Finance Committee on Feb. 19th, 2016

[The Chair, Liberal, Wayne Easter]

Pursuant to Standing Order 108(2), on the pre-budget consultations 2016, this is meeting number seven.

I welcome the witnesses this morning. I know some people had quite short notice and we appreciate your making the effort. We are under a tight time frame, too.

We'll start with Ian Lee as an individual. He's an assistant professor at Carleton University.

Ian, go ahead. The floor is yours.

[Dr. Ian Lee, Assistant Professor, Carleton University, As an Individual]

Thank you very much, Mr. Chair.

I'm going to present slides in one moment, but I just want to state that I have been a full-time tenured professor at Carleton University's school of business since 1987, teaching business, economics, and public policy. This is my 29th year at Carleton. I have taught over 100 times in developing countries, including every year in Poland since 1991 and China since 1997. These are the two most successful post-communist countries in transition, which provides a lot of lessons in terms of economic development and so forth.

I appear on my own behalf as I do not work on behalf of lobbyists, NGOs, unions, corporations, political parties, or other individuals. Finally, since 2008 I've appeared 24 times before House and Senate committees of the Parliament of Canada, including multiple times before this august committee. I recognize the veteran, Monsieur Caron. I was mentioning to him that I am, I guess, a veteran, too.

In the run up to the budget, you'll receive numerous submissions from what Captain Renault in Casablanca called the usual gang of suspects, with long shopping lists of millions and billions of dollars. I will not do that today. I am going to do something completely different, following Prime Minister Trudeau's excellent statement that policy must be evidence based.

I will now provide some empirical data on the graphs that deconstruct some urban legends that are being touted regularly in the media by pundits, sometimes by elected officials, as the budget must be grounded on empirical reality and not on snake oil or quicksand.

I will start just by stating that Canada, as we all know, has experienced a temporary—and I underline the word “temporary”—oil shock. The economy is growing, albeit slowly. This year it's forecast to grow at 1.5%—that's positive 1.5%—next year, over 2%. There's already massive monetary stimulus sloshing around the system because of the historically unprecedented low interest rates, and there are $30 billion right now as we speak being pumped into the Canadian economy, representing the annual provincial deficits in aggregate across Canada.

I want to deal with urban legend number one. I've heard NGOs and some elected officials say that we're a one-trick pony, completely dependent on oil and gas. This is one of the biggest urban legends of all. I deconstruct it as often as I can. This is a very fresh graph. It's only two weeks old. It's posted by Statistics Canada. It breaks down the totality of Canada's economy into sectors ranked by employment. I'm not going to read through the list. I just simply want to highlight that the totality of all Canadians working in natural resources—that's where we're all allegedly working—is 370,000 Canadians, one-third of one million.

By contrast, 16 million of 18 million employed Canadians are working downstream in the services—plural—sectors, and that includes education, like me. There are 1.3 million of me running around, one million in financial services, and 2.7 million employed in health care. I can go on and on. We are one of the most diversified economies in the entire world alongside the United States, so when people say we're not diversified, that is not evidence based. We can discount that urban legend.

Another is that we're running into very bad times and we're very poor, or we're about to be. This is simply not true. We are one of the richest, most affluent countries on the planet Earth, somewhere around the 10th wealthiest in the world ranked by GDP per person on a PPP—that's purchasing power parity—basis, which is the proper way to do it. As you can see, there's the graph showing that we're in the top 10 countries of about 200 countries in the world.

Another urban legend is that the middle class is in collapse—it's shrinking; it's disappearing; it's vanishing. This is simply not true. This is Stephen Gordon's graph. You're all aware of Professor Gordon from Laval, and this is from a CANSIM table. Again, I'm not going to belabour this. Yes, it collapsed or dropped very dramatically in the 1990s because of the historic downsizing. It was the largest downsizing in Canadian history, but it has recovered since then.

Another thing we're hearing all the time from the NGOs is that inequality is exploding in Canada, yet people refuse to do comparative empirical research. This is OECD data. It's unimpeachable and it's showing that we are almost smack dab on the OECD average. This idea that we're an extreme outlier is simply empirically false. I'm not suggesting that we shouldn't do more about each of these urban legends, that we can't do more to reduce inequality, but we have to start from facts and not from urban legends.

