Evidence of meeting #46 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was young.
A video is available from Parliament.
4:55 p.m.
Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Tax Law LLP
Not that I've seen, no. As a matter of fact, I see red ink for many years to come. Again, that frightens me as a plan.
4:55 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Did you have a chance to look at the fiscal anchor, which is basically a return to the old debt-to-GDP ratio but without any firm target attached to it?
4:55 p.m.
Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Tax Law LLP
I saw it briefly. As you know, Mr. Fast, I'm not an economist, so I don't fuss on that as much as I do on tax policy. Certainly the ratios I saw in the document frighten me and concern me. Even as an average Canadian, I really have no idea how we're going to get out of this hole.
4:55 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Mr. Steve Poloz appeared at our committee earlier today. He suggested that the inflationary pressures shouldn't be something we should be too concerned about because, in his mind, they are transitory in nature. Do you have any comments on whether those inflationary pressures are transitory, and whether we should be taking them seriously or generally not worrying too much about them?
4:55 p.m.
Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Tax Law LLP
“Transitory” is an interesting word, isn't it? My understanding of the definition of “transitory” is temporary or not permanent.
I guess I'd respond to that and use my own life as an example. When I go to the grocery store, do I see my groceries more expensive today? Yes. Do I see toys that are more expensive? Yes. As an example, I wanted to buy my wife an electric bike, just so that we can get the hell outside and do some fun stuff. Last year that bike was $2,500. Do you have any guesses on how much that bike costs today, Mr. Fast, anybody?
4:55 p.m.
Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Tax Law LLP
It's $3,700, and guess how long it takes for me to get it? Twelve months. By any definition that's inflation. Do I consider that transitory? I don't consider that transitory.
It might be transitory for certain other items, but for the average thing, when I go to the grocery store, buy my wife a bike or even other toys, maybe some real estate, everything that I touch these days is more expensive. I don't consider that transitory.
5 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Great.
I'll go to Ms. Potter. Ms. Potter, I was intrigued to hear you mention the number of things you're looking for. First, you suggested that you're looking for a road map to recovery. Second, you were also concerned that the HASCAP design challenge has not been addressed, especially as it relates to the debt service ratios that are required. The third was flexibility for repayment. Then fourth, you were looking for a plan to safely reopen the border.
Have any of those four items been specifically addressed in this budget?
5 p.m.
President and Chief Executive Director, Tourism Industry Association of Canada
Not specifically, no. We are working very closely with ISED and with the BDC on the HASCAP issues. The ongoing support for the wage subsidy and the rent subsidy were addressed in the budget, but are not at levels that we think are sustainable for our industry.
5 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Did you see the budget as representing a road map to recovery per se?
5 p.m.
President and Chief Executive Director, Tourism Industry Association of Canada
There was certainly mention of a road map in the budget, but there is no plan at this point.
5 p.m.
Conservative
5 p.m.
President and Chief Executive Director, Tourism Industry Association of Canada
There was mention of it, but there was not a plan included in the budget.
5 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay, we'll have to move on from there to Mr. Fraser, followed by Mr. Ste-Marie.
Mr. Fraser.
5 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
Thank you, Mr. Chair.
I'll start with a very brief question to Ms. Potter. Thank you for your testimony and thank you for the work that your sector is doing. I think it's going to help sustain the recovery, particularly in Atlantic Canada.
That brings me to my question about the Atlantic bubble. You mentioned that you hope there will be a uniform set of rules for Canada, for interprovincial travel, and it will minimize barriers. I think, when the time is right, that will be very important.
Certainly our region has managed, from a public health point of view, the COVID-19 pandemic more effectively when you look at the caseloads. If there's an opportunity for us to reinstitute an Atlantic bubble, I certainly wouldn't want to wait until the public health situation in other provinces would allow them to join us. I would love to have the tourism operators in our side of the country benefit from free travel within our region so the tourism operators can potentially make some cash this summer that will sustain them.
I just want to give you the chance to clarify. Are you suggesting there should be uniform rules right away, or do you think we should wait until the situation is completely under control across Canada before we have that uniform set of rules?
