Thank you, Chair, and thank you for this hard-working committee. I don't now how you guys do it. That's a lot of witnesses you are hearing from. I'm going to do my best to be quick.
Yesterday, the Bank of Canada told us that the worst could soon be over for the economy. That's great news, although the pace of rebound of the economy is far from certain. The virus certainly killed the income-earning potential for over one-third of Canadian workers, according to Statistics Canada, by mid-April, but the federal treasury swiftly acted to help people contain the contagion and prevent a surge of debt, announcing about $146 billion in COVID-related spending. The Parliamentary Budget Officer estimates that real GDP is likely to shrink by 12%, so the Government of Canada's initiatives may backfill about half of the estimated $288-billion hole created by the pandemic.
As our hopes and actions now turn to recovery, the debate is already dominated, as you have heard, by a discussion of how quickly to turn off the federal spending taps and to delimit public deficit and debt. I contend that this is the wrong approach. We should not be looking at the cost of federal spending without also looking at its benefits—in other words, the net benefits of public spending.
Indeed, the federal government is going to have to keep spending more than it did before COVID-19 hit, but it will have to pivot to reassuring Canadians about the ability to safely reopen the economy instead of keeping people safe at home to contain the contagion, and that spending will have to be designed to maximize the future potential for growth—not just how much you spend but what you spend it on. Targeted and sufficiently resourced spending could literally pay for itself, not just in shovel-ready physical infrastructure but also in critical social infrastructure that supports the economic activity we all undertake through our households and our businesses, just as much as roads and bridges do.
This pivot from contagion containment to strategies for safe reopening will require historic federal intervention in child care, for reasons that I just detailed in my presentation to the Standing Committee on Human Resources, Skills and Social Development just moments ago. I have submitted my brief to your clerk, so please avail yourselves of it if you would like to learn why I think child care is the secret sauce to recovery. Simply put, given the number of women who have been sidelined by the shutdown of activity that is simply essential to economic transactions, and given that pre-COVID, women were 50% of employees, there can be no recovering without a “she-covery”, and there can be no “she-covery” without child care.
Without a nationwide strategy for safe protocols for reopening schools and child care facilities, we are likely to create another vector for transmission just like the long-term care facilities, and we will not be able to fully redeploy our economic potential for even longer. Therefore, putting the emphasis on safe reopening is key, and the federal government will play a key role in ensuring exactly that, because the last thing we want is for child care to look like long-term care with regard to COVID transmission.
I will just remind you quickly that the problem is actually a cascade of problems. It's a health crisis triggering an economic crisis, which is triggering a debt crisis. Obviously, job one is to contain the health crisis. Job two is to offset the scale of the economic crisis. Only when we've done those two things will we know what the scale of the debt crisis is that we will have to deal with as households, as businesses and as governments at every level. More debt is simply inevitable. The only question is who will hold it. In accounting terms, there are only four places for the debt to grow: among households, among corporations, among governments, and through current accounts, which are cash flows into and out of Canada.
Government debt will include increasing debt for the federal, provincial and territorial governments as well as municipal shortfalls in revenue intake for non-discretionary expenditures that they must make for their citizens. This pandemic should result in more government debt to secure the recovery, and it should be more federal government debt, because federal debt is the lowest-risk, lowest-cost debt in the entire ecosystem of debt. Households pay the highest rate on debt, followed by businesses, followed by municipalities, followed by provinces. The cheese stands alone when it comes to the federal debt.
Those arguing to reduce federal deficit debt are, in my view, effectively arguing for a slower recovery, deeper economic losses for more people and more income being paid through the entire system for debt servicing. I am confident this is nobody's goal at this table.
Thank you for your time. I welcome any of the questions you have about my approach that federal debt will be a good thing in the coming months.