Another issue is that I receive emails from NGOs who get angry at me talking about this. Andrew Coyne has also talked about this in his columns. Poverty has collapsed in this country over the last 50 years, collapsed.

It was 25% in the mid-1960s when I was a child growing up in eastern Ontario. Twenty-five per cent of Canadians were below the poverty line. Today it's 8.8%. That's under both Liberal and Conservative administrations. This is completely non-partisan. We are doing an extraordinary job at reducing poverty.

Parallel with that is the idea that—

[The Chair, Liberal, Wayne Easter]

Mr. Lee, just to interrupt, we are trying to hold people to five minutes, so take another minute to—

[Dr. Ian Lee]

I'll skate through these really quickly.

Elder poverty, likewise, has collapsed from very high levels to one of the lowest in the world. We're at the very bottom of the OECD. In terms of pension readiness, 83% of Canadian households are on track to retire without a problem. We do have a problem in Canada, but it's a small problem. It's a minority of 15% to 20% of working Canadians, and 7% who are already retired. Elders are the wealthiest people in Canada. Senior families, according to Statistics Canada data, have $650,000 in net worth. So our elders are our wealthiest, not our poorest.

I'll just finish up on these two, because I've heard some elected officials say that infrastructure spending has collapsed in Canada. Actually, it has not. It's at its long-term average of 4% of GDP.

I'll skip over these very quickly.

The last one I want to deal with is the municipalities because they claim all the time that they're running out of money. Municipality revenues are exploding. Their population has grown 11% in the last 10 years; their spending has grown by 43% in the last 10 years.

Finally, my final point is GHG emissions. We're told all the time that we have to be more like the Americans. We are cleaner than the United States on GHG emissions per capita. They source 20% of their energy from coal, which is the dirtiest of the filthiest of the dirty. We only source 6%. We are cleaner than the United States. We want them to emulate us.

Thanks very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Lee.

We'll turn to the Alberta Chambers of Commerce with Ken Kobly.

[Ken Kobly, President and Chief Executive Officer, Alberta Chambers of Commerce]

Thank you, Mr. Chair.

Thanks to the committee members for inviting me this morning to present on behalf of the Alberta Chambers of Commerce. For those of you who don't know, the Alberta Chambers of Commerce is a voluntary federation of 126 community chambers in the province of Alberta, which in turn represent in excess of 24,000 businesses in the province, and approximately 95% of those members are small and medium-sized enterprises.

Why am I here today? I am not here to ask for money. As my colleague mentioned earlier, I'm here to urge caution to the Government of Canada. When setting the budget for this coming year, be aware of the impact of cumulative effects and cumulative layering of costs on businesses.

Certainly in Alberta we're going through some issues right now with the oil industry, the price of oil being at a dramatic low level. One thing that doesn't get a whole lot of press play is the small and medium-sized enterprises that are currently suffering. Those small and medium-sized enterprises go the way of the oil. Right now they are not feeling that there's a whole lot of attention being paid to them and the issues they're facing.

I would ask you to avoid layering costs on top of businesses in Alberta. We are obviously feeling the effect of a low loonie, which affects input costs for most small and medium-sized enterprises.

We've recently had an increase in the corporate tax rate, going up by 2%. Again, that is only affecting large companies, some people would say. However, small and medium-sized enterprises in the province of Alberta are fed by larger corporations. If their corporate taxes increase, the amount of money that goes to small and medium-sized enterprises obviously decreases.

We're facing uncertainty as far as our minimum wage goes. As you probably know, we're going from $10.20 to $15 an hour by the year 2018, which adds a dramatic cost onto small and medium-sized enterprises. It doesn't affect only those who are paying at the minimum wage, but also those who are paying above minimum wage, because there's always pressure to increase.

As was pointed out by the previous presenter, we're also faced with increased municipal taxes, which is a cost that is burdened onto businesses in the province. We're also facing an increase in the carbon tax. Our province has had a long-standing carbon tax. It is going from $10 per tonne up to $30 per tonne within the next three years.

The Edmonton Chamber of Commerce put out a great press release yesterday. I would echo its words, that when it comes to what the Government of Canada is doing when it's drafting its budget, “Stop! Look both ways. Think before you tax.”

On the issue of infrastructure, we support targeted infrastructure stimulus spending. We've heard a lot of comments around the issue of being shovel-ready. I would ask you instead to be shovel smart. Look at what infrastructure spending would provide long-term economic impact. Target those areas of the country that require stimulus and help.