5 p.m.
President and Chief Executive Director, Tourism Industry Association of Canada
We would like to follow the guidance of Dr. Tam, the public health authority who says that once 75% of Canadians have one vaccine and 20% of Canadians have their second vaccine, we can see an easing of restrictions that will not impact our health care system.
All the modelling suggests that will happen this summer and that we can reach that first milestone in June and that second milestone in July. I have spoken to tourism operators in Atlantic Canada. I spoke to somebody in New Brunswick, and 100% of their bookings are from Quebec. Right now she's going to have to turn them all away.
I was talking to another operator on Prince Edward Island. This is an operation that normally employs four people year-round and up to 200 seasonal staff. In an average year, they have a net profit of about $300,000. With the wage subsidies and other supports, last year they lost $300,000. With the decline in the wage subsidy as it is depicted in the budget, they will lose an additional $80,000. They will be in the hole $380,000 this year on top of the $300,000 they lost last year. This is not a sustainable model. We need to get the bubble opened.
5:05 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
I don't disagree. I only mean to suggest that if we have the potential to do it sooner in the Atlantic region, I hope we take that opportunity, and as soon as public health allows, quite rightly, as you point out, we should be allowing travel within Canada.
I will try to be quick. My comments are directed towards Mr. Moody. I share his concern about needing to manage the fiscal situation in Canada in a prudent way. I think we have disagreement—although I found his testimony interesting—with regard to what that looks like. I point out that we had Kevin Milligan, a professor of economics, testify before the committee in April of 2020. He pointed out that incurring debt was not a choice. It was just a question of where we would allocate that debt. He pointed out that it would fall on households and businesses to bear that debt. If they went bankrupt, the banks would bear that debt, but moreover, the cost of not supporting them would have been a restriction on the growth opportunity at the back end of the pandemic.
I've seen only one group actually do a counterfactual analysis of where we would have been had we not made these investments, and it was the IMF. I'm going from memory here, so I may be off on the statistics. They projected there would have been a decline in GDP in the ballpark of, I think it was, 7.8% and an increase in the unemployment rate of 3.9%. If I can critique your household analogy, there are certain things governments can do that will allow them to either experience a rate of growth greater than the cost of that debt or prevent a loss that would be far greater than the cost of that debt. If we take that to the extreme end of the logic, if we didn't invest in any public health measures and we forced everyone to shut down because the virus was so rampant, we would have spent less. However, the IMF actually found that our debt-to-GDP ratio would have been the same, but our growth opportunity would have been severely hamstrung by that course of action.
I'm curious as to whether you recognize that there may in some instances be a need to spend more and that doing that could be the fiscally responsible thing because of either the growth opportunity it would represent or the losses that we would avoid.
5:05 p.m.
Liberal
The Chair Liberal Wayne Easter
Mr. Moody, be fairly quick in your answer since we're going to be well over time on this one.
5:05 p.m.
Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Tax Law LLP
I don't think I ever said in my testimony today or previously that there wasn't a need to spend. I never did. Frankly, I've been complimentary to the government for its quick rollout of spending. Where I disagree with Mr. Milligan, with you and with a whole bunch of other economists and people who think that what is coming out of the tap is endless is with regard to where that “endless” stops and where it get restrained. That's where we foundationally have a disagreement.
Thank you.
5:05 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
If I can only clarify, I don't think anybody is saying that what is coming out of the tap is endless, and for what it is worth, the minister herself has disabused the public of the thought that the government is behind modern monetary theory. However, I think that degree is a subject for a future conversation.
5:05 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
My point of order is exactly what he just did. Mr. Fraser can't keep on responding to Mr. Moody. He gave Mr. Moody an opportunity to respond.
5:05 p.m.
Liberal
The Chair Liberal Wayne Easter
We're a little over but not too bad on his time. Mr. Moody was fairly quick. I gave Kelly more time in the beginning, Ed.
We'll go to Mr. Ste-Marie, Mr. Julian, Mr. Falk and then Mr. McLeod.
Mr. Ste-Marie, go ahead.