Finance Committee on Feb. 19th, 2016

[Manuel Arango]

You're absolutely correct. Both are important.

Here is a very important incentive to increase physical activity. It has actually been raised indirectly here by a couple of folks. The issue actually relates to shovel-smart infrastructure investments. This was mentioned a little earlier.

Currently in Canada, we have a coalition that's asking for investments in active transportation infrastructure. This means sidewalks, bike lanes, and bike paths. This will help people commute to work more easily by having access to public transit rather than having to depend on cars all the time. They'll be able to walk to the store, etc. What does this do? It reduces greenhouse gas emissions, reduces air pollution, creates jobs, and makes people healthier and therefore more productive.

A very important incentive is to invest in shovel-smart infrastructure that promotes active living. That's much preferable to the road to nowhere, which has no return on investment other than creating jobs. We've got to create jobs, but we also have to be smart with our infrastructure investments.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Francesco, so that we can get three people in, I'm going to go to four minutes in this last three.

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

Good morning, Mr. Chair. Thank you, panellists, for your thoughtful remarks. I'll try to be as pointed and as quick as possible.

Dr. Lee, thank you for your slides. They were very insightful. As an economist myself, and someone who's worked in the finance and capital markets sector for 25 years, I understand where you've gotten your data.

In reference to the poverty slide, our platform is going to do more work on the poverty side—that is, bring it down. We've come out with the Canada child benefit, which will be introduced this year. It will lift 300,000 children out of poverty. I think it's a worthy endeavour. I think it's great policy.

There is the announcement on the guaranteed income supplement for single seniors. Those are worthy endeavours on the policy side by the federal government. I think it is a great slide to bring out. We need to do more work in reducing the poverty rate in Canada, and that's what we're going to do.

The Canadian economy in the 1970s grew by about 4% in real GDP; in the 1990s, it grew 3%; in the pre-financial crisis, it was about 2%. I remember working on the bond desk when everything was imploding in the U.S. We're now growing at about 1%.

What are three things that can get the economy growing, quickly? I have some follow-up questions, so please be quick.

[Dr. Ian Lee]

I'll just shotgun them. We do talk about this issue. There are many economists talking about it right now. How can we move the needle?

One is restructuring. That's not austerity. Restructuring means opening up the economy, getting rid of interprovincial trade barriers, having more free trade agreements, and doing anything that encourages, fosters, and facilitates economic growth, including pipelines.

Two is immigration. The younger population grows faster than the older population, whether you like it or not, and I'm sure everyone does. That's a reality.

The third one is infrastructure. I do agree with infrastructure as long as it's targeted.

Those are my three.

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

Spending on infrastructure that gets goods and services to markets, such as ports and rail, etc., is very important.

We know the numbers. A $1 investment in infrastructure provides $1.60-$1.64 in benefits to the economy. Right now, the Canadian economy needs it. I'm of the personal view that we need infrastructure on the maintenance side, because there's a maintenance backlog, an infrastructure deficit, but at the same time, we have to take the longer view. Whether it's a 4-year, 8-year, 12-year, or 20-year horizon, we need infrastructure dollars flowing to where we have gridlock. If goods and services can't get to market—call it the GTA issue—it's costing our economy billions of dollars. It's important that we do something about it. That's what we're going to do.

I'll end my remarks there. How long do I have?

[The Chair, Liberal, Wayne Easter]

You've got a minute and a bit.

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

Mr. Arango from the Heart and Stroke Foundation, how can we get this number lower in terms of preventing people from going to the hospital with heart disease and heart attacks?

It seems that every morning we wake up to hear that someone we know has passed away from a heart attack, a stroke, and so forth. Is it more education? Is it a lifestyle change? Is it a marketing campaign?

I know you've advocated the sugar sales tax. I'm not going to touch on that. How do we further get this reduced?

[Manuel Arango]

As with anything, and I would use the example of tobacco control, it's a multi-pronged approach that works.

Yes, public awareness and public education are important, and that's an important starting point. As well, we have to make sure that the environment we live in makes the healthy choice the easy choice, so price is important. You need to have affordable foods and you have to ensure that the unhealthy foods are not as affordable. With regard to the difference in the price between milk and sugary drinks, especially in northern communities there's a huge disparity, so we have to improve that.

Affordability is important. Accessibility of healthy food, accessibility of healthy living and health-promoting infrastructure, as I just mentioned, are all important. There are a number of things we have to do, but basically the easiest way is to use public policy to change our environment.

Another example, which has been raised by the government and on which a commitment has been made, is to put restrictions on the marketing of unhealthy foods and beverages to kids. That's another example that can improve health and improve heart disease and stroke in the long term.

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

As the father of a three-year old and a five-year-old, I know quite well the advertising aimed at young children. I'm with you on that.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. Aboultaif, you have four minutes.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Thank you very much. There were great presentations from the panel.

Mr. Lee, I'm grateful to hear a lot of positive news on the economy at large and to see the economic performance and the indices that you presented, although I believe that the economy is a full cycle. Everybody works for everybody, so everybody, at the end of the day, makes the economy as good or as bad as it is.

You've touched on the middle class and poverty reduction and the great job that previous governments have done. For the last 10 years, we've operated to reach, at the end of the day, a balanced budget.