Rex Murphy said about six or seven years ago that, when the cod fishery collapsed, the government didn't build an LRT in Saskatoon. I would ask you again to target those areas of the country that need assistance, that need a little bit of a kick-start on their economies.

Obviously, coming from Alberta, I think the biggest infrastructure project that could go ahead and not affect or cost the Government of Canada any money is obviously the construction of pipelines, because that would put a tonne of money into the economy. We have no control over the price of gas and oil. That's a world commodity. But with access to markets other than the United States, we could maximize and receive full market value in the global marketplace. It would have a side benefit of probably reducing the cost of energy in eastern Canada, given the amount of oil and natural gas that's currently imported into Canada.

I would use this time period that we're going through with higher unemployment rates to take the time to fix our immigration system. We will rebound—in my lifetime I've seen this rodeo about four times—and when we rebound, we will need access on a timely basis to immigrants who can help us with the labour shortage that we're certain to see when we come out of this thing. Think it out and develop it right, so we don't have another program where the rules are changed every six months.

Our full submission is available on the website at abchamber.ca. We've also submitted a full copy. I believe the committee has received it. Again, I would sum up my presentation by saying, “Do no harm in this budget, please.”

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Kobly. The submission that you submitted will be transmitted to all members after it's translated. Thank you very much, a lot of good information there.

From the Canadian Association of University Teachers, we have Mr. Sylvain Schetagne.

[Sylvain Schetagne, Associate Executive Director, Canadian Association of University Teachers]

Mr. Chair, members of the committee, thank you for giving us the opportunity to present our suggestions for the next federal budget on behalf of 68,000 professors, librarians, researchers, professionals and other staff working in over 120 universities and colleges across the country.

The Canadian Association of University Teachers (CAUT) is actively involved in improving the quality of post-secondary education, by increasing accessibility and safeguarding academic freedom.

After years of austerity and attacks against science and scientists, Canada needs a new vision to get science right and improve accessibility and quality of post-secondary education.

CAUT welcomes the new government's commitments to unmuzzle government scientists, to make government science fully available to the public, and to ensure that scientific analysis is considered in decision-making. CAUT applauds the restoring of the long-form census. We were also pleased to see that the new science minister's mandate includes the examination of options to strengthen the recognition and support for fundamental research.

For years, CAUT has been raising concerns about the former government's direction in science policy that favoured narrowed commercial interest at the expense of basic research and the broader public interest. It is now clear that this strategy has not delivered the promised investments in jobs and Canada is falling behind other developed countries in science and innovation. More needs to be done to rebuild Canada's research capacity, starting with more investment in basic research.

An infusion of $3 billion of new research and development money would be needed in this country right now to bring us back to what was spent in 2006. Now is the time for the federal government to invest in Canada's knowledge infrastructure and boost Canada's scientific capacity.

More precisely, CAUT recommends that in this year's budget, the federal government invest an additional $250 million, $350 million the following year, and $500 million in three years in base funding for basic research to the three research granting councils. It should do so while ensuring research funding provided through Canada's research granting councils and decisions about priorities, projects, programs, and scholarships are made using peer-review processes by the scientific committee on the basis of merit.

We also recommend the federal government reinvest significantly in its own research. The former federal government cut about $1 billion and 4,000 jobs from government science programs. This has reduced the ability of the government's scientists to provide independent and reliable data, and to serve the public interest.

Finally, we believe that the Parliament of Canada would strongly benefit from a parliamentary science officer, or PSO. The PSO would be an independent officer of the Library of Parliament who would report to the Senate and the House of Commons. His or her role would be to provide advice and analysis to Parliament about the adequacy and effectiveness of the nation's science policy, priorities, and funding.

Investment in our knowledge infrastructure cannot happen in a vacuum. It must be combined with improved access to and participation in post-secondary studies.

In 1990, public funding represented up to 80% of the operating revenue of universities, compared to just under 50% in 2014. This step backward largely has to do with the reduced federal funding transfers to the provinces from the 1990s on.

The CAUT is urging the federal government to work with the provinces in order to develop and implement a national post-secondary education strategy, with one of the pillars being increased funding to overcome all obstacles, including financial ones, to access to and participation in post-secondary education.

