Finance Committee on March 17th, 2021

[Aaron Wudrick]

I think it's mostly all been said here. I think that perhaps what's most alarming about asking for the increase in the debt ceiling and the planned $100-billion spending when we don't know what it's going to go to is that it has been explicitly stated as being for after the pandemic.

I think the government has a strong case that when the pandemic hit, there was pretty much unanimity across the country that this was an emergency and that it had to send money that it didn't plan on. We get that. I think everybody gets that.

After the pandemic is a different story. I think it's a very different argument for the government to propose permanent new spending without any debate. It's essentially saying, conveniently, that all the things it wants to spend on with new permanent spending miraculously aligned with the things it wanted to do before the pandemic but didn't have the money to do. If the argument is that we didn't have the money before the pandemic, it's very hard to now say that suddenly, after the pandemic, we're able to spend money on these things that we couldn't find the money for beforehand.

[Ted Falk, Conservative, Provencher, MB]

Thank you.

[The Chair, Liberal, Wayne Easter]

This is your last question.

[Ted Falk, Conservative, Provencher, MB]

Could you offer any practical suggestions for areas where the government could make life easier for Canadians by reducing red tape or providing tax cuts during this time?

[Aaron Wudrick]

Well, first of all, when it comes to stimulus, the minister, as she herself has pointed out, has preloaded the stimulus if Canadians want to spend money. If Canadians are feeling good coming out at the other end of this pandemic, obviously they will want to travel. They will want to spend. That will be a large part of the stimulus, so the idea that we need to spend more should maybe be set aside.

In terms of tax relief and looking particularly at small businesses and offering them relief, we proposed last year, for example, a temporary suspension of the small business tax rate, say for a year or two. That would allow some businesses to get back on their feet over time and would make up for a lot of the struggles they've had to go through over the course of the pandemic.

[Ted Falk, Conservative, Provencher, MB]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thanks, all of you.

I will turn to Mr. Fraser, who will followed by Mr. Ste-Marie and Mr. Julian.

Go ahead.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you very much, Mr. Chair.

I'll take a different view from that of our chairperson when he said that he didn't want a debate between the witnesses. I thought it was one of the most engaging conversations I've heard in committee in quite some time.

Maybe I'll go right to the points of disagreement between—I was going to say “Mr. Cochrane”, but I think you corrected the record and I should acknowledge that—Dr. Cochrane and Mr. Moody. Although I think Mr. Wudrick may have something to add to this debate, I'll limit it to the first two just in the interests of time.

Dr. Cochrane, you've given essentially one of the most concise explanations of modern monetary theory that I've ever heard, in the sense that we can spend money into existence, as you've described, and that the limit is really on the real economy's ability to soak it up.

Mr. Moody, I'm curious, and the first question will be for you.

The Bank of Canada usually sets an inflation target of 2%. We haven't seen inflation to that magnitude in years. In the evidence before the committee over the course of the summer, I think it was former governor Poloz who indicated that deflation represents a very real risk during this pandemic.

I'm curious as to your thoughts on Dr. Cochrane's submission. If you don't agree that MMT is the way to go, which I expect you don't, is there a problem with...? Particularly since we're at the effective lower bound of interest rates presently, is the inflation target wrong or is there a different way to get there?

[Kim G.C. Moody]

I'll just say that I'm not an economist. I'm a tax expert. I've spent many years studying tax, and I practise tax.

I will say that after talking to my economist friends, I do think there's a concern about inflationary pressures. Am I the guy to ultimately say with certainty that this opinion is right? No, I'm not, but am I concerned about it? Sure I am. That said, I'll end it there.

[Sean Fraser, Liberal, Central Nova, NS]

Sure.

Before I go to Dr. Cochrane, I'll say that I think we all have to be looking at long-term risk, including inflationary pressures, but I can't ignore the elephant in the room. To me, the deflationary risk is enormous. When I see the shock to our economy that COVID-19 represents, the risk I remember in the early days in particular was that there wouldn't be businesses here to support an economy on the back end because their customers wouldn't be there because the businesses were shut down. It was a sort of a supply shock and a demand shock at the same time.

I'm curious, Dr. Cochrane, though, to know if I've poorly articulated your submission. Why do you think that although it won't be necessarily endless spending, we can manage with the government's ability to print money into existence, so to speak, and this is really the right way to do it? When would you put the brakes on and how would you put the brakes on if the real economy failed to soak up some of the cash?

[DT Cochrane]

Thank you very much for inviting this discussion. I will acknowledge that I learned much of this through MMT. The basics of what I described don't actually require MMT. A lot of it is just a straight-up basic Keynesian understanding of how the monetary system works.

When I was first exposed to the ideas of MMT, which I found shocking, I wanted to confirm whether this is how Canada's monetary system works. In the course of that, I found a document from the parliamentary library, entitled How the Bank of Canada Creates Money for the Federal Government, that I would highly recommend to everyone. It describes how, when the federal government is running a deficit, the Bank of Canada creates its liability, the assets of the Government of Canada, and also creates its asset, in the form of the securities it holds, the treasuries. It can then sell a portion of those off to the public while holding on to a certain portion.

During the pandemic, the portion that the Bank of Canada has held has risen, which has allowed the Government of Canada to spend the money it needs to spend.

Now, how do we decide when enough is enough? I will actually affirm in this area something that Mr. Wudrick said, which is that we need more study. We need more understanding of the things that are happening in different parts of the country and in different sectors. Where are prices rising? Where are they falling? The inflation level, this 2%, is a statistical artifact. It doesn't tell us what's happening to the price of toilet paper or the price of houses or the price of something in Calgary. We need more understanding of what's happening in different parts of the country.

