Government Operations Committee on Jan. 27th, 2021

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

I'm sorry, but I can't hear a thing at the moment.

[Yves Giroux]

Is that better, Mrs. Vignola?

The cost of the wage subsidy is estimated at $86 billion.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Okay, thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

We'll now go to Mr. Weiler. You have six minutes.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair, and thanks to Mr. Giroux for coming to join our committee again today.

Mr. Giroux, in your remarks earlier you made the criticism that the fall economic statement does not have a fiscal anchor or clear thresholds for fiscal guardrails. I'm sure, however, that you're aware the Minister of Finance's mandate letter contains a commitment to bring in a new fiscal anchor.

Recently the former Bank of Canada governor has opined that Canada's debt is manageable with GDP growth. He said that:

…if economic growth is faster than the rate of interest, then the base you're taxing keeps growing faster than your interest payments, and gradually your debt declines as a share of GDP and your ability to finance it.

Do you think this would be an appropriate fiscal anchor, or what advice do you have that would guide government spending to ensure that Canada's debt remains manageable?

[Yves Giroux]

That's a very interesting question.

When I advocate for a fiscal anchor, I don't advocate for one specific fiscal anchor. I'm advocating for one fiscal anchor—or multiple if the government wants to have multiple such anchors. The choice of anchor is, obviously, up to the Minister of Finance, the Prime Minister and the cabinet, but when I'm advocating for one fiscal anchor, I'm not recommending one in particular.

However, one that's widely used is a declining or specific target, a declining debt-to-GDP ratio or a stable debt-to-GDP ratio. That's one that's widely used across the world. It is relatively well understood and also takes into account the science of the economy and the science of the government's debt.

Others have suggested targeting a specific growth rate or expenditures or revenues or interest debt payment. These are all, I wouldn't say, equally valued—it depends on the objective of a government—but these are all other fiscal anchors, and one can think of more fiscal anchors.

The choice of the anchor in and of itself, we can debate that, but first and foremost, I think we have to have an anchor.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you for that.

Let's get back to the discussion of vaccines, given what we know about the immunization timelines for Canada: that all Canadians who want a vaccine will be immunized by the end of September. With these likely timelines, similar to when we know we'll be able to return to normal with the pre-pandemic ability to have social gatherings, to travel and otherwise, what would your advice be for the government with respect to whether it should or should not extend some of the pandemic relief programs, like the emergency rent subsidy, the emergency wage subsidy and the emergency business account?

[Yves Giroux]

That's a very tricky area for me to venture into because, in my capacity, I provide information and analysis, but my mandate does not include providing advice to the government or to parliamentarians. Extending or not extending some of these measures is a decision that you collectively have to make as parliamentarians.

One thing that I can say, however, is that in our fiscal and economic outlook, we have assumed that the support for COVID-related measures will be allowed to expire as planned. If these measures were to be extended, then the deficit that we indicated in our documents would obviously be higher. As to whether the government should or should not extend these, I'll leave that to policy-makers.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

From the financial analysis point of view, what would be the monthly cost of extending these programs, say, by another three months or by another six months?

[Yves Giroux]

It depends on the programs themselves. CERB, for example, ran at about—if I'm not mistaken—$6 billion to $8 billion per month. The wage subsidy is probably running at close to a few billion dollars a month, so it depends on which programs you're talking about and on exactly when you're thinking about extending them. Extending a program when the economy is in a recovery phase is much less expensive than extending it, for example, right now when lockdowns are still in place in many areas of the country.

So, it depends on when these would get extended, but you're talking about easily $10 billion a month if you were to extend all of these programs beyond their scheduled expiry dates. Again, that's with huge caveats.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

I've spoken to a lot of businesses in my riding that have been very, very hard hit by the pandemic, perhaps none more so than those in the hospitality or F and B sectors. El Segundo is a restaurant in Sechelt that opened up after the pandemic hit. It made commitments to open up far before the pandemic hit. It's not eligible for things like the pandemic relief programs. I'm wondering if you've analyzed the cost of extending these programs to businesses that were established after the onset of the pandemic or after mid-March?

[Yves Giroux]

We haven't done that because the data we have would probably not allow us to do that, certainly not right now. It takes a little bit of time, with some delay and lag, to get information on businesses that have been recently established. So, we haven't done that—unless my colleagues want to chime in and contradict me by saying that it would be easy to do, but I don't think it would be easy to do at this point in time.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Giroux. If your colleagues have an answer, if they would provide that in writing it would be greatly appreciated.

We'll now go to Ms. Vignola for six minutes.

