Finance Committee on Oct. 24th, 2016

[Chris Matier]

I would just add that when we did prepare our assessment of the economic impact of different types of government measures from budget 2016, we did find that the multiplier effect or the increase from one dollar of spending was very similar, whether that was government undertaking its increased capital formation or whether that was coming from the private sector. They were very close and both would raise the level of GDP and therefore have a positive impact on government revenues.

[The Vice-Chair, Conservative, Ron Liepert]

I'm going to stop it there as you're way over the time, Steve.

Mr. Caron.

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

Thank you.

I want to go back to your report on the monitoring of spending, at the end of September.

You spoke of additional spending by the government in relation to the same period in the previous fiscal year. You mentioned that part of the increase, $1.22 billion, was the result of infrastructure commitments. Can the economic benefits or impact of the investments be determined? How much time should we wait to see improvements or economic benefits?

In other words, what would be the lag that we could be expecting in terms of the benefits we could be getting?

[Jean-Denis Fréchette]

I'll ask Mr. Jacques to answer part of the question.

A Senate committee asked us to monitor infrastructure spending. We'll monitor the spending more closely to give them some information. We met with the Senate Standing Committee on National Finance members at a public meeting. They asked us to monitor infrastructure spending and also to monitor green infrastructure spending. They want to see whether there is a link or a larger multiplier effect for green infrastructure. That's what we're currently doing. At this time, we haven't completed the analysis.

Mr. Jacques, you have the floor.

[Jason Jacques]

To elaborate on Jean-Denis' point, with respect to our ability to actually assess the real impact on the economy from the jump we saw in the first quarter's cash flows coming out from the government, the short answer is neither yes nor no; it's not yet. That said, obviously there's a lag associated with that, and the lag will depend on the nature of the projects.

As Jean-Denis mentioned, our office has initiated working with many federal departments and agencies to actually identify the specific projects that they're undertaking with infrastructure funding. To the best of our knowledge at this point, the list is at over 1,000 and growing in terms of those individual projects, both with start dates and end dates and the specific locations of the projects. So, stay tuned.

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

That begs a question. Do you have enough resources to actually take on such a major undertaking?

[Jason Jacques]

Jean-Denis is better placed to respond to that question, but I myself have been with the office since 2008. Thankfully, we have the same person on staff who undertook that project in 2009. He led that project pretty much single-handedly. Thankfully, he's still with us now. I notice that he's losing some hair, but I think we're adequately resourced simply owing to the high quality of staff we currently have.

[Jean-Denis Fréchette]

As I said before, we hope to have more resources eventually. I know the parliamentarians want the answer next week. However, since we're discussing projects that will last several months, you'll have the results of the study only in one year. At this time, we aren't telling the committee no because I think it's important to do it.

Mr. Jacques mentioned the fact that we've asked 28 departments, organizations or agencies to provide their data. We've received a very good response rate. Things are going well in that area.

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

We haven't met since April, and you've prepared a few reports since that time.

Let's go back to the report in June on fiscal sustainability. One of the important things you emphasized was the dangers or failures that lie ahead for provincial governments in terms of their debt. The situation isn't improving. In the report, you said that provincial and local governments should generate about $30 billion annually to maintain their debt burden at its current level.

I want to ask you a question about the report you just released. In the past six months or in the past year, can you identify measures taken by the federal government that will help the provinces and municipalities with their debt burden and fiscal sustainability?

[Mostafa Askari]

In terms of the measures that the federal government has done, no, I cannot name any right now that would help provinces to deal with their shortfall.

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

Is the warning still in effect?

[Mostafa Askari]

The warning?

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

The warning is about the situation provinces and municipalities are in, in terms of their debt levels and how much it would actually take just to sustain their current situation.

[Mostafa Askari]

Yes, of course. The situation for the provinces in terms of their debt and their future debt profile is still the same. That hasn't changed.

[The Vice-Chair, Conservative, Ron Liepert]

Mr. Caron, I'll have to stop you there.

Mr. Aboultaif.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

I have a couple of things to ask about. You mentioned in the carbon tax analysis that the impact would be $1,400 on the GDP per capita. Is that figure correct? Did I hear that correctly?

[Jean-Denis Fréchette]

GDP per capita.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

That's about $50 billion based on the calculation, which is equal to about 2.5% of the GDP.

[Mostafa Askari]

Let me just clarify that. The study we did a while ago on climate change and the impact of a tax actually did not come directly from us. It came from the round table on the environment and the economy, and it was based on a hypothetical situation.

Concerning the current announcement the government made on the tax it's planning to impose, we don't really have enough information on exactly how that's going to work out. It all depends on how the provinces are going to react to this and how they're going to recycle the money they're going to receive from this. With all that information, then we can actually sit down and measure the overall impact of that change. Right now it would be very difficult to actually pinpoint a number and say what the impact would be.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

I do appreciate that and I agree with you. I made some kind of calculation, and it's not to the point where I have the time and ability to do so, but this is a very scary number. We're talking about $50 billion and for the size of the Canadian economy, it's huge.

Regardless of how the money is going to be circulated, we know that some of it could be wasted here and there and we would not benefit from it whatsoever. Rather, it's an imposition of taxation on Canadians.

The other question is on the CPP. You mentioned the figure of $6 billion which is equal to one-quarter of a per cent of the GDP. Economically, I call this an artificial growth of the GDP rate, because we're collecting extra taxes from people and then we're putting it in the economy and we call it growth in the GDP. Am I correct?

[Mostafa Askari]

I'm sorry, I didn't call it growth in the GDP. I was just talking about the amount relative to the GDP. I wasn't saying that this is going to increase growth in the GDP. I was just saying that this is equal to one-quarter of a per cent of the GDP.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Beautiful. I only wanted to clarify that.

Now, the $6 billion is on one side, and then we have job reduction, wage freezing, and maybe reluctance of consumers to spend, because of less income at the end of the day. Have these factors been calculated into the raw picture of impact?

[Mostafa Askari]

Only that we mentioned in the report that the CPP impact is already taken into account in our baseline projection.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

This is a very common question, and I believe we asked the question before. Do we have a revenue problem or do we have a spending problem in Canada?

[Mostafa Askari]

I don't know whether we have a revenue problem or a spending problem, but we do the projection and the bottom line is whether there is a fiscal deficit or a fiscal surplus, and that's what really matters at the end.

Do we have a revenue problem? I don't know. I don't think so. I don't know whether we have a revenue problem or a spending problem. It is a decision of the government to spend money and raise taxes in the way they wish, so I can't say whether it's good or bad in that sense.