The CAUT recommends that the Canadian social transfer be replaced by separate stand-alone funds for social services and post-secondary education. A new transfer for post-secondary education should be included in legislation on post-secondary education, modelled after the Canada Health Act, outlining the responsibilities and expectations of each administration, establishing national guidelines, enacting enforcement mechanisms and, above all, providing stable and long-term funding formulas.

Let me conclude by saying that the rising tuition fees have placed a disproportionate burden on students, especially on Canada's indigenous students. Funding provided to band councils to support First Nations students has remained flat despite the soaring tuition fees and demographic explosion. The result has been that thousands of eligible students remain on waiting lists to get the funding they need to pursue a post-secondary education.

It is time for the federal government to honour its historical commitments to Canada's First Nations by recognizing that education is a treaty right and by providing the necessary financial support.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Schetagne.

Turning to the Canadian Psychological Association, we have Ms. Cohen.

[Dr. Karen R. Cohen, Chief Executive Officer, Canadian Psychological Association]

Thank you.

Good morning. My name is Dr. Karen Cohen. I'm the chief executive officer of the Canadian Psychological Association. CPA is the national association of Canada's psychologists.

The federal government has an important role to play in Canada's mental health. We're pleased with its commitment to making high-quality mental health services more available to Canadians. If we want a health care system that will deliver cost and clinically effective care, then we must revisit policies, programs, and funding structures through which health care is delivered.

Mental illness affects one in five Canadians and costs the economy $50 billion a year, yet no province currently pays for assessment or treatment by psychologists outside of publicly funded institutions.

Research has found that psychological treatments are less expensive than and at least as effective as medication for the most common mental health conditions, and in some cases, work better. Psychological treatments do a better job for depression than medication in preventing relapse.

Psychological treatments work, but unfortunately only some Canadians have access to them. Access to effective health treatment should not depend on your employment benefits or income level. Those who cannot afford to pay for treatment end up on long wait lists, have to depend on prescription medications, or simply do not get help at all.

We have some solutions to this problem.

The CPA commissioned a report from a group of health economists that proposed several models of delivering enhanced access to psychological services for Canadians. The report provides a business case based on demonstrating positive return on investment and desired clinical outcomes.

In the past decade, the United Kingdom and Australia have made huge investments in publicly funded therapy. The U.K.'s improving access to psychological therapies program provides treatment to people with depression and anxiety disorders. The new health accord could improve access to psychological services by adapting similar programs here in Canada.

I also want to bring your attention to an issue that is extremely important to psychologists and their patients.

Budget 2013 included an unclear statement about changes to the GST on what is and is not considered a health service. Because of this change, psychologists and other health care providers have to charge their patients GST for some services. The new tax came into effect immediately and the government predicts that it will collect only $1 million in 2015-16 and $2 million in 2016-17. This tax policy runs counter to the government's agenda to advance mental health in Canada.

Despite the fact the tax came into effect three years ago, it remains unclear what services should be taxed and which are exempt. Advice provided to our members from the Canada Revenue Agency has been inconsistent and contradictory. For example, we are fairly certain that an assessment to determine the impact of child sexual abuse in adult survivors for the purposes of civil litigation is now subject to tax. Also taxed are evaluations for the purposes of establishing eligibility for disability, fitness to stand trial, and mediation in a divorce proceeding. In the spring of 2015, we were told by CRA that additional clarification was coming, but none has materialized. We hope that this situation can be rectified in the upcoming budget.

Investment in psychological research is also paramount to Canada's social fabric. Psychological research has broad and significant application to the well-being of Canadians and their communities, creating an understanding of people, human problems, and the many environments in which we live.

Finally, as has already been mentioned, a strong science culture relies on the availability of national statistics with common data points. The cancellation of national surveys, such as the university and college academic staff system and the survey of earned doctorates, to name just two, has left significant gaps in our ability to track the number and demographic distribution of academics in Canada, psychologists among them. Without such surveys, we don't know how many people have attained graduate degrees in psychology, who is working where, or if there are enough psychologists to meet current teaching, research, and health service needs of Canadians.

In closing, I will sum up our recommendations.

One, make access to psychological services the priority of the new health accord.

Two, target funding to assist the provinces and territories to improve access to psychological services. The funds could be used by the provinces and territories to adapt the U.K.'s improving access to psychological therapies program here in Canada.

Three, remove the new tax on psychological services. All psychological services have a health purpose and should remain exempt.

