Finance Committee on June 4th, 2020

[Dr. Ian Lee, Associate Professor, Sprott School of Business, Carleton University, As an Individual]

Thank you, Chair.

I thank the finance committee for the invitation to appear, but first, here are my disclosures, which are standard. I do not have any conflicts of interest because I don't consult or have any investments of any kind anywhere. Secondly, I don't belong to or donate funds directly or indirectly to any political party, and I don't allow lawn signs on my property in any election. Thirdly, I am one of those high-risk Canadians as I am over 65 years of age, I do have rheumatoid arthritis and I do take immunosuppressive drugs.

Now I'll go to my comments.

For the past 90 days, the Government of Canada has undertaken unprecedented monetary and fiscal spending to avert an economic disaster of massive numbers without income. As a consequence, governments deliberately shut down most of the economy.

As a consequence of this, I think that today Canada faces a far more pressing problem. Per the PBO and other forecasts, Canada is facing a deficit of approximately a quarter of a trillion dollars. While a considerable number of analysts have publicly stated that this is sustainable, a careful review of these comments reveals caveats and hedges to these statements that limit what I'll call the “sustainability thesis” to the current year or the short run.

In sharp contrast, as I argued before this committee a couple of months ago, deficits of this magnitude are not sustainable sine die or indefinitely into the future. Indeed, the distinguished former Governor of the Bank of Canada, Dr. Dodge, and his C.D. Howe group, I believe, have come to this conclusion.

Yet in scrutinizing the press conferences of the Prime Minister and the Minister of Finance announcing yet more and more federal spending, I cannot find any serious or extensive discussion of the very temporary nature of these programs and the urgent need for an exit strategy, not in five years or three years but starting almost immediately, and there is, in my view, a reason. Our public health officials and our federal and provincial elected leaders from all political parties have done such an effective job of frightening the population into believing—in my view, wrongly—that everyone is equally vulnerable to infection and death from COVID-19 that there is very little public support for reopening the economy.

To be fair, the lockdowns were chosen because we did not know better at the time. Today, the public health data from every country very clearly reveals that elderly people over 65 and people with serious health issues are highly vulnerable—people like me—but also that vastly larger numbers of the population are at very low risk and, overwhelmingly, these are young or middle-aged healthy individuals, who, as I've said, are most of the population.

Now, with the experience and knowledge of the past three months, our leaders must revise and revisit our strategy to address COVID-19. The Government of Canada must work very closely with the provincial governments to classify, per the WHO, every firm and every industry by degree of risk into low-contact and low-risk activities, such as almost all of retail, excepting bars, restaurants and entertainment, versus high-contact, high-risk activities characterized by many people together in close contact for extended periods of time.

Much, much more importantly, the Government of Canada, in conjunction with the provinces, must undertake a communications campaign to educate the public concerning those at high risk and to encourage or even insist that those high-risk individuals self-isolate. I want to illustrate this very quickly with a very personal example.

Three years ago, I came down with an ordinary cold/flu, like many Canadians do, but it turned into a virulent pneumonia for six weeks. I've never been so sick in all my life. So what? What's my point? Well, I learned that I have a responsibility to myself to change my behaviour, because it was and is in my self-interest. I cannot expect Canadian society to throw millions and millions of young people out of work and destroy hundreds of thousands of businesses because Ian Lee has a seriously compromised immune system. That's not right.

Long before this crisis, three years ago, I started to self-isolate—I didn't even know the word—by completely avoiding places where there were a lot of people, in buildings close together in the winter months, coughing on me, and who probably would make me sick. Restated, we must turn our public health model upside down. Isolate and protect the elderly, for sure, and the sick and the vulnerable, while ensuring that low-contact, low-risk businesses are reopened with appropriate distancing measures, staffed by low-risk individuals. Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Lee.

We're turning to Mr. Jack Mintz, president's fellow, School of Public Policy, University of Calgary.

Mr. Mintz, I believe you were here in Ottawa, the day that this started, if I recall correctly.

[Dr. Jack Mintz, President's Fellow, School of Public Policy, University of Calgary, As an Individual]

You're absolutely right. I do remember that time.

