Evidence of meeting #34 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was debt.
A recording is available from Parliament.
6:05 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
Ladies and gentlemen, good evening. Thank you for your presentations.
Mr. Garon, one of the things you addressed was transfers to the provinces. You talked about the importance of better funding the health care system. You also suggested a transfer payment for the rest.
6:10 p.m.
Liberal
The Chair Liberal Wayne Easter
Gabriel, my own microphone was off, so you couldn't hear me. Just slow down a little bit.
I gather that there are some microphones on. If anybody has their microphone on, make sure it's shut off. There's feedback coming in to the translation booth.
Start over, Mr. Ste-Marie, if you could, please.
6:10 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Okay. Thank you.
Mr. Garon, could you talk about the importance of transfers? There has been a lot of talk about the debt. Do you think the debt is an obstacle to transfers to the provinces?
6:10 p.m.
Professor of economics, École des sciences de la gestion, Université du Québec à Montréal, As an Individual
Thank you very much, Mr. Ste-Marie.
As an economist, I must admit that I agree with the diagnosis made by some of my fellow economists here, including Dr. Mintz, which I welcome.
Yes, the debt burden and the deficit are significant, but I have the following reservation. We are in a crisis that is virtually unprecedented. I feel like the house is burning down, and we're looking at the state of the shingles on the roof.
I think it's the transition that's important. It will start with the budgetary steps that will be taken in the coming months to make assistance more targeted and to regain control of the budgetary situation. That's the first thing. The transition will also involve wage subsidies and a more functional employment insurance program.
The second thing is the transfers to the provinces, which I've already mentioned. Recently, I was looking at the major transfers to the provinces. Excluding infrastructure, the per capita amount that the federal government gives to the provincial governments is roughly equal to the amount of the CERB. There was an urgency to act in this crisis, and a lot of money was made available, but the provinces, which are bound by a social contract to their people, have to provide front-line health and education services. They get an average transfer, which includes equalization payments. This means that it's much less for some provinces that don't receive equalization payments. They get less than the CERB per capita. This is an indication that there must be a renewed partnership between the provinces and the federal government to get out of the crisis and make a debt transfer. I think this is important. If the provinces haven't all requested it yet, I believe they will eventually.
We talked about the debt of future generations. We have to be a little pragmatic about that. The well-being of future generations depends on their employability, their productivity and their ability to return to the work world honourably and enthusiastically. There will have to be a massive investment in the training and “re-training” of the workforce.
I watched the first two hours of this parliamentary committee meeting, and this is what the colleges and universities are requesting. Obviously, there has to be coordination with the provinces. I don't think the middle of a crisis is the right time to be counting the debt and asking for very short-term budget rules. In fact, Quebec is in the process of questioning these rules. The middle of a crisis isn't the right time to be thinking about the future of future generations.
6:10 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you.
Quebec had an agreement on skills training. The Government of Quebec manages the training, and the federal government transfers the money. We know that it takes time for the two levels of administration to coordinate. This is the case, for example, with social housing, where the needs are great. The money was announced a few years ago and the agreement has still not been signed.
Are any obstacles likely in this case and could the money announced for Quebec not be released?
6:10 p.m.
Professor of economics, École des sciences de la gestion, Université du Québec à Montréal, As an Individual
I repeat that we must train the workforce and increase the amounts currently on the table. The federal government has a role to play, particularly by improving employment insurance programs. The provinces will have to come to an agreement with Ottawa so that it can be done quickly.
I have a Quebec bias because I study the Quebec situation a lot. Quebec has a specific agreement on workforce training. As you said, Mr. Ste-Marie, this sort of agreement often takes a long time to negotiate. After long negotiations, we come back to square one, with some accountability, without very stringent conditions, and with a fine partnership.
Training the workforce in times of crisis will be an excellent test of how Canadian federalism works.
6:10 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you.
In your presentation, you reminded us of the importance of having incentives to return to work. In terms of social supports, people might be moving towards the end of the CERB. Then they would rely on wage subsidies.
But, as you were saying, the various sectors will not all restart at the same pace; the reality in each industry is not the same.
What should the government do to ensure monitoring and properly meet income support needs, while maintaining an incentive to return to work?
6:15 p.m.
Professor of economics, École des sciences de la gestion, Université du Québec à Montréal, As an Individual
That is a very good question.
First, I want to point out that, at the very beginning of the crisis, I was strongly in favour of wage subsidies. I was in favour of finding a way for the state, the Government of Canada, to become a kind of buyer of last resort for our businesses in a period of crisis when supply and demand collapsed.