Four, invest in psychological research with continued, increased, and balanced funding for research via base funding for the granting councils, as well as stabilized funding for operating and infrastructure support.

Finally, we hope that this budget will include funding for Statistics Canada to reinstate the surveys that are critical to the development and maintenance of good programming and policy.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Cohen.

Manny, with the Heart and Stroke Foundation, the floor is yours.

[Manuel Arango, Director, Health Policy and Advocacy, Heart and Stroke Foundation of Canada]

Thank you, Mr. Chair and honourable members.

The Heart and Stroke Foundation is a national volunteer-based charity, led and supported by more than 125,000 volunteers across the country and close to two million donors. The aim of the foundation is to create healthy lives free of heart disease and stroke. We do this in three ways: the advancement of research, the promotion of healthy living, and advocacy work as well.

Despite an impressive 75% reduction in the death rate from heart disease and stroke over the last 60 years, every seven minutes a Canadian still dies from heart disease and stroke, and that's unacceptable. It amounts to more than 66,000 deaths per year. Heart disease and stroke is the leading cause of hospitalizations and the second leading cause of death in Canada. We have a lot more work to do. There's no doubt about it.

The foundation is proposing to work with the federal government on solutions that are consistent with the themes proposed by the finance minister for the 2016 pre-budget consultations—in particular, creating economic growth while ensuring our most vulnerable do not get left behind. Specifically, we're seeking to partner with the federal government to do two things: one, protect Canada's children by adopting a manufacturers' levy on sugary drinks; and two, invest in science by providing $30 million annually to support heart disease and stroke research in Canada.

To help protect Canadian children, we're recommending that the federal government adopt a manufacturers' levy on sugary drinks. Ideally, this tax should include various elements or best practices. It should be an excise tax based on volume, should increase according to the amount of sugar in the drinks, should be visible at the point of purchase, and should include a broad range of sugary drinks including fruit juices, which have just as much or more sugar than soda pop. A federal levy of 5¢ per 100 millilitres on sugary drinks, sugar-sweetened beverages, would raise almost $2 billion in revenue for the government, which is much needed revenue at this point in time.

Ideally, a portion of this new revenue stream would be redirected toward subsidizing healthy living initiatives such as a national healthy lunch program for students. There is strong and growing evidence that sugary drink taxation is working. In Mexico, for instance, a one peso per ounce, or 10%, excise tax on sugary drink purchases led to a 12% reduction in sugary drink purchases and as high as a 17% reduction among low-income people. This can work in Canada, too, to improve health and raise much-needed revenue.

Our second request deals with research. There are four areas that require investment: heart failure, creating capacity for the future, heart research for women, and nutrition. The foundation has a tradition of working with the Canadian Institutes of Health Research and leading universities and hospitals to fund the best researchers across the country.

In June 2013, the Heart and Stroke Foundation launched the universities and hospitals initiative, a unique collaboration in which the HSF committed to providing $30 million annually in heart disease and stroke research funding to Canada's top 20 leading universities and hospitals. Unfortunately, despite this commitment, the reality is that Canada is falling behind in high-impact heart disease and stroke research. Applications to CIHR in all fields of research have increased by 110% between 2000 and 2010, yet in heart disease and stroke research, it's only increased by 22%. As well, and more worrisome, the number of early investigators or new researchers in the field has reduced by 50% between 2002 and 2010, so we need more investment to encourage young researchers into heart disease and stroke.

What's the opportunity here? In addition to saving lives and improving Canadians' quality of life, this investment would create high-value jobs—70% of funds that go to research would go toward job creation. It would also help retain young researchers in the field. Finally, it would lead to as high as an almost 40% return on investment. This means that an investment in heart disease and stroke research could be fully recouped by the government within two years.

Mr. Chair, thank you for the time. I look forward to questions and discussion with the honourable members.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Manny.

We'll turn to Mr. Koss. I see that you took the parliamentary secretary's chair to the microphone. Maybe you want to do question period for him today, too.

[Richard Koss, President, Hunter Wire Products Ltd.]

Thank you. I haven't said a word yet and I've been promoted already.

[The Chair, Liberal, Wayne Easter]

With Hunter Wire Products Limited, Mr. Koss, president, go ahead.

[Richard Koss]

Mr. Chair and honourable members, my name is Richard Koss and I am a small business owner from Winnipeg.