Thank you very much, Mr. Chair.

Let me begin with four points.

One, according to the IMF April report, Canadian consolidated public deficits—that's for all levels of government—as a share of GDP will be the second-highest amongst all advanced economies, at 11.8%. This estimate on the size of the deficit is underestimated, since it does not take into account further spending commitments announced after April 6, 2020. As it is based on national accounts methodology, it ignores certain liabilities, particularly public employee pension plan deficits.

Two, using public accounting, the federal deficit is predicted by the parliamentary budget office to be $250 billion in 2020-21, which is 11% of forecasted 2020 GDP. The provincial deficits are not known, but RBC forecasted that they will be close to $65 billion. This would mean that the consolidated public deficit on a public accounts basis—which, by the way, includes deficits of public employee pension plans—will be close to 15%, the highest in this past century.

Three, the IMF predicts Canada's public net debt as a share of GDP to rise from 25.9% to 40.7% in 2020, the highest since 2001. Canada also has the third-shortest term to maturity for public debt, at 5.4 years, amongst advanced countries. Estonia and Sweden have shorter-term structures for their public debt. This means that we roll over our public debt more often than other countries. With 23% of this debt held by non-residents, we are sensitive to international investor perceptions of Canada's fiscal responsibility.

Four, we also know that our public liabilities are more than what is currently reported as net debt. It does not include unfunded health care, long-term care and OAS liabilities, net of taxes paid on RSP and pension plan withdrawals. CPP net assets are subtracted from net debt, but future CPP obligations are ignored. Public non-financial assets, especially important at the provincial-local level, are not easily liquidated if debt rollovers must be covered. Our consolidated government net debt obligation is almost triple the official number.

We also know that much of what lies ahead is uncertain. Return of lockdowns in the fall of 2020 or spring 2021 will make recovery much more difficult. There will also be significant demands for stimulus, given that many households and businesses will be running out of cash this fall with deferrals coming due. While the 2021 fiscal deficit should not be nearly as large as 2020 because of all the temporary measures, it is more than likely that the federal and provincial deficits will be elevated for several years beyond 2020-21 fiscal year.

Now, federal as well as provincial governments will need to lay out a budget for 2020-21. At that time, the Minister of Finance will likely indicate a fiscal target, in part to bring back more financial control to the budget, as demands will be enormous for spending hikes or tax cuts. In the past, the approach has been to ensure that debt as a share of GDP should not rise. This fiscal anchor makes less sense today, with $1 trillion more in official federal net debt plus other future obligations in our aging society.

When markets become nervous over a country's fiscal path, governments often resort to fiscal rules such as expenditure limits, tax ceilings, targets for balanced budgets and debt limitations. As the IMF reports, all advanced countries use different fiscal rules depending on their circumstances. In fact, in the past 30 years, the IMF reports that half of countries have used fiscal rules of various sorts to try to deal with deficits, including Canada back before 2005.

Alongside Iceland, only Canada at the national level has no fiscal rule today. This is, I mean, pre-COVID days.

Right now I'm not sure anyone has any fiscal rules. Many fiscal rules are statutory, embedded in legislation or the Constitution. They typically allow for adjustments for cyclical effects and may exempt debt-financed public infrastructure. Some countries, such as Australia, the United Kingdom and France, use multiple rules, such as a limitation on expenditure growth, a debt-to-GDP limit and a deficit-to-GDP limitation.

The criticism of fiscal rules is that they reduce budget flexibility and discriminate against public infrastructure spending. However, studies have shown that fiscal rules improve fiscal credibility, which keeps interest rates lower and ensures investor confidence in a country's debt. A recent study by German economists found that statutory fiscal rules also result in higher economic growth rates—18% in higher GDP in the long run. Fiscal rules only based on political commitments do not have a growth impact.

When the next budget is set, the Minister of Finance will need to address how big deficits should be in the future. How much debt can be tolerated? How much spending can grow? What tax reductions are affordable? What tax increases will be needed? The minister will need some type of fiscal rule and will need to decide whether it should be supported by legislation to indicate adherence to the plan.

