Evidence of meeting #9 for Finance in the 43rd Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was als.
A video is available from Parliament.
Conservative
Pierre Poilievre Conservative Carleton, ON
Right, and as you know, the old saying is that compounded interest is the best servant and the worst master. It works in your favour if you're the one lending, but it can work against you if you're the one borrowing.
Do you think there is a chance that there will be medium-term increases in interest rates? If there are, would Canada find itself in some sort of a debt crisis?
President's Fellow, School of Public Policy, University of Calgary, As an Individual
Well, I think we also have to remember that we're building up debt very quickly, so the base is getting larger. Right now, we're at $1.2 trillion. I've worked out the forecast for 2025, assuming that the $100 billion of extra spending is adopted. We are going to end up having $1.6 trillion in debt, which doesn't include other provincial debt and doesn't include unfunded liability.
If you have a rise in interest rates, particularly on this very much larger base.... Let's say that on average they go up from 1.5% to 3%. That will double, plus we've more than doubled the size of the debt, so we've quadrupled the size of the debt. All of a sudden those interest expenses start becoming a much bigger part of the budget and much more expensive, and we end up putting more money of our tax dollars into paying interest than we do in trying to fund other—
Conservative
Pierre Poilievre Conservative Carleton, ON
In a heartbeat—because I'm running out of time—could that lead to a debt crisis?
President's Fellow, School of Public Policy, University of Calgary, As an Individual
Oh, it could potentially lead to a debt crisis, but we also have to remember that there could be potentially another bad event happening. A lot of people run these models assuming nothing will ever happen after COVID.
Conservative
Pierre Poilievre Conservative Carleton, ON
Right. I remember a journalist from the CBC telling me that there would not be a recession, that all the experts knew it. This was in December 2019. Sure enough, three months later, we were nearly in a depression. Unpredictable events happen.
On the issue of wealth inequality, our friends in the NDP are talking about a $6-billion wealth tax, but they're ignoring simultaneously the massive subsidized ballooning of the wealthiest people's assets through the quantitative easing program. The Bank of Canada is printing money and buying the assets of the very rich, ballooning asset prices and causing billionaires to make vast fortunes, regardless of what industry they're in, not because of their sales but because of the inflation of their asset values. That's $400 billion being pumped into the assets of very wealthy people.
The NDP is concerned about $6 billion. Fine, but I think all of us are asleep at the switch as the wealthiest people in the country gain the biggest increase in unearned wealth perhaps in my lifetime. I'd like to ask Mr. Booth if he can shine some light on this monstrous wealth transfer from wage-earners, whose wages are being devalued by this money-printing exercise, to wealthy asset owners whose stocks, bonds and real estate are ballooning in value.
Liberal
The Chair Liberal Wayne Easter
That's a tough question to do in a minute, Mr. Booth, but Pierre is considerably over already.
Go ahead. I'm sorry.
Entrepreneur and Author, As an Individual
I can do it.
That's exactly what's happening, and a lot of the conversation that I hear today, while it's well intended, is dealing from within the system. Everybody is out to get their handout from within the system, while the system contributes to that overall inequality and makes it worse and worse. That's the problem. The system requires inflation and all the monetary easing.
The interest rates in a free market would be way higher. Canada wouldn't be able to get away with it. That's why there's the printing of money: to be able to drive that monetary experiment, which increases the wealth gap. It's way worse than that. This is important. Right now, there's a bunch of “let's fix the green economy.” Some of that might be right, but think about it more deeply.
What that means is that today, right now, with solar coming on, it's a cheaper form of energy, and it's supplying extra energy to the market. That extra energy coming into the market had a lower price. It's bringing down oil prices and everything else. The only way to be able to overcome that and grow our economies out of that is to manipulate money further.
In other words, a problem that is bigger by an order of magnitude for our entire climate is the printing of money. It's not the environmental one that people think it is. That's within the system. No matter how much innovation goes in, there has to be more printing of money to be able to stop that and keep the inflationary system in check.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Booth, for doing your best.
We'll split the six minutes between Ms. Koutrakis and Mr. Fragiskatos.
Liberal
Annie Koutrakis Liberal Vimy, QC
Thank you, Mr. Chair, and thank you to all our witnesses today.
In the interest of time, I will try to get in two questions, both addressed to Dr. Mintz.
Dr. Mintz, as a percentage of GDP, interest payments are at historically low levels despite the COVID deficit. The Minister of Finance has stated in the fall economic statement that the government is moving more debt into long-term bonds, up to 30 years, which yields less than 2%.
At the same time, the Federal Reserve chair, Mr. Powell, a conservative Republican, is asking Congress to introduce another stimulus package as soon as possible to keep the U.S. economy from stalling.