You have my written submission already. I won't speak to that except to answer questions if you have any, and I know I'm on the clock, so forgive me if I get right down to business.

According to recent reports, there are expectations from the Quebec government and from Bombardier that the federal government will match Quebec's contribution to Bombardier of $1 billion. That's $2 billion of taxpayers' money going to a company that has just announced a 7,000-person layoff, but strangely not in the sector that is trying to market an aircraft that itself is already $2 billion over budget.

If this were a one-time event one could be persuaded that there might be value in it. The reality is that Bombardier is constantly being fed public money and its appetite is insatiable. Between 1966 and 2009 they have received $1.14 billion already via 48 separate transactions from Industry Canada alone. De Havilland, which was acquired by Bombardier in 1992, has received an additional $1.1 billion, and Pratt and Whitney, which makes the engines for Bombardier's not-yet jet, has received $3.3 billion.

My intent is not to beat up on Bombardier, but to highlight the relative unfairness of these kinds of supports when there are so many viable and productive small businesses needing help far more than the Bombardiers of the world.

December 2012 Statistics Canada estimates placed the number of employer-owned businesses in Canada at 1.1 million, 98% of them classified as small or less than 100 employees. Other StatsCan reports state that these businesses employ over 7.7 million people, or 40% of Canada's total workforce. They contribute 28%, or over $500 billion, of the country's total GDP and account for 25% of its total exports.

According to Bloomberg Business, Bombardier employs 24,000 people in Canada and contributes $12.4 billion towards our GDP. That's impressive, but should we be paying them to do that?

Not all large corporations are receiving taxpayer-funded handouts and not all small businesses are in need of financial assistance, but many are or will be in the next short time span.

I have a personal perspective to this. In September 2014, my company, Hunter Wire Products, borrowed $350,000 from BDC to purchase an automated powder painting line. We encountered numerous difficulties with the paint contractor and finally locked them out of the building in May 2015. From that point on, we were in almost constant negotiations with BDC attempting to obtain the release of the balance of the loan proceeds, approximately $50,000, so we could hire another firm to complete the work. We were unsuccessful.

Eventually, due to other serious financial pressures added to the burden of the non-operational paint line and its loss of revenue, the company declared bankruptcy in October 2015. This resulted in the closure of a well-known, 70-year-old Winnipeg manufacturing business. For the lack of $50,000 we lost a company producing over $7 million in revenue, almost $1 million of that in exports, and 50 people lost their jobs.

Saving my 50 employees would have cost $1,000 per employee. In comparison, assuming Bombardier gets their requested financing, the cost is $83,333 per employee.

A survey released on Wednesday by the Winnipeg Chamber of Commerce cites 40% of its respondents as stating that access to financing is either somewhat or very difficult. Some of these companies are certain to go out of business due to lack of funding. You can do something about that in the upcoming budget. Make a point of creating or enhancing programs that fund small business start-ups. Small businesses create three and a half times as many new jobs every year as medium and large businesses combined. That's 77% of all private sector jobs created since 2003.

Ensure that there is adequate financing available to establish small businesses for their needs. This applies just as much to old wire manufacturing companies as to new 3-D additive manufacturing start-ups, and sometimes even more so.

Mandate that a certain percentage of federal government purchases must come from small business. This doesn't mean a small business front that is owned by a large corporation.

Offer more loan guarantees at reasonable interest rates to allow small businesses to invest in needed technology for the sake of productivity improvement. Report after report states how under-invested Canadian companies are in R and D and technology. It's because technology is expensive, and we need help.

Put a moratorium on grants and subsidies and loans to large corporations, especially publicly traded ones. They are able to go to the marketplace for capital, small businesses cannot.

Honourable members, you cannot solve all our problems. You cannot remove the risk of running a small business and we don't want you to. We're not asking for a handout, but sometimes we need a hand-up and this is one of those sometimes. Small business is a key driver of the Canadian economy, producing the wealth that many of the other presenters here are asking you to redistribute in their direction. Help us to do that. At the very least, don't forget or take for granted where it comes from.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Koss, and for a very personal story as well.

I couldn't help thinking when you were making your case on the problems with the need for $50,000, would a little common sense from BDC have solved the problem, rather than sticking completely to the rules and regulations?