Economists, and there are many of us here at this meeting, are currently working in the dark. It is difficult. There are production stoppages in many sectors. Some sectors will be able to reopen. Some will reopen in some provinces, in some regions, and others will not.
To be able to design an effective and fair asymmetrical design of employment insurance, for example, and also of wage subsidy measures, we will have to have the situation clearly mapped out. Very extensive work will have to be done to find out where these production stoppages are and in which sectors. This will allow us to make the right decisions, because all analysts, even the smartest ones in the country right now, are having a hard time identifying those sectors.
I would add that it is important for the government to find out which sectors must be given priority. We see it in the provinces, and we will see it here, in the federal government, if it's not already the case: there are sectors where lobbyists are lining up for help. We are clearly sensitive to that. These are jobs, these are the lives of Canadians.
However, we will have to have a good idea of the sectors that need priority assistance if we want to regain control of the budget situation. It is difficult to get that information at this time. I think the government has a role to play in providing us with the information. I also know that public servants are very busy and that we are asking for a lot.
6:15 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you both very much.
We'll turn to the last questioner of the first round, Mr. Julian, and we'll start the second round with Mr. Morantz.
Peter.
6:15 p.m.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Thanks very much, Mr. Chair.
Thanks to all our witnesses for being here. We certainly hope that you and your families are safe and healthy.
I'd like to direct my questions to Ms. MacEwen.
Ms. MacEwen, you're a breath of fresh air. Some people in Ottawa want to go back to the old normal where 50% of Canadian families struggled, within $200 of insolvency on any given month, the largest level of family debt load in the industrialized world. According to the Parliamentary Budget Officer, $26 billion in tax revenues are going offshore. Very wealthy and very profitable corporations can basically take their money offshore because of an extremely porous tax system.
I have three questions.
Your presentation, I thought, was brilliant. You talked about really putting the emphasis coming through and out of the pandemic on the health of Canadians and income supports. How important is that structure?
For my second question, we've seen a lot of profiteering during this crisis. The banks have $750 billion in liquidity support from the various federal government agencies. As you noted, support hasn't trickled down. I believe that with programs for corporate bailouts, they can apply to oversees tax havens. We see companies like Amazon that don't respect the health and safety of their employees getting contracts from this federal government. How important is it that we crack down on this type of profiteering?
Third, what do you think the public appetite is for these changes? We've seen record levels of support for wealth tax, for child care. In the same way that after the Second World War, Canadians finally said, "Enough is enough. We're going to start investing in people", to what extent do you think Canadians now are also ready for investments finally going to people for a change rather than to Bay Street?
6:15 p.m.
Senior Economist, National Services, Canadian Union of Public Employees
Thank you very much. That's a great question. I appreciate that.
I'm really grateful to be presenting with Armine, because I agree completely.
The first thing we have to focus on is health. If we're not healthy, and if we can't be healthy at work, we know that we spread this to others in our community. Our health is incredibly linked to each other. Income supports allow people to stay home when they're sick. That was why we introduced the CERB. It was to allow people to be able to afford to follow public health advice and stay home to limit the spread of the virus. That was largely quite successful. The second thing we need to do is to get the situation in long-term care homes under control and to improve the staffing ratios and protocols in place there.
In terms of profiteering, this is what I was talking about. Regular Canadians, the members that CUPE has, make less than $50,000 a year on average. You can talk to a construction worker or to a health care worker about what they see the government doing with all of these announcements around liquidity and supporting the banks, and they very clearly feel that they're being left behind. They're struggling to make ends meet. They're struggling to pay for their food and mortgage. They can't find child care. They see banks providing record profits. They see executives getting public bailouts at the same time that they're getting huge bonuses. That sense of unfairness really resonates with people.
In order for people to feel that they matter, we need to put them first. We need to actually make sure that we're helping people pay their mortgages instead of letting them go bankrupt and lose their houses. It's not good enough to get the money to the banks. We actually have to get the money into people's hands. The same is true for small businesses and for vulnerable communities. We don't want our favourite restaurants to close because they weren't able to pay their rent while they had to shut down to keep us safe.
I definitely think that the impact of the pandemic has not been equally shared. About 25% of people are office workers and can work from home, and they're saving money because they're not spending any money, whereas regular people are going back to low-wage jobs. They feel that while the banks are getting bailed out, they're getting sold out again, just like what happened in 2008.
6:20 p.m.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
I'll just come back to the issue of public support for things like a wealth tax. At the same time, I'll take the opportunity to ask Ms. Yalnizyan a question around the “secret sauce” of child care and what those benefits would be in terms of the positive economic fallout.
