week commenting that the fiscal anchor should be our debt-to-GDP ratio, and it is declining on a federal basis. What is wrong with going down that trajectory? Our deficit-to-GDP ratio is below 1% at 0.7%. We've run a surplus for the first 11 months of the year, and we're investing in infrastructure. As we all know, there was an infrastructure deficit left behind from the previous government.

[Dr. Trevin Stratton]

To the first part of your question, when it comes to Canadian competitiveness, there are other rankings, for instance, the World Economic Forum's ranking where Canada ranks 12th in the world.

I think you're very right. One of the reasons that people do invest in Canada is the level of talent and skills in this country. If you look at some of the other rankings, for instance, from the Swiss business school, IMD, one of the best business schools in Europe, the bottom rankings for why people invest in Canada are our tax system, our regulatory system, and in some ways, R and D investments as well as our R and D spending. These are other aspects of competitiveness that a lot of investors, a lot of businesses look to when they're looking at where to invest, when it comes down to it.

When it comes to the fiscal situation in Canada, when it comes to debt to GDP, I would say that there are a couple of aspects here. First, for debt to GDP, there's a numerator and there's a denominator. While the economy is doing well, it looks great, but it can deteriorate very quickly if we hit economic headwinds, and that is problematic. Keep in mind that it can change very quickly. Also, as Ian mentioned, we need to look at the federal debt and provincial debt together.

I think that when it comes to the business community, our feeling on this is that there's no plan to get back to balance. A detailed plan with timelines is really what the business community is looking for.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you for those comments.

On the competitiveness front, that's why I got into politics, to provide a better future for my kids and to ensure that we're a great country to invest in and to live in, which we know we are.

Mr. Lee, thank you for being here. We've obviously worked together on the housing affordability front, doing a lot of work there.

I am in agreement with you in terms of the 30-year mortgages for insured first-time buyers. I think that's a segment of the market that is important. It's important in my constituency and for my stakeholders, and it's important for a lot of millennials and young Canadian families.

With regard to our budget and the measure we've implemented, shared equity mortgages have been introduced in other parts of the world and have worked very well. At the end of the day, they provide a lower mortgage amount for individuals, and the potential over the next three years for over 100,000 new homebuyers to come into the Canadian market.

It is a very big step. It's actually transformational in the market. At the same time, there's always more to be done, but you have to acknowledge on that front that this is a policy measure that's definitely worthy of some congratulations, for sure, but also definitely worthy of being taken up by Canadians in the months ahead.

[The Chair, Liberal, Wayne Easter]

Mr. Lee and Ms. Wyton, the two of you have been waiting. If both of you want to respond, go ahead.

[Kevin Lee]

With respect to the shared equity mortgages, it is in fact something that CHBA has recommended to this government and to other institutions as well. We think it's a huge opportunity to help people, especially those perpetually stuck in rent, and that's where we've seen it. We did a study of programs across Canada that help people get out of perpetual rent and into home ownership, and the number one way is through shared equity mortgages.

Is it a valid program? Absolutely. Our challenge now is that this will only address a small portion of the market. We certainly would hope that the projections are right, that it will help up to 100,000 people over the next three years. We're not sure, however, that this will actually be achievable under the current circumstances. In the meantime, we still see a need for the 30-year amortization for insured mortgages to help the rest of the market.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Kevin, I want to interject really quickly. Chair?