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

Thank you very much, Mr. Chair.

Good afternoon, Mr. Giroux. Thank you for being with us again.

In your opening remarks, you mentioned that the fall economic statement did not meet transparency requirements in several areas. For example, you noted the absence of a fiscal anchor, which we just discussed, the lack of clear thresholds for the fiscal guardrails, and the lack of detail related to the employment insurance operating account.

First, I would have liked to ask you what would have been an appropriate fiscal anchor for you, but you have already answered. You don't have a suggestion but you think we need one.

So let me move to my next question. Is it appropriate, in a time of crisis like the one we are experiencing right now, not to have a fiscal anchor? If we had one, what would that change in your analysis of the budget and in ours?

[Yves Giroux]

Thank you for your question.

Is it appropriate not to have a fiscal anchor during a crisis? There are two ways of looking at it. On the one hand, we can say that it is completely appropriate, since a fiscal anchor is no longer worth much in a crisis situation, given that the future is so uncertain. That's true. On the other hand, I think giving up on any fiscal anchors increases the uncertainty about the state of public finances, because it creates a lot of ambiguity about where they are headed.

It would have been possible to have a fiscal anchor and suspend it, with a commitment to return to it later, or at least to review it. That's what several provinces that had fiscal rules have done and still do. In my view, it would still be possible to do that. We could give ourselves some leeway as a country. Of course, we can't commit ourselves to a constantly declining debt-to-GDP ratio. But we can commit to returning to our fiscal anchor, or trying to return to it, once the situation has stabilized. That would have been one way to go.

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

The disadvantage of not having an anchor is that it creates economic uncertainty for Canada. Thank you very much.

In terms of fiscal guardrails, how is not having thresholds a problem?

[Yves Giroux]

With respect to the fiscal guardrails included by the Minister in her fall economic statement, she mentioned three indicators of when or under what conditions fiscal stimulus could be reduced. Although the economic and fiscal stimulus plan is over a three-year period, two of the three indicators mentioned could return to pre-pandemic levels within the next year, in the first half of 2022. In other words, we could already return to the pre-pandemic situation when we would be at about 50% of the planned economic stimulus period.

One of the indicators is the employment rate, that is, the number of adults working. As the population ages, it is quite possible that the employment rate will never return to the pre-pandemic level. When people are older, they want to retire, although there are exceptions. I don't think I'm one of them. In any case, since we have an aging population, it is quite possible that we may never go back to the employment rate we had before the pandemic.

In short, the fiscal guardrails in the economic update are contradictory and may not be entirely consistent with the economic stimulus measures planned over a three-year period.

That said, if the objective of the $70 to $100 billion in spending over three years is to make structural changes to the Canadian economy, that is a different story altogether. If that is the objective, it is not up to me to assess whether it is appropriate to set a three-year horizon for those expenditures.

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

If anything, we could focus on self-promotion because two of our three objectives were achieved within the set timeframe.

[Yves Giroux]

Yes, that could be the case.

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

Okay.

To follow up on what Mr. Paul-Hus asked earlier, could you tell us how many departments still have problems with transparency, in your opinion?

[Yves Giroux]

I would have difficulty answering that question based solely on my personal point of view.

In the context of my mandate, I would say that, when it comes to providing information to my office, only few departments have problems with transparency.

My colleague Ms. Maynard, the Information Commissioner, would probably give you a completely different answer.

Since this issue can be looked at from a number of different angles, I will stick to what I know and to the information provided to me by the departments. Those who do not provide me with the information I need in a timely manner are in the minority.

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

Thank you very much.

[The Chair, Conservative, Robert Gordon Kitchen]

We'll now go to Mr. Green for six minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you very much, Mr. Chair.

To the Parliamentary Budget Officer, welcome back. Perhaps I'll pick up where I left off the last time you joined us.

I heard you state that, in your consideration, we might never get back to the unemployment rates pre-pandemic. Would you care to elaborate on that? Are you suggesting that they'll remain fairly high or that with the exit of an aging population they'll be artificially suppressed?

[Yves Giroux]

Thank you for the opportunity to clarify. I referred to the employment rate. That's the proportion of adults in the Canadian population who have a job. It's possible that, with an aging population, as there is a growing proportion of people who are age 65 and over, we will never reach again the employment rate that we saw prior to the pandemic. More people will get into that age category where they expect to retire and do something else than work in life, so it's quite possible that we will never return—at least not for several, several years, if not decades—to the pre-pandemic proportion of adults who have a job. So it's the employment rate.