I would suggest to this committee, even though it is early on—we're not talking about this year's fiscal rules—that in the coming months it should study the approaches used by countries for budget planning. It is critical, since future generations, which have no influence over our decisions today, could be left with a financial mess in the future if our generation does not act fiscally prudently.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Mintz.

We'll now turn to Armine Yalnizyan, who is an economist and Atkinson fellow on the future of workers.

Welcome, Armine. It's been a while. The floor is yours.

[Armine Yalnizyan, Economist and Atkinson Fellow on the Future of Workers, As an Individual]

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.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Armine.

Before I go to Mr. Cross, I'll give members a heads-up on who will start the first round of questioning. We'll start with Mr. Poilievre, followed by Mr. Fraser, Mr. Ste-Marie and Mr. Julian.

We'll now turn to our last witness, Philip Cross, from the Macdonald-Laurier Institute. He's not a new arrival to this committee, either.

Philip, go ahead.

[Philip Cross, Senior Fellow, Macdonald-Laurier Institute]

Yes, I was here with Professor Mintz when you had the last public meeting. Let history record, by the way, if it's true that we'll never be shaking hands again, that the last human being I shook hands with was Mr. Julian, after that meeting.

I'd like to take this time to address two subjects: looking back at how Canada dealt with past fiscal crises, and then looking forward on whether this is the appropriate time to restructure the economy. Using the projections from the PBO, federal spending is jumping from 15% to about 26%. Together with lower revenues, this inflates the deficit from 1.1% of GDP to 12.7% and raises outstanding federal debt from 31% to about 48%. The actual outcome is likely to be larger, but these estimates provide a good baseline for understanding the fiscal consequences of this crisis.

The most obvious comparison is with World War II. Federal spending initially jumped from 10.5% to 22.8% by 1941, with annual deficits hitting nearly 5% of GDP. Starting in 1942, the increase in government spending became enormous, hitting a peak of 48% of the economy in 1943 and boosting deficits to over 20% of GDP every year between 1942 and 1944. Despite sharply higher taxes, the federal debt soared from 22% to 160% of GDP during the war.

How did Canada cope with such a high level of debt? Initially, the government ran surpluses for six straight years after the war, as spending almost returned to pre-war levels but taxes did not. While some surpluses were sizable, averaging 3.6% a year from 1946 to 1948, equivalent to about $72 billion today, they totalled only 13.4% of GDP. Instead, most of the reduction of the debt load from 160% of GDP to 70% in the post-war decade reflected unexpectedly rapid growth as GDP nearly tripled in one decade.

Today, the prospect of a comparable surge of income growth seems remote. Instead, the model for lowering today's deficit is the austerity adopted after the 1994 debt crisis and the 2008-09 recession. Three-quarters of the deficit reduction after 1994 was achieved by lowering program outlays. The rest was from raising revenues. After the recession ended in 2009, the $43-billion federal deficit was eliminated entirely by reducing program spending.

Most economists advocate deficit reduction through spending cuts and not tax hikes. A recent IMF review of the literature found that spending cuts boost business investment while tax hikes dampen spending. By relying mostly on spending restraint, economic growth was sustained after both 1995 and 2009.

This year's extraordinary increase in government spending and deficits apparently does not deter some from seeing an opportunity to restructure Canada's economy. After all, it is tempting to ask, if we can command the huge resources needed to contain the pandemic, why not use the occasion to make fundamental changes to our society?

However, this thinking is flawed and undemocratic. The vast deployment of government resources in response to the pandemic was intended to preserve the economy as it was. The 11-point hike in government share of GDP was to replace household and business incomes, which collapsed almost overnight. This temporary income support was meant to keep labour and capital in place so these industries could resume normal operations as soon as the virus subsided. Making the increase in government spending permanent by financing programs such as a guaranteed annual income or green energy infrastructure projects would be counterproductive to this short-term goal and would harm long-term growth.