That brings me to my question. Based on the evidence that you provided—and we will look into the details at some point—it looks as though we don't have to introduce a deficit budget. We probably can easily have a balanced budget. Is that the message I'm hearing from you today?

[Dr. Ian Lee]

I'm releasing a paper next Monday for The Macdonald-Laurier Institute. I'm making an argument along that line and putting forward, which no one has put forward thus far, to my knowledge, in Canada, an actual test. I'm not against deficits, but we talk about them and we say we need a deficit and we say we have to stimulate, but nobody explains when or why or how. What we're doing in this short paper is arguing that deficits are necessary and useful in extreme circumstances, so we put forward a test and we give examples—the Depression, 1980-81, 2008-09—when there is a national systemic collapse or dramatic decline in the economy.

If the economy is growing—which it is right now, at 1.5%, and it's scheduled to go to 2%—as I said on The Exchange last night, and forgive me for quoting myself, “Crisis? What crisis?” It's like the Supertramp album. Where is the crisis?

There is a crisis in Alberta. I'm not trivializing Alberta and the problems of Alberta. That calls again for a targeted solution, and I have no problem with targeted solutions. The GIS improvement from your government is a great idea. It's targeted.

To answer your question about the deficits, in this short paper we are arguing that the current economic conditions do not meet the test. We're growing at 1.5%. Are we just going to say, every time we are unhappy about the growth rate, “That's it, we have to go into deficit and stimulate like crazy”? There should be an objective, principle-based test. We're arguing that you have to have negative GDP; it has to be systemic across the whole country and not regional in orientation; and it must be a very dramatic decline—not something hovering around minus 0.1%, but a systemic, dramatic, sustained decline nationally. That's when you stimulate. The year 2008-09 had the most recent example of that situation, and today those conditions are not being met.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

I hear, basically, that this is no time for panic. I think we should take our time and really be thoughtful over what kind of budget we need to introduce.

On the other hand, I have a short question for you. Do we have a revenue problem or a spending problem?

[Dr. Ian Lee]

I argue, because of the views I've developed, that governments typically face spending problems, because there are always more demands than you can possibly meet. There are going to be hundreds of groups coming before you at this committee saying, “Spend, spend, spend, or the the world's going to come to an end. The end is nigh.”

My joke about professors and MPs is that you have to learn the most difficult word in the English language, which is the shortest word in the English language: “No, I am not changing your grade”, or “No, I am not giving you the money, because it's not justified”.

[The Chair, Liberal, Wayne Easter]

Thank you.

We are turning to Mr. MacKinnon for the last round.

[Dr. Ian Lee]

He knows the word “no”.

[Steven MacKinnon, Liberal, Gatineau, QC]

Clearly, Mr. Schetagne, our friends opposite did not fully grasp the criticism when they formed the previous government and they are grasping it even less fully today.

I would like to bring up the long-form census with you. Can you briefly describe the impact that the discontinuation of that form, that census, had on academics and scientists?

[Sylvain Schetagne]

Our members have talked about that impact on a number of occasions.

Various studies were underway, such as labour market integration, employment equity—but not necessarily employment quality—and understanding other life circumstances. Every study on those questions was affected. The impact was significant because there was an interruption in the data, an interruption that unfortunately cannot be repaired. The quality of the data produced was so poor that most people refused to use them.

Despite the interruption, the return of the census will allow us to continue to study precise phenomena. More importantly, it will also allow us to provide the data that I hope will be useful to you in making the political decisions with a view to improving the lot of Canadians.

[Steven MacKinnon, Liberal, Gatineau, QC]

So you are talking about a return to evidence-based decision-making.

[Sylvain Schetagne]

Exactly.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you very much.

Mr. Kobly, welcome, and thank you for travelling here today.

All of us, wherever we come from in the country, are affected by and dislike this boom-and-bust cycle. Have you reflected on it at all, or do you have any thoughts on it for this committee?

Governments, at any level, run up big surpluses when commodity prices are high and go into deep deficits when commodity prices are low. Even Mr. Lee would agree that the reality is that things are a little smoother than they look on the surface. From the perspective of an Albertan, do you have some thoughts on how Alberta could perhaps better prepare itself for bust cycles in the future than it has in the past?

[Ken Kobly]

Certainly the province of Alberta, through our heritage fund and our stability fund, was able to shelter from it.

When you have a material drop in commodity prices like this, it's very difficult to find shelter from that. To some degree that dramatic drop in commodity prices was aggravated by the fact that we have no access to tidewater for our natural resources, so we're forced to take the price that is offered when we export to the United States. Certainly we would have the ability to smooth that out a bit if we were able to access world markets.

[Steven MacKinnon, Liberal, Gatineau, QC]

I think that's clear. I also think that government reliance from royalty income, as opposed to other sorts of revenue, is a factor. Is that something you've considered?

[Ken Kobly]

Sorry, I didn't quite hear that question.

[Steven MacKinnon, Liberal, Gatineau, QC]

I know, for example, that Saskatchewan is projecting a deficit this year after a great run-up in potash and oil prices. Obviously Alberta is having the same sort of difficulty, as well as Newfoundland and Labrador. It is all seemingly due to the run-on effects of an overreliance on royalty revenue as opposed to other sources of revenue.

Do you have any thoughts on how these provinces could smooth their fiscal paths?