Government Operations Committee on May 29th, 2020

[Kelly McCauley, Conservative, Edmonton West, AB]

Yes.

[Yves Giroux]

Except for the missing pieces, which are an important aspect, yes. When we ask for information—

[Kelly McCauley, Conservative, Edmonton West, AB]

Do you think those other 20,000 projects exist?

[Yves Giroux]

I believe they do exist, but it's hard to be convinced. I have faith that they do exist, but I don't have proof that they exist.

[Kelly McCauley, Conservative, Edmonton West, AB]

Of the billions being spent by this government or by the department, what percentage of that money can be attributed to these 33,000 specific projects?

[Yves Giroux]

I don't have that information off the top of my head, unfortunately.

[Kelly McCauley, Conservative, Edmonton West, AB]

What kind of bump are we getting for GDP growth from this spending, and is it the best value for stimulus?

[Yves Giroux]

I'd have to go back to previous reports. I've been focusing mostly on measures related to COVID-19. I remember that the amounts were relatively small compared to the overall spending amounts in terms of the economic impact.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right. My understanding is that for every dollar being put out, the provinces or municipalities are pulling back spending. My understanding, again anecdotally, is that the economy is not seeing a push or a bump from these billions of dollars of spending.

[Yves Giroux]

That's true. In one of our findings we discovered that provinces are displacing some of their spending that would otherwise have taken place as a result of federal infrastructure spending. They're spending on projects to ensure that there's cost-matching, but they're reducing other types of projects.

In summary, federal spending ends up displacing a portion of provincial spending that would have taken place otherwise.

[Kelly McCauley, Conservative, Edmonton West, AB]

Is it true you're having the same problems with DND, that they're just refusing to release the information? Those 20,000 projects are maybe 38% of the total projects. How do you lose 38% of projects?

[Yves Giroux]

We didn't find an unwillingness to provide us with the information. It seems to not exist in one single repository. We asked Infrastructure Canada for a list of projects and we didn't get a list that covers the entirety of all the projects. We have to ask other departments, and we still don't have a complete list.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

We will now go to Mr. Jowhari for four minutes, please.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair, and thank you, Mr. Giroux, for providing the testimony.

You indicated that based on your analysis, we're going from 30% to about 48% of debt-to-GDP ratio, and that was as of, I believe, April 24. You also mentioned that another $7 billion after that needs to be added to the debt, and assuming the same rate of GDP growth, we would be, as you mentioned, higher, but you didn't specifically say where that would position us.

You also mentioned that we could reach about 66%, comparable to the 66% in 1995. As of today, where would our debt-to-GDP ratio be with the addition of the $7 billion?

[Yves Giroux]

Doing some quick math in my head, which is always risky, I would say we would be close to 49% debt-to-GDP ratio if we also included the $7.6 billion announced since April 24.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Then applying the same quick math, and if we say that as these emergency supports come to an end we'll stop doing that, where do you think we will end with the GDP ratio? This is assuming all of these will finish at the time we've announced for them to finish.

[Yves Giroux]

That is highly hypothetical, but assuming that the programs that are temporary do remain temporary and sunset, and with the slow recovery that we expect, it would not be unthinkable to have 55% debt-to-GDP ratio by the end of the next fiscal year. That's assuming the economic recovery is at a reasonable pace.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

Where would that put us vis-à-vis the debt? What would you anticipate would be the debt growth? We know there's $255 billion and another $7.5 billion, so what would our debt balloon to?

[Yves Giroux]

It would certainly be above a trillion dollars, so one thousand billion dollars. The exact level is highly hypothetical. We have not published a scenario analysis for beyond the current fiscal year, because it's highly uncertain.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Fair enough.

Let's assume there is a $1-trillion debt. What would that do to the cost of servicing that debt? Currently, I believe we're at $30 billion in servicing the debt. What would that do to servicing the debt? How much of the revenue that we get as a government would go into servicing the debt?

[Yves Giroux]

We expect the cost of servicing the federal debt to amount to about 8% or 8.2% of federal revenues. That's significantly lower than the peak reached in the mid-1990s where it was 35%, 36%, if not slightly higher. It's still relatively low compared to the peak that was reached 25 years ago, but that's due to the very low level of interest rates. Interest rates being so low means they can either stay very low or they can start to increase progressively over time. Even though it's a very small proportion of federal revenues, that share is likely to increase over the next several years.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Okay, thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

We'll now go to our two-minute interventions, starting with Monsieur Barsalou-Duval for two minutes.

Go ahead, please.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you very much, Mr. Chair.

I have two questions for the Parliamentary Budget Officer. Since I do not often have time for two questions, I will ask both right away and the Parliamentary Budget Officer can answer them in the time he has left.

Earlier, my colleague Ms. Vignola asked you some questions. We can see that the Canada emergency response benefit, whether for students or workers, discourages people from working because it is not gradually reduced according to employment income.

Have you assessed the loss to government tax revenues resulting from the disincentive caused by the benefit?

My second question is about the Canada emergency commercial rent assistance, rent that is one of the fixed costs of doing business. Basically, very few companies take advantage of it. We think it's probably an ineffective government measure, but I'd like to know if that's your opinion as well.

[The Chair, Conservative, Tom Lukiwski]

Be very brief, please.