[Richard Koss]

We thought so as well. We made no headway with that. We made numerous requests for somebody from Calgary to come to our plant and see what we were talking about. We couldn't get that. Nobody from BDC showed up at our facility. We would have days and in some cases weeks go by with unanswered emails, and this was a vital piece of our operation. It was incredibly frustrating.

I'm not here to trash BDC. We've been a customer of BDC since 1979. We've done lots of work with them, but it appears to us that something has changed in their philosophy and how they're operating. They seem to be more of a bank and less of a business person's friend.

[The Chair, Liberal, Wayne Easter]

Thank you.

That's good information for us to have. I think anybody who is an MP, who has ever dealt with bureaucracy—even a minister for that matter, Ms. Raitt, a minister trying to deal with bureaucracy—runs into that all too often.

Turning to the first round, we have Mr. Ouellette for seven minutes.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Thank you very much, everyone, for being witnesses here. It's very much appreciated.

Mr. Lee, because you presented a lot of facts about some of the myths in the Canadian economy, I'd like to get a sense of what government should be allocating resources to that's perhaps going to get the economy growing at higher rates. What's going to have the greatest return on investment?

[Dr. Ian Lee]

I want to echo what Mr. Kobly said, and I've been arguing this in my research in different areas including social policy and for that matter account policy. I really think that you have to target. It's the same idea as in business; we talk about focus. I think there's no good argument for universality, whether we're talking CPP reform, where most people do not need help but some people do. That's an example of targeting.

To answer your question on infrastructure, I think you will go ahead with infrastructure and I think it's a great idea, but I think you have to do it in a very smart way and target. I'm drawing on Jack Mintz's excellent paper, which I hope all of you read, published only a couple of months ago. Infrastructure is projects that speed up the movement of goods, services, or people across distances.

Let me be really blunt. That rules out green infrastructure. It rules out social housing, and it's not because I'm against social housing. I'm not. We do it in Ottawa. But if you're asking me what will give you the better bang for the buck, it's focusing on infrastructure that moves stuff: roads, ports, railroads, pipelines, that sort of thing. If you want the economy to get moving again you're going to get a much bigger ROI on so-called traditional infrastructure.

To answer your question, because I think you were asking about infrastructure, I would deal with that.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

I'm asking about everything.

[Dr. Ian Lee]

Number one is targeting, because to put it really bluntly you're wasting money.

If I can go back to CPP reform, because everybody knows about it and I've published two papers on this that are peer-reviewed, large numbers of us don't need it. Why would you want to reform CPP to make me pay more premiums, when I have a gold-plated pension at Carleton University that I think exceeds the Government of Canada's?

Why would I want to pay more into a CPP, which gives me less money in my pocket to spend on the economy in restaurants and on small businesses, because the premiums that you pay are taken out of the flow? Yes, they're reinvested, but I don't have them to spend. If you do go forward with a universal reform to CPP, you're going to slow down the economy for a whole bunch of people who don't need it. Instead, in that context, target the people who do need help, and there are people who do need help.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

That's for people who are retiring today, but there are a lot of young people who don't have the type of employment to build up a pension. I was a university professor. I didn't get my five years in so I'm not getting a pension from the last five years. I didn't get a pension from when I was a teacher for two years. I didn't get a pension when I was in another employment for a couple years. I'm 39, so I do have 10 years of pensionable time with the military, but for the rest of that 18 or 19 years, it's not there. The pension that I'm going to get is going to be around $8,000 or $9,000.

[Dr. Ian Lee]

I promise you I will send the committee my two papers. I don't get royalties on this so this isn't about money, but I'll answer it very quickly.

There's another urban legend that Canadians are completely dependent on the so-called first two pillars, which are OAS-GIS and CPP. That's simply empirically not true. Empirically, the top three quintiles receive very small amounts from the first two pillars. The bottom two quintiles in Canada, the bottom 40% by income, are vitally dependent on the first two pillars I've described: OAS-GIS and CPP. There's no question about that, but the idea that the other three quintiles are dependant on those first two pillars is not true. I don't have the time to present the whole paper, but suffice it to say that we really do have two different pension systems in Canada operating parallel and we don't realize it. That's what the argument was in my paper.

We have essentially social welfare for low-income elder people. It's called OAS-GIS and CPP, and people in the top three quintiles have all kinds of other sources of income coming in. That's been documented in Kevin Milligan's research, in Jack Mintz's research, In Vijay Jog's research, and my research, to name just four.