Restructuring the economy is problematic no matter what course the virus takes. If it does subside, either on its own or due to a vaccine, we would expect Canadians to resume spending on personal services. If on top of this we had a substantial increase in government spending, soon the economy would surpass its capacity limits. While not at full employment before the crisis, Canada was not several points below it either. The Bank of Canada estimated that the output gap was about 1% late in 2019.

On the other hand, if the virus disrupts spending for a long period, Canada faces a very difficult transition for its labour and capital. People little versed in economics warn of stranded assets in our fossil fuels, but that would pale by comparison with the hundreds of billions potentially stranded in aerospace, urban transit, hotels and commercial and office buildings. For workers, as widely noted, income and job losses have been concentrated in service industries with low levels of skill, education and pay. Restructuring would be a painful and costly exercise at a time when the economy is still struggling with the pandemic.

A more basic question is to ask whether Canadians want an economy restructured along these lines. In the short term, higher government spending is replacing some of the record decline in household spending, especially on services that form the basis of much social activity. However, humans are inherently social beings. Canadians spend substantial amounts on restaurants, hotels and the like, preferring a large variety of these activities at low prices. It is unlikely that people will permanently give up this network of social activities to finance a guaranteed income, green energy infrastructure or more health care.

At a minimum, plans to rebuild and restructure our economy need to be transparent so that Canadians can decide if they accept this trade-off on a permanent basis. A temporary willingness to make sacrifices during a crisis should not be confused with a permanent shift in preferences. In past crises, Canadians postponed consumption for the common good, but not forever. As World War II ended, a weariness with sacrifice resulted in the defeat of Winston Churchill and the near defeat of Mackenzie King. People wanted to spend on their personal well-being after two decades of pent-up demand. Similarly, austerity programs are best implemented quickly, before people lose the motivation for shared sacrifice.

Unless Canadians choose to lower their consumption for more government spending, plans to impose a restructuring look like another elitist attempt to tell ordinary people how to live. The pandemic supposedly made us more aware of the contribution of blue-collar workers, but the contempt of many for blue-collar consumption choices remains just below the surface. Even worse than slowing economic growth by diverting resources into less desirable activities, imposing such a choice undermines democracy.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Cross.

We'll start our six-minute round with Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

I'm sorry. I was just taking a moment to marvel at Dr. Philip Cross's excellent presentation. That's why I was delayed in coming online.

I'd like to direct my questions to you, Dr. Cross, as the former chief economic analyst at Stats Canada. You have studied the data over the years. You can provide us with an informed outlook on the impact of government spending and debt. We now have a record level of combined personal, government and business debt, as a share of GDP, approaching 400%. Do you believe we can go on adding to these debt levels for the medium term in order to carry out this government-directed economic transformation that many ideological utopians are dreaming about?

[Philip Cross]

That's a very good point. It's something that I find missing in the whole run-up to this crisis and now, as the crisis unfolds. We tend to focus—for example, as we did during the federal election and now, during this crisis—only on government debt, as if government debt is somehow isolated from all the other debt in our society. In fact, we had one of the highest levels of household debt in the OECD. We had the highest level of corporate debt. We had very high levels of provincial debt. It was only the federal government that had relatively low levels of debt entering this.

That's very important to note. Yes, we are shifting a lot of debt into the government sector, and quite appropriately, as they were the only sector, for a period there, that the financial markets were willing to lend to. It's appropriate that the government took on that load. Nevertheless, we will be servicing all of this debt—personal, corporate and government—out of the same income stream of GDP. That's something that we have to be aware of. We can't just look at government in isolation from all the other debt we have in our society.

[Pierre Poilievre, Conservative, Carleton, ON]

Right. It's about the flow of GDP income. There's one GDP, and it has to support the debt of households, of governments and of business. We cannot assume that the Government of Canada has a full right to 100% of that GDP in order to service its debts.

I want to also talk about the income inequality that high levels of government debt engender.

Dr. Mintz, that was an excellent presentation, as always. A lot of people often argue that we need big deficits to reduce poverty. What they don't mention is that big debts mean big interest payments. Those interest payments go disproportionately to wealthy people who are bondholders. We know that they are wealthy, because if they weren't, they wouldn't have been able to lend money to governments in the first place. Debt interest is inherently a transfer of wealth from the working-class taxpayer to the wealthy lender.

