Thank you very much, Mr. Chair. I want to thank you for inviting me here.
First, I will make my disclosures very quickly. I do not consult directly or indirectly to anyone anywhere. Second, I have no conflict of interest, as I have no investments in any firms anywhere. Third, I do not belong to or donate money to any political party or allow lawn signs on my property in any election.
Excuse me for looking to the right rather than at my tiny laptop, which has the camera. I have a much larger screen to my right, at 24 inches.
Since the 1960s, Canada has developed a well-deserved reputation for a strong and effective social safety net in multiple areas of Canadian society, including income support for seniors, OAS, GIS and CPP; income support for the unemployed through our famous employment insurance program; social support for low-income people and disadvantaged people; social housing; and child support.
Now the Government of Canada has introduced the Canada emergency student benefit, to last from May until August. I applaud that it is temporary and is delivered through the CRA, which I also strongly endorse. The government has also introduced the Canada student service grant. These are sound innovations that are in addition to previously announced programs.
We can certainly further tweak these various programs here and there, with a nip and a tuck or perhaps even major surgery, but every one of these business and individual programs is premised on several critical, unstated—or at least not adequately discussed—assumptions.
One is that these massive fiscal and monetary spending programs of somewhere near $200 billion involve—this is the assumption—temporary support for only a few months.
The second assumption is that, as this spending is absolutely essential, we must not discuss or worry about consequences.
The third is that if the pandemic continues without a vaccine—i.e., is not temporary—we must continue spending at these unprecedented levels.
The fourth is that we cannot reopen a significant percentage of firms or employment until the coronavirus is eradicated or mostly gone.
I want to focus on the much larger strategic issues that directly challenge these assumptions. Over the next several months, thousands of firms, overwhelmingly small business firms, are going to die. In the immortal words—and I'm not trying to make light of this at all—of John Cleese from Monty Python, they will not be sleeping; they will cease to be. They will cease to exist. There will be no jobs to return to one day in those firms. Indeed, it is highly conceivable that more small businesses will die in the next 12 months in Canada than will Canadians from the coronavirus. Thus, we must focus government fiscal and monetary policy on ensuring that most of our SMEs survive.
Why? Why am I so hung up on this, if I don't consult with them whatsoever? Here is a quick refresher course.
Statistics Canada data says that there are roughly 1.2 million small businesses in Canada with fewer than 99 employees, which is the definition, and they provide 70% of all the jobs. There are only 22,000 mid-size firms, with 100 to 499 employees, which provide 20%, and the 3,000 large corporations provide 10%.
As I stated at the outset, we have a diverse, well-structured suite of social infrastructure programs for individuals across society, but it's not quite so good on the business side. Indeed, in recent years some demonization of SME entrepreneurs concerning taxation ensured that we did not discuss and understand the critical centrality of SMEs in employment in our economy. Fortunately, those suggestions seem to have disappeared with the crisis.
I'll wrap up in the next minute.
Before turning to important alternative approaches, we must examine at a very broad level where we are. It appears increasingly likely that the federal deficit will reach $200 billion in 2020, or 10% of GDP. Yes, that's sustainable in the short run, but as I advised this very committee last fall and last spring, it's misleading to argue for the fiscal strength of the Government of Canada at a 30% debt-to-GDP ratio, because when we include the much weaker provincial governments, which is standard practice with OECD measurement, then we're at a 90% debt-to-GDP ratio, and that's before the crisis.
When we calculate the collapse in GDP, the denominator, plus a $200-billion deficit and the 30% debt-to-GDP number of last year's budget, we are now approaching 50%. When we add in a minimum of two more years of federal spending at $200 billion a year, we're approaching the debt-to-GDP percentage of Prime Minister Chrétien in 1995, which triggered the largest downsizing in Canadian history. It took three decades—the seventies, eighties and nineties—to achieve what we're going to accomplish in three years.
These numbers demonstrate the gargantuan magnitude, but there are solutions beyond praying for a vaccine.
We need to immediately classify every farm and industry by risk of coronavirus infection using the classification used by Professor Hendrik Streeck, a leading epidemiologist at the University of Bonn. He uses a classification of low–contact, low–risk activities, such as most of retail, excepting bars, restaurants and entertainment, versus high-contact, high-risk activities characterized by many people in close contact for extended periods of time. This refers to bars, restaurants, sporting events, and of course our front-line health care workers and seniors in our seniors homes.
We need to develop a plan—as Germany is doing as we speak, as well as Denmark, Saskatchewan and Quebec—to bring parts of our economy back, with appropriate distancing measures, to ensure the survival of SMEs, employment, our economy and our society.
I thank the committee.