Given the extremely low borrowing costs and the fact that we are not yet out of the woods even as the vaccines start to roll out, and given that we have lost growth potential, should the government not take this opportunity to help the economy get back to full employment levels of 2019 sooner rather than later?
President's Fellow, School of Public Policy, University of Calgary, As an Individual
I will answer your points quickly.
I think you should remember that.... True, the interest rates are low now. Canada actually had, among the advanced countries, one of the shortest-term structures in debt. Actually now moving towards a longer-term structure, I think, is helpful because that reduces the amount that we have to go to the international markets for to raise debt. Right now, every year 22% of our debt rolls over.
The other thing is that you can't forget the provincial government side, so that's important too. I totally agree that at this time we need to keep supporting the economy while we go through this health crisis. We're probably looking at 2021 being another bad year, in my view, because the vaccines are going to be coming too slowly and it will take until fall before we can really establish herd immunity.
If that is the case, then I think we really do need help, but I think we need to be much better targeted. My friend Michael Smart put out a very good piece today reminding people that the Canada wage subsidy, unlike the U.K. one and some of the others, is far less well targeted. We're giving money to companies that would keep on the workers anyway, and so we've made it very expensive. We could improve that quite a bit.
The CERB—and the CRB now—in my view, is not well targeted. We're giving the same money to part-time workers as we do to full-time workers. It's not that we shouldn't help people, but we shouldn't do it to the extent that Canada, unlike any other OECD country except for the United States, has. It has buoyed up household income so much during the recession that people actually made more money on average: 11% more under the OECD numbers, and in the update 13% more, which is a huge amount of money. We need to be a lot more careful.
Liberal
Annie Koutrakis Liberal Vimy, QC
Had we not done these programs, would it not be more expensive...to slow down a sputtering recovery?
Had we not done what we did, wouldn't our economic recovery be worse?
President's Fellow, School of Public Policy, University of Calgary, As an Individual
No, you're thinking like demand was creating more growth.
We have a supply shock. You could throw tons of money at people and they won't go out and spend, which is what happened. Consumption actually declined and savings went up hugely, actually. It's really the opposite. What we've done is that we have mortgaged the future with overzealous spending, and we just went overboard. That's my point—not that we shouldn't have spent, but that we went overboard.
Liberal
The Chair Liberal Wayne Easter
Thank you both.
We have two minutes for you, Mr. Fragiskatos, and then we're done.
December 3rd, 2020 / 6:15 p.m.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Thank you, Chair.
Mr. Cross, you have written that there isn't a “she-cession” under way in Canada. In other words, the pandemic, in your view at least, has not disproportionately negatively impacted women. Is that correct?
I'm referring to a Financial Post piece that you wrote.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
I'm curious about that, because we've heard quite the opposite, not just at today's meeting but in previous meetings from noted economists like Armine Yalnizyan and many others out there out there who have studied this.
I'm just a bit confused, because in your Financial Post piece that I just referenced, the data that you used to say that there is not a “she-cession” under way in Canada ends in August. You take a small snapshot.
Ms. Yalnizyan wrote...and it's not my job to defend her. I just want to put it on the record, and I want to make sure that committee members, including myself, have accurate information in front of them. She wrote a rebuttal piece to you, in which she referenced what was going on in the month of September, the month that information is most recently available for, and I'll quote from that piece.
She says that, in the month of September, there were over 350,000 jobs “missing” from the economy, lost jobs because of COVID-19, and “women's [job] losses accounted for 85 per cent. There were actually 12,000 more prime-age men (aged 25-54) working in September than there had been in February.” She also says that in September “an additional 54,000 men joined the labour market [while] 57,000 women left it.”
I'm struggling with that, Mr. Cross.
Liberal
The Chair Liberal Wayne Easter
Peter, I have to give Mr. Cross time to answer, and I know we have a hard stop here.
Mr. Cross, do you want to respond?
Senior Fellow, Macdonald-Laurier Institute
Yes. I put a rebuttal in the Financial Post that Armine was using data that wasn't seasonally adjusted. If you use seasonally adjusted data, the loss is 50:50 between men and women. If you use unadjusted data, it's 85:15, which is what she used. What she basically used—
Liberal
Senior Fellow, Macdonald-Laurier Institute
Why ask me questions if you won't let me answer?
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Because I have limited time.... Go ahead and finish your thought.
Liberal
The Chair Liberal Wayne Easter
Finish your thought, Philip, if you could. It wouldn't be the first time there were disagreements in this committee.
Go ahead, Mr. Cross.
Senior Fellow, Macdonald-Laurier Institute
All Armine showed is that men and women have different seasonal patterns to their employment. Men lose their jobs in winter because they tend to work more outdoors, so they recovered more over the summer. That's all her data demonstrated.