Do you have any comments on the distributional impact that large governmental debts have on the equality or inequality of the population?

[Dr. Jack Mintz]

You're raising an interesting point. We have to remember that interest payments, on public debt in this case, are a form of transfer. They're a transfer from the government budget—but of course that's really the taxpayers' budget—to bondholders.

Of course, the taxpayers tend to be in the upper-income groups, at least when it comes to public debt, and the interest paid on it of course goes to bondholders, many of whom are outside the country. As I mentioned, about a quarter of them are, so it's actually a drain on resources for the country when taxpayers are covering these interest expenses. As far as inequality impacts go, I think that's where the household debt becomes particularly relevant. Of course many middle-income groups have taken on significant household debt. In fact the numbers that you gave—400% of GDP for household, non-financial corporate and public debt—are based on IMF data. That doesn't even include all of the financial obligations that the governments have in Canada, which I've emphasized in the past.

In terms of that household debt and its impact on inequality, I have to admit that I haven't really looked at that very carefully, but certainly when you get borrowers who are getting low interest rates right now, maybe that's not as much of a problem for those individuals. The big problem, of course, comes down the road when they renew their obligations and they are facing higher interests rates. That is bound to happen as we get past this and into the recovery.

[Pierre Poilievre, Conservative, Carleton, ON]

Chair, do I have time for one more question?

[The Chair, Liberal, Wayne Easter]

You can have a 30-second question and a 30-second answer.

[Pierre Poilievre, Conservative, Carleton, ON]

I'm worried about the uppercut that's coming. We have extremely high levels of debt in this country. Our debt service ratios are thus far not that high because interest rates are obscenely and unusually low. When they go up, then governments, households and businesses are going to be hit with that uppercut.

How worried should we be about the interest rate uppercut that is going to hit our overly indebted nation? That question is for both Dr. Cross and Dr. Mintz, please.

[Philip Cross]

I will just add something quickly and then cede the rest of the time to Jack.

I don't think we even have to wait for interest rates for this to be a problem. I am quite concerned about what will happen six months from now. For the moment a lot of household mortgages have been deferred. The CMHC has been saying that by next year we could be looking at 20% of households foreclosing on their mortgages.

It's not just interest rates. We could just stand still exactly where we are and have an interesting debt problem in several months.

[Dr. Jack Mintz]

I'll be very quick, Mr. Chair, because you said half a minute.

We have to remember that interest costs are two things. They are the interest rate times the actual amount of debt. We're taking on a huge amount of debt right now at the public level. Plus we have significant debt at the private level. In fact that debt has even gone up with all these deferrals because people are going to have to pay back utility bills, mortgage payments and taxes that were deferred. Then there's a lot of tax to be paid on the income support that is currently being provided.

Dealing with our debt overload is going to be a very significant issue for all sectors of the economy. It's not just that the interest rate may go up. It's also the fact that there's been so much new debt taken on. It's just a fact that we're going to have to be concerned about.

[The Chair, Liberal, Wayne Easter]

Thank you.

Thank you all.

We go now to Mr. Fraser, who will be followed by Mr. Ste-Marie.

Sean.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you, Mr. Chair.

My questions will be directed to Ms. Yalnizyan.

Thank you so much for joining us today. I'll let you know that I was as enthralled by your testimony as my colleague Mr. Poilievre was by that of Mr. Cross.

I'll pick up where the last questioning left off, on the cost of servicing this debt.

Of course, it's something that's on everyone's mind. We don't want to be irresponsible, but I think one of the points you articulated very well was that there is a need to look at the benefits of some of these measures as well, and a need to recognize that in fact the virus created the need to respond. It effectively created the debt that we're dealing with.

I want to give you the opportunity to talk about the cost of inaction had we not chosen to have the federal government assume this debt and had we left it to individual households and business owners. I can tell you from my experience in the constituency that the consequences would have been far greater because there would have been widespread bankruptcy of half the businesses in my community and kids without food on the table.