I'll go to Ms. MacEwen first, and then to Ms. Yalnizyan.
6:20 p.m.
Senior Economist, National Services, Canadian Union of Public Employees
EKOS has done polling. Three-quarters of Canadians support a fundamental transformation of the economy because it wasn't working for them. They knew that. We suddenly have this moment where we see that a government can actually make a difference in people's lives. People have some hope that we will have some change in that relationship and that we can actually have government make a difference in our lives and we can do some things differently.
In terms of the wealth tax, the Broadbent Institute did commission some polling. Three-quarters of Canadians support a wealth tax. Two-thirds of Canadians support deficits indefinitely and spending as much as we need to to get through this crisis. It's definitely broadly popular to do that as well.
6:20 p.m.
Economist and Atkinson Fellow on the Future of Workers, As an Individual
I'm going to pass. I'm happy to answer Mr. Julian privately, because I don't think most people much care what's happening to child care, based on the conversation.
My views are out there. You have seen them. Also, plenty of you can see them in the report I did to HUMA. I'm just going to let things move along if you don't mind, Mr. Julian, and I will get in touch with you personally.
6:20 p.m.
Liberal
The Chair Liberal Wayne Easter
Yes. Well, you did say that child care was the secret sauce of recovery. I remember that you and I—
6:20 p.m.
Economist and Atkinson Fellow on the Future of Workers, As an Individual
It is.
6:20 p.m.
Economist and Atkinson Fellow on the Future of Workers, As an Individual
Sweetheart, we've been talking about it since 1970. We're coming up on the 50th anniversary of the Royal Commission on the Status of Women report. We've been talking about it for 50 years now, or at least women have been—not so much governments—but we keep trying.
6:20 p.m.
Liberal
The Chair Liberal Wayne Easter
We had it in 2006, but something happened. Do you remember that, Peter?
We'll go to Mr. Morantz and then to Ms. Dzerowicz.
6:20 p.m.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Thank you.
Dr. Mintz, that was a very good presentation. I want to touch on something you mentioned and discussed in your article in the Financial Post today, which was about the necessity for statutory fiscal rules. Here in Manitoba we've had balanced budget legislation for the better part of 25 years. The NDP repealed it for a while, but now it's back. Economic growth here has been strong. The GDP in Manitoba has more than doubled over that period of time.
Right now it seems as though there are no rules—none—and we're facing a $1-trillion deficit. I want to talk to you about interest as well, but first I'm wondering if you could expand on the types of fiscal rules you think the Government of Canada should be looking at in a post-COVID economy.
6:25 p.m.
President's Fellow, School of Public Policy, University of Calgary, As an Individual
I think it has to be understood that what I'm raising today is sort of the next issue once we start getting back into recovery. [Technical difficulty—Editor] anticipate at some point the Minister of Finance is going to have to present a budget, and it's going to be very important, I think, to change the expectations. Right now there's so much money being poured out it can't continue at the pace it's going. We're already starting to move back to 1995. We're already at 2001 in terms of our official net debt. We've gone back now almost 20 years in terms of our debt load. I suspect that we will have a high deficit next year again—not anything like we're seeing right now, but this will be an issue where the government will have to start changing expectations. Let's be honest; no politician has $2.2 trillion sitting in their pocket to substitute for the whole economy.
In terms of your question, if you look around the world, statutory fiscal rules are actually fairly commonplace. In fact, the study I mentioned, the one that German economists have recently done, is quite fascinating. It's based on three datasets, with a lot of different work done. They show that actually it does contribute to more growth. The question at the federal level is this: What fiscal rule will the federal government even consider? In the past, it was not to let the debt-to-GDP ratio go up. That actually didn't happen, even before this COVID thing. There was some boost in the debt-to-GDP ratio in the past few years, but it didn't go up a lot. It didn't go up dramatically. It has gone up dramatically now, and it will go up dramatically again next year unless we control what's happening. That creates a lack of confidence by the market in the economy, and you end up getting credit spreads as a result.
To give you an example, look at provincial bond credit spreads today over the government bond rate. Alberta, despite having the lowest debt per capita amongst all the provinces, now has the second-highest provincial bond rate, below only Newfoundland and Labrador. The reason for this is that the market is saying that Alberta's fiscal situation is a problem, and the province has to show a plan that it's going to be able to get its fiscal picture under control. That interest cost is an additional cost to the government when we really want to get people back to work and use the money to get people back to work.