Government Operations Committee on May 29th, 2020

[Yves Giroux]

That's a question that the government would be in a good position to answer. For example, in the need to return to more sustainable spending, if the government decides to cut some aspects of government operations and targets defence spending, then it could put in jeopardy “Strong, Secure, Engaged” spending, or DND spending more generally. However, if it decides to reduce other areas of government spending, it could leave DND [Technical difficulty—Editor].

These are all policy choices that the government will have to make when it decides the way in which it wants to return to more sustainable levels of deficit, or even a balanced budget.

[Kelly McCauley, Conservative, Edmonton West, AB]

Yes; as if.

I assume that's my time, Mr. Chair?

[The Chair, Conservative, Tom Lukiwski]

We'll have to ask Paul.

Has the time expired?

[The Clerk]

Yes. The next person is Mr. Kusmierczyk.

[The Chair, Conservative, Tom Lukiwski]

All right.

Mr. Kusmierczyk, you have five minutes, please.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you very much, Chair.

Thank you very much, Mr. Giroux, for your report. It has provided us with a detailed economic picture during this COVID period compared with some of the forecasts from previous years, for example.

I want to get a sense of our economic fiscal position relative to other countries that are going through a similar situation. Would you be able to speak to that a little bit? I'll cue that up by mentioning that I read a report that said the total value of the measures that were put forward in the United States, for example, amounted to about 6% of their GDP. We know that in France the measures they put forward amounted to about 1% of GDP.

Can you paint a picture of the measures that were put in place in terms of the $250 billion? What percentage of our GDP does that actually represent?

[Yves Giroux]

[Technical difficulty—Editor] sure. The measures put in place by the government so far, although I don't have the exact numbers off the top of my head...and it also depends on whether you include loans and loan guarantees or just fiscal spending. A deficit of 12% of GDP is slightly higher than several of our international peer countries, with whom we usually compare ourselves. That being said, we haven't done a thorough analysis of what's being done abroad, because we have focused on the Canadian situation.

Japan, for example, has recently announced efforts that are significant in relation to the size of their economy. As you mentioned, some European countries are doing efforts that are slightly lower than what we have announced in Canada, while other countries are doing slightly more. For example, you mentioned France. While France is doing probably less as a proportion of the economy than Canada is, the European Union is also pooling its resources to help affected countries. It makes international comparisons a bit more difficult.

That's why I wouldn't venture into too much detail as to how we compare internationally, because my office has not done that work, at least not to the extent that I would feel comfortable talking about the various situations of each country compared with Canada.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Okay. I understand completely.

Can you describe in general terms, even with this unprecedented spending that we've seen here, the fiscal position of Canada at this point?

[Yves Giroux]

Sure. The fiscal position of Canada before the pandemic started was relatively sound, in the sense that our debt-to-GDP ratio was relatively low compared to other countries, at about 30%, which allowed the government to introduce fiscal measures as well as guarantee loans, as it has.

Even with the deficit that we mentioned in our scenario report, the deficit at $250 billion to $260 billion should result in a debt-to-GDP ratio of about 48% at the federal level, which still has some way to go before it reaches the record level it reached in 1995-96, which was 66.6% of GDP, so there is still some flexibility at the federal level to borrow or spend a bit more.

The difficult situation there would be to keep that temporary, because if these measures are extended or made permanent, then we would be in a situation where we'd have deficits year after year at a very significant level. In such a scenario, we could easily reach 66% of GDP, which was the record level reached in the 1990s.

While we still have some fiscal room for manoeuvre, we don't have that room for manoeuvre at the current levels for several years.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Okay. Great.

I have one other question. A lot of the report focused on public debt, for example, but we know that we have to take into consideration household debt as well when we're devising policies.

I'm curious. Knowing that a big chunk of the $250 billion was focused on helping families pay their bills and pay down some of their debts as well, how important was the federal stimulus to help and support families in light of the household debt that we have in Canada?

[Yves Giroux]

It's—

[The Chair, Conservative, Tom Lukiwski]

Unfortunately, Mr. Giroux, we're out of time [Technical difficulty—Editor] so if you could, provide a written response to our clerk.

Now we'll go to our next intervenor.

Ms. Vignola, you have the floor for five minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much.

Good morning, Mr. Giroux. Thank you for being here with us today.

I'm the “question lady”—I always have a lot of them.

I'd like to ask about an aspect of your mandate. Before a new measure is put in place, is your office consulted to assess its potential impact?

[Yves Giroux]

I'll give you the short answer: no.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

I see. Would it be a good idea to consult you first?

[Yves Giroux]

It would be a good idea, to the extent that the government would want the opinion of the Parliamentary Budget Officer, who is an independent officer of Parliament. However, it might have to ignore that opinion.

I must add that that is not part of my mandate. My mandate would have to be changed in order to allow me to do that freely.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much.

In your statement, you spoke about certain measures that could become permanent. What are the measures that could become permanent?

[Yves Giroux]

It depends of course on the wishes or intentions of the government.

One of the measures that could become permanent, since Canadians are very pleased with it, is the Canada emergency response benefit. It is much simpler to administer than the employment insurance program and easier to understand. People receive a set amount per week, whether they are wage earners or self-employed workers, who are also covered by the emergency benefit. There could be a lot of pressure on the government to make it permanent.

That said, I am absolutely not expressing any judgment or opinion on the advisability of making the measure permanent or not. That is a political question that falls to the government and to parliamentarians.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

If the government were to decide to make the CERB permanent for one reason or another, what would be the advantages and disadvantages of that for the budget and the economy?

[Yves Giroux]

On the pro side, I would say that this measure is relatively simple to administer.

In terms of disadvantages, however, since the benefits are not directly related to the level of earned income, and therefore are not modelled on earned income, it may be much more attractive for some individuals to remain on CERB for as long or as often as possible rather than work.

For example, people receiving minimum wage and working less than 35 or 40 hours may earn more by receiving the CERB than by working. This is a significant disincentive to work. This is the biggest disadvantage.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Basically, if the CERB were to become permanent, there would have to be incentives to work. This could be an adjustment to CERB based on earned income. To take the current situation as an example, let's say that if an individual earns $1,000, they would receive the CERB, but if they earned more, for every extra dollar earned, their CERB benefit would be reduced by a given percentage.

Could this be an incentive for people to go back to work?

[Yves Giroux]

Yes, several models are possible and could increase incentives or reduce disincentives to work.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Do you think government spending is having the desired effect on stimulating the market at this time?

[Yves Giroux]

I don't see the current measures as a way to stimulate—

[The Chair, Conservative, Tom Lukiwski]

A very brief answer, sir.