That was another key component of conducting the economy during World War II. We had extensive study to understand where actual materials were moving and what prices were being attached to those materials. That then allowed the government to identify where there was profiteering going on or where there were legitimate price increases because of whatever other reasons.

We need to disaggregate our understanding of the macroeconomy and understand the economy through many more lenses. That—

[The Chair, Liberal, Wayne Easter]

We'll have to end it there.

We'll go to Mr. Ste-Marie, followed by Mr. Julian and Ms. Jansen.

Mr. Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Ms. Laurin, you made it very clear that the current suite of programs fails to meet the needs of sugar shacks and banquet halls.

What are you looking for from the government? What can the government do to help you?

Should it make existing program benefits available to you, such as the emergency wage subsidy or the emergency rent subsidy?

If not, do you need a specific program tailored to your sector?

If so, what does the program need to do?

[Stéphanie Laurin]

Thank you, Mr. Ste-Marie.

We want to see the Canada emergency wage subsidy extended so we can take advantage of it when we resume operations in 2022. We have nothing on our calendars until the summer of 2022, so we would really like to access the wage subsidy then. We'd also like the regional relief and recovery fund to provide support in the form of a loan where a percentage is subsidizable, given how difficult it will be for our members to repay the loan. Lastly, we would like the Canada emergency business account to be fully subsidizable, so businesses don't have to repay the $60,000 loans.

Of course, an emergency fund would have been most welcome since business owners will remain without revenue for another 12 months. Countless facilities all over the country offer venues for large gatherings, such as hotels and banquet halls, but they have no bookings to speak of. Events that were postponed until 2021 are now being postponed until 2022, and that is having a devastating impact on our industry. Large banquet halls in Canada's major urban centres have been without revenue since last spring and have not received any bookings for the next 12 months. The situation is dire.

I do want to thank you, though, because the Canadian government has done a lot to help our businesses. Without the support of the Canadian government, I would not have been able to appear before the committee today because my business would have unfortunately gone under. I am extremely grateful to the government for how quickly it took action at the beginning of the pandemic.

At this stage in the game, I think the existing programs need to be adapted to industries that were especially hard hit. Since last spring, entire sectors have experienced a 95% drop in revenues, and those losses will continue until 2022. The impact on business owners is devastating. Dozens, if not hundreds, have already closed their doors. The pandemic is taking a great toll. Speaking on behalf of sugar shacks in Quebec, specifically, I can tell you we've already lost 100 of the 240 we had. Had I not worked for free to save them, we'd have no more than 50 or so. I am proud to say I played a part in saving some 100 businesses. I am fighting very hard, but unfortunately, I need help.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

Mr. Chair, can I—

[The Chair, Liberal, Wayne Easter]

Thanks, both of you.

We're turning to Mr. Julian, who will be followed by Ms. Jansen.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you, Mr. Chair.

I'd like to thank Ms. Laurin and Ms. Bédard for their compelling accounts.

Ms. Bédard mentioned suicides and Ms. Laurin talked about the closing of businesses. What I find worrisome is the fact that the federal government plans to significantly scale back the support being provided to individual Canadians and businesses to help them cope with the COVID-19 pandemic.

As of April 1, in two weeks, the federal government is planning drastic cuts for the next fiscal year. Nearly half of all spending on current support measures will be cut across the entire federal government. With that in mind, I want to ask each of you the same question. What do you intend to do if no other assistance is made available to Quebec's self-employed workers, and banquet hall and sugar shack owners?

Ms. Laurin, you said you had saved 100 or so sugar shacks. Only 140 of 240 remain. How many will be left if the federal government withdraws its support and fails to provide further help?

[Stéphanie Laurin]

Ms. Bédard, do you mind if I go first?

[Caroline Bédard]

No, not at all.

[Stéphanie Laurin]

I can tell you it would be devastating to the industry if the federal support programs came to an end. Unfortunately, the industry has already been devastated.

I can't say the support measures are truly tailored to our needs. As I mentioned, none of the programs are. The business owners I represent really haven't received any assistance. A few applied for the regional relief and recovery fund, but others, unfortunately, did not want to because of the personal liability requirement. That's a huge challenge for business owners. If the support programs ended, it would not be any worse than what we are facing now, since we don't have access to any real support. I am being very honest here. There is no question that our industry needs saving.

[The Chair, Liberal, Wayne Easter]

I believe—

[Stéphanie Laurin]

The industry needs a bailout.

[The Chair, Liberal, Wayne Easter]

Thank you, Ms. Laurin. We seem to be having a little trouble with the sound.

Could you give a quick answer, Ms. Bédard? Then we'll have to move ahead.

[Caroline Bédard]

As people get vaccinated, things will pick up, of course. The Canada recovery benefit was extended until the end of June, which gives self-employed workers some relief.

What we want is for hairstylists, massage therapists and all those with a small commercial rent payment every month to be able to apply for the Canada emergency rent subsidy without needing a business number. That would make it a lot easier for them to access the subsidy.

As for the Canada recovery benefit, I agree that the CRA should verify the information—as I said earlier—but the agency should stick to the announced validation process, not conduct further validation.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

Just on this discussion, I know that this hearing is on Bill C-14, but a lot of this discussion really relates to our COVID-19 expenses and potential solutions. Let's keep that in mind as well. Maybe members of the committee need to carry this forward over to the other discussion, in some way.

We are rapidly going to run out of time. I'd like to hold Mrs. Jansen and Ms. Dzerowicz to four minutes each, and then give Elizabeth May the opportunity for one question.

Mrs. Jansen, go ahead.