I'm curious as to whether you can give some perspective on what the cost of inaction would have been if we had chosen not to have such an aggressive intervention in response to the COVID-19 pandemic.

[Armine Yalnizyan]

If you think we're facing a wave of mortgage failures—and we are—the wave of debt that is going to be coming at us can't be ducked, nor can the wave of insolvency for businesses and households. That is going to happen, so the question is simple: Who holds the debt?

As I said in my opening statement, based on what the Parliamentary Budget Officer has estimated, the hole that the pandemic blew into the economy is $288 billion. Federal spending is going the whole nine yards. We don't know if all of it will get spent, in particular with the wage subsidy, but all of the different forms of help total up to $146 billion, so less than half of the hole. Without this, the hole would have been twice as big and more people would have lost their homes, more rapidly. People would not have stayed at home. We would have been unable to contain the contagion.

As I said in my comments, it isn't good enough to just talk about what would have been. I think nobody in this virtual room is arguing that the feds should not have done what they did. If some were arguing that it should not happen, that's a really marginal thought to the community of economic thought. Almost everybody agrees that they had to act and had to act fast.

My point is that it's not time to cut spending and worry about federal debt, because there other forms of debt, which Mr. Poilievre, Dr. Mintz and Dr. Cross have all acknowledged. There's one flow of income to deal with household debt, business debt and government debt. Government comes in three flavours: federal, provincial and territorial, and municipal. Everybody is going to have more debt, and the cheapest debt to be held is at the federal level. It's okay if that debt goes up. In fact, that's the smartest way to reduce costs for debt servicing.

I don't know what else I can add. I said all of these things before.

You were also asking about benefits of spending. If we do not spend on child care, if we do not ensure that critical infrastructure is in place so that people can get back to work.... As I have said a hundred times before, given how many women lost their jobs and that they are half the workforce, if they don't get back into the economy, we cannot recover. We cannot recover our purchasing power, which is 56% of the economy.

We know that the United States is poised to lose half of its ecosystem of child care. If we do not support this critical infrastructure, there will be no recovery because there will be no “she-covery”, and there will be no “she-covery” because there's no child care. That's math. That's just plain math.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you very much for that testimony.

Mr. Chair, if I have a moment left, I'll try to sneak in two questions.

Ms. Yalnizyan, you can eat up the rest of the time with your response, if that's okay.

I'm incredibly worried about a generational gap, given the impact that this pandemic is having on young people. I think there's obviously a longer-term question we have to ask ourselves about repaying some of this debt. I look at the wage loss for young people and it's astonishing.

I'm wondering if you can comment on the long-term impact of that phenomenon. If you have time to offer a quick piece of guidance on how we can better reflect the value of unpaid work, I would be grateful.

[Armine Yalnizyan]

Wow, there's a bunch of stuff there.

I don't know what to do immediately about the lost generation. We're looking at numbers that we have never seen before. About half of Canadians aged 25 to 34 have lost more than half of their income. They have to get back into the workforce. The great news is that there's plenty of work to be done in our communities. There's no reason for us not to put them back to work. We need this stuff done. We could be creating opportunities.

I think the bigger story, from my perspective, is understanding that child care is actually a triple weapon in our war in the recovery: It helps women get back to work when they have a job; it is a form of employment; and done properly, it provides the ability for every single child to be learning-ready when they enter the school system and for us to make sure that they're supported. As I noted in the presentation that I just did for HUMA, which I hope you have an opportunity to look at, it literally pays for itself. We're literally leaving money on the table by not expanding access to child care dramatically throughout the system and having the federal government pay for it. You'll see in my comments why I think the federal government should be taking the lead at this time.

Thank you very much for your really tough questions.

[The Chair, Liberal, Wayne Easter]

Thank you.

You either have or you will send that brief to the clerk, Armine.

[Armine Yalnizyan]

It has been sent already. It's in the clerk's hands.

[The Chair, Liberal, Wayne Easter]

Okay, thanks a lot.

We will turn to Mr. Ste-Marie, followed by Mr. Julian.

Gabriel.