Government Operations Committee on Sept. 25th, 2025

[Jenna Sudds, Liberal, Kanata, ON]

That's a fair answer, and I think that, as members of Parliament, as individuals representing our respective communities, our closeness to the ground and understanding the challenges that our communities face is reflected in the measures and the policies that we've been putting forward. We want to ensure that we are investing where needed to support Canadians through what we know will continue to be challenging times through this trade war, as our economy rebounds.

I appreciate that it is a tough question, but from this vantage point, it's certainly important to just raise the flag that, as elected officials, we certainly have a different vantage point than the Parliamentary Budget Officer would.

In the report, you pointed towards weaker trade. The global uncertainty of course was referenced, and key drivers in the outlook were put forward. Can you expand on how much Canada's fiscal picture is being shaped by those two things—the weaker trade and the global uncertainty?

[Diarra Sourang]

I think a good starting point would be to look at what's happening to nominal GDP, which is, as I'll call it, the largest proxy for the tax base. Because of those headwinds, trade policies and other challenges as well, such as demographics, we've revised our outlook for nominal GDP by approximately $13 billion every year during our outlook. That definitely contributes to affecting the fiscal position, but as Kristina would say, there are other items or measures that have also been included in there.

[Jenna Sudds, Liberal, Kanata, ON]

Excellent, thank you very much.

Your baseline captures existing measures announced up until—I believe it was—September 5. However, it doesn't weigh the full impact of investments in housing, infrastructure or skills. Would you agree that these measures would strengthen growth over time?

[Diarra Sourang]

On those specific investments, we do have a view as to what the baseline looks like in terms of government investments in general. Unfortunately, because we don't have enough detail as to how big these investments will be or how they will be delivered, we have not fully incorporated them into our outlook.

We do know, however, that, depending on the delivery mechanism, an investment might have more or less different impacts on the economy. For example, business investment has a different multiplier than transfers to households. It just depends on how the delivery is being done.

[Jenna Sudds, Liberal, Kanata, ON]

To wrap up, I appreciate those comments and look forward to seeing the impact of these very strategic investments that our government has been making to the betterment of the country and the economy.

Thank you.

[The Chair, Conservative, Kelly McCauley]

Ms. Gaudreau, it's back to you for two and a half minutes.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

Thank you, Mr. Chair.

I'll be quick.

I'm not an economist or an accountant, but I know that in order to balance the books, you have to balance revenues and spending. I look at the current situation and think that, personally, I would have declared bankruptcy a long time ago.

I'd like you to explain something to me. How can the government lower taxes and reduce the government's tax base? I don't understand that.

[Jason Jacques]

I don't think we're in the best position to explain the Government of Canada's decisions and policies. I'm the interim Parliamentary Budget Officer, not the parliamentary Government of Canada policy officer.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

I can still ask you if it's responsible to demonstrate—

[Jason Jacques]

Reducing taxes and increasing spending would increase the deficit and exacerbate the problem that the Government of Canada needs to address.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

There's another issue. We're talking about reducing the size of the public service. That was already promised some time ago. At the same time, and this undermines the effect of a 20% decrease in the size of government, we're talking about spending 5% of GDP on national defence. There's something I don't understand.

[Jason Jacques]

You may get all the details on November 4.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

Okay.

My last question is this.

There have to be models that already exist. We were talking about the U.K. earlier. I'm thinking of Quebec. Other provinces have transparent breakdown measures.

Shouldn't the federal government adopt a way of letting the numbers speak?

[Jason Jacques]

That's a good question.

I think the government, especially the public service, is aware of practices elsewhere in the provinces and other governments. I think the government is taking a new approach with an operational and investment plan.

I hope it can take action quickly, but, like everyone else, we have to wait until November 4.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

Thank you very much, Mr. Chair.

[The Chair, Conservative, Kelly McCauley]

We will go back to you, Mr. Chambers.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

I want to pick up where we left off when the chair so abruptly cut me off last time.

We're issuing a record amount of debt this year, as I understand it. The last debt management strategy came out early in the summer. I think about $620-odd billion has to be issued this year. Is that your understanding as well?

Okay.

If the government is saying they will spend less and invest more, in theory, these investments will have a return, of course, because investments do have returns. They continue to borrow through short-term debt instruments. Usually, you'd try to match your assets and liabilities. If you continue to borrow on the short end of the curve, as they say, but make long-term investments, will that not increase the risk to taxpayers?

As interest rates change, taxpayers and the government are far more exposed to the sensitivity of interest rates such that our debt service cost could increase much more quickly if rates were to go up for any reason. I'll note that the rates were dropped recently, but the five-year yield increased after the Bank of Canada increased its rates. Is that your understanding as well? Should we be looking at the matching of assets and liabilities?

[Jason Jacques]

I think duration matching is a pretty fundamental principle of borrowing an investment to make sure that you're not exposed to fluctuations in the financial market and make sure that you can come up with cash when, in fact, you can't, because the money is tied up in longer-term assets.

[Adam Chambers, Conservative, Simcoe North, ON]

Right—or it's an admission that actually what you're doing is just borrowing to do the operations of government.

You don't have to answer that. I'll just leave that there.

I read a report earlier this year from the IMF. It referenced that for every dollar spent on interest on the debt, there was a somewhat reduction in spending on social services. Are you aware of that report? That came out in the spring, I think. Is that a report that you're familiar with?

[Jason Jacques]

Actually, I think I read the report. I forget the precise numbers—it was several months ago, and I read a lot—but I am familiar with it. The underlying principle associated with a lot of the basic macroeconomic models is that the higher your debt and the greater your debt interest costs, the more it ends up eating up spending in other areas, whether it be social programming or investment or what have you.

[Adam Chambers, Conservative, Simcoe North, ON]

Right. So when you use the word “unsustainable”, is that also what you're getting at—that the level of debt we have and the burden of the service costs of that debt are unsustainable such that a consequence would be a reduction in social service spending?

[Jason Jacques]

[Technical difficulty—Editor] reductions in spending. Again, we don't do policy.

[Adam Chambers, Conservative, Simcoe North, ON]

Sure.

[Jason Jacques]

We do budgeting. From a basic budgeting perspective, you have spending and you have revenues. In a situation where you have a large deficit, and effectively your debt levels are growing at an unsustainable rate, you have to either increase your revenues or decrease your spending.

[Adam Chambers, Conservative, Simcoe North, ON]

Right. So when there were questions asked about increasing debt and deficits five and six years ago—or, say, after the new administration took over and said they would run some small deficits—I think debt service costs were about 7¢ or 8¢ on the dollar. You're now projecting that it goes to 14¢ on the dollar. Some people were laughed out of the room for asking questions about why we should be concerned about this, but here we are. Again, that's before we have any serious economic downturns or even a recession.

Is it fair to say that spending is at risk as debt service costs continue to increase?