Thank you, sir.
I appreciate the invitation to participate in the pre-budget consultations. I want to use my time primarily to focus on general fiscal policy matters, and to the extent that there is time left to briefly set out a specific idea to support economic growth and opportunity, based on the questions the committee has put to witnesses.
One thing I want to try to accomplish in my remarks is to focus on the when and why of fiscal policy rather than the how and what, which my colleagues here no doubt will focus on and many of the other people appearing over the course of your pre-budgets will also focus on.
It's often underappreciated that economic and fiscal policy involves trade-offs between the short and the long term. Policies designed to stimulate the economy, such as deficit spending, dampen long-term economic potential. Policies that boost long-term growth, such as liberalizing labour markets or free trade, may involve transitory job losses that dampen short-term growth.
At its core, then, politics is primarily about making judgments about these trade-offs. Governments may decide to run deficits to minimize the harmful effects of recession, even at the cost of somewhat lower growth over the long term. Similarly, policy-makers may accept short-term dislocation to support long-term opportunities.
As the former chief economist at the Bank for International Settlements has said, the long run is not just a series of short runs. The present fiscal policy debate in Ottawa sometimes seems to miss this nuance. Deficit spending tends to be characterized as a free lunch, but when it comes with long-term costs in the form of higher taxes or higher debt servicing payments, we need to be more preoccupied or more focused on the question of when and why.
The onus, it seems to me, should be on those who advocate for deficit financing to make the case that the trade-offs are worth it and that downside risks will be minimized. I put it to this committee that the government has work to do on both fronts.
There is little evidence that the deficit is being driven by investment rather than consumption, and thus the extent to which it will have an effect on short-term growth is minimized. There's also a lack of evidence that there's a plan to close the gap between revenues and outlays over time.
Addressing these trade-offs in general and setting out a clear and credible plan to eliminate the deficit in particular should be the government's top budget priority, and—I put it to the committee with respect—your top priority as well.
Failing to do so risks setting us on a path of protracted deficit and increasing long-term costs or long-term opportunity costs. In this regard, I'd encourage the government to reconsider the enactment of fiscal rules, such as balanced budget legislation, to improve fiscal transparency and to help politicians help the government to reconcile these trade-offs between the short and the long term.
The previous balanced budget legislation didn't preclude deficit spending, as members know, but required the government to be transparent about why it was entering into deficit and how it intended to get out, by having the Minister of Finance appear before this committee. If the government nevertheless thought the law was too restrictive, which it set out in its election manifesto and then enacted in the first budget implementation bill, there's nothing stopping it from introducing an alternative.
The point is, it seems to me, that fiscal rules can not only help government manage the short- and long-term trade-offs between economic and fiscal policy choices, they can also help parliamentarians and this committee hold the government to account.
More generally, members, I would encourage you to grapple with this question of short- and long-term trade-offs, short- and long-term implications of economic and fiscal policy, as you develop your budget recommendations to the government.
With my remaining time, Mr. Chair, I will focus on two specific ideas that you might consider as part of your package.
The first is on the subject of broadband. The government, to its credit, has made a commitment to infrastructure, and not just traditional infrastructure but also broadband infrastructure. As many of you know, including in P.E.I., sir, broadband infrastructure, particularly in rural parts of the country, represents game-changing infrastructure. It is at the core of economic opportunity, business development, and social engagement.
Canada is a world leader in broadband infrastructure at this precise moment, with 99% of Canadians having access to high-speed Internet and 96% of Canadians being able to subscribe to download speeds of five megabytes per second. This has occurred to date largely through private investment. But it would be a mistake to rest on our laurels, especially since government policy plays such a critical role in creating the conditions for broadband infrastructure and broadband investment.
At the Macdonald-Laurier Institute, we have done considerable research on the strengths and weaknesses of Canadian broadband policy. In my submission I've set out some recommendations to help create the conditions to continue to have private investment driving the development of broadband infrastructure, not just in our urban centres but also in parts of rural Canada.
I'll just take one more moment. I just want to echo what Mark has said about the importance not just of affordable housing but of affordable home ownership. It's a subtle distinction, but it's a critical one. Much of federal spending on homelessness, particularly through the flagship or signature program, the homelessness partnering strategy, focuses primarily on affordable housing. I think there's plenty of work to be done on the subject of affordable home ownership and I think that the Habitat for Humanity model is unique in bridging that gap. I would encourage the committee and the government not just to refocus parts of the homelessness partnering strategy to support Habitat for Humanity but to more seriously think about how we can create the conditions not just for affordable housing but for affordable home ownership.
With that, Mr. Chair, I am grateful for the chance to be here and I look forward to the discussion. As I said at the outset, I would encourage members to grapple with these choices between the short and long term as they develop recommendations to the government.
Thank you.