Mr. Speaker, first of all, I am pleased to rise today and speak on the social reform issue, which I believe will be of great significance during the coming months for a number of reasons.
I would like to take a moment to demonstrate that the Liberal government is facing an unsurmountable problem, trying desperately as it has been for the past year to defend the Constitution. I am referring of course to the federal system as we know it, this system that the Prime Minister described as profitable federalism over a decade ago.
In fact, this profitable federalism that we keep hearing about without ever seeing any results, this much-vaunted profitable federalism has no room left to move because it is throwing everything in reverse as we will see later. And there are only two ways out the deadlock for the federal system: to tax the middle-class to excess or cut social services.
This is the context in which I think the social reform proposals before us must be seen. While the previous government, a Conservative government, became famous mainly for increasing the tax load of middle-income earners, the present Liberal government seems to want to make a name for itself with social service cuts affecting first and foremost the less affluent.
All of this boils down to what was described as the vicious circle in which the Canadian economy is trapped. You start by overtaxing middle-income earners, thereby reducing their buying power which in turn forces them to change their consumer habits and definitely buy less. This results in fewer jobs and higher unemployment. The low-income population is growing at the expense of the middle-income one. The decline in employment causes the government's tax revenues to drop as well.
Similarly, since unemployment and social assistance costs are going up, the government must spend more. The deficit is growing every day, while the government's manoeuvring room is getting narrower.
Faced with this situation, the well-off often transfer their assets to other countries before it melts away here. Again, this eliminates jobs, raises the unemployment rate, cuts government revenue and increases public spending, which in turn narrows the government's room to manoeuvre.
To address the problem, the government has decided to reduce its services. In this regard, this government is not so different from the former Conservative government, since its proposed social reform reflects the philosophy behind the various UI reform initiatives put forward by the Tories when they were in power. To be convinced of this, one only has to look at the main elements of this reform. First of all, the government has created two classes of unemployed: the occasional UI claimants and the frequent claimants. We may well ask ourselves if the workers now benefiting from the infrastructure program put in place by the government last year will become frequent or occasional claimants when they lose their short-term jobs.
Since it creates these two classes of unemployed people, the government also creates two classes of benefits: basic insurance and adjustment insurance, as it is called. Basic insurance is for occasional claimants. It is pretty much the same as the present system which the government finds inadequate. In the second case, adjustment insurance, the government perpetuates the vicious circle of the Canadian economy which I mentioned earlier.
In fact, the reform of social programs which the government has presented to us provides no real policy to stimulate employment. So one may well ask what claimants of adjustment insurance can adjust to.
To deal with this situation, the government intends to require frequent claimants to do community work or take training courses in order to qualify for benefits. We see how ridiculous the situation is, because these are bandaid solutions. Once these unemployed people have completed their community work to which the Department of Human Resources Development will assign them, they will all return to unemployment as even more frequently unemployed, since in the mean time the government will have provided nothing to stimulate employment.
So we go from one vicious circle to another, making the unemployed pay for this government's lack of initiative when it comes to job creation. However, this little game is just fine in the context of the vicious circle prevailing in Canada. First, the government no longer has any margin. Consequently, it forces the unemployed to participate in new employment expansion and development programs. So as to lower their production costs, companies use these programs to hire workers whose salaries are lower, and therefore competitive with those already being paid.
Consequently, in the medium term, well-paying jobs become more and more rare, thus reducing even more the purchasing power of the middle class. Since employment income tends to diminish, it results in lower tax revenue for the government, which then has even less of a margin. The result is that the government must make new cuts in services to meet its budget goals. And the vicious circle starts all over again for the Canadian economy.
The introduction of this social program reform by the Liberals only confirms what the majority of Quebec voters figured out last year: To vote for the Liberals or the Conservatives was just the same. The Conservatives overtaxed the middle class, while the Liberals will cut aid to the poor. At least one Liberal MP, the hon. member for York South-Weston, recognized this when he said that, during the ten years that the Liberals formed the Official Opposition, they accused the Conservatives of reducing the deficit on the back of the poor, but that they were now doing the same thing.
It is useless to vote for a party that supports a constitutional framework that is dragging us down into bankruptcy. The problem is that all this is being done at the expense of the vulnerable in our society. The rich are never affected by these reforms. To illustrate my point, I may refer to a letter sent recently by a Liberal member, the hon. member for Gander-Grand Falls, to the Minister of Finance. In this letter, which was published in the media either yesterday or today, the hon. member said, and this was to the Minister of Finance, that he was particularly upset about the shocking and immoral deductions allowed as entertainment expenses, for instance, the purchase of $200 bottles of wine, cruises, escort services, and so forth. What is the hon. member for Gander-Grand Falls actually saying?
Every year, one of my neighbours in my riding, Mr. Tremblay, has one or two corn roasts for his friends. He buys corn, of course, some wine and some cake, and he entertains his guests. Of course, Mr. Tremblay does this at his own expense. Meanwhile, large corporations entertain their guests, serving cocktails, petits fours and champagne, and that is tax deductible. Who is paying? Mr. Tremblay, through his taxes. So Mr. Tremblay is paying for everyone. That is why corn is expensive, and that is why it is so expensive to be poor.
In his letter, the hon. member for Gander-Grand Falls estimated that amounts spent on wine, petits fours and champagne were costing the government $200 million.
The hon. member, who did some research at Revenue Canada, also pointed out that forward averaging of taxes by companies now amounted to nearly $40 billion. Forward averaging refers to amounts that are payable but may be spread over subsequent returns. Nearly 1,200 companies recorded profits of at least $1 million without paying a cent of income tax, according to the hon. member. In concluding, he said more or less the following: As the minister can see, the $9 billion he is looking for could be found by collecting the taxes that should have been paid by companies on their profits.
I agree with the hon. member of the Reform Party. I think that before cutting social services, we should first get the money that is out there so that we have some degree of social justice. Where are we heading, politically speaking? I am sorry to put it this way, but I really think we are starting to look like a banana republic. A banana republic is not a republic where people pick bananas. It is a republic where the people who pick the bananas do not grow them. This means a republic with only two classes: the poor and the rich. The rich always get richer and the poor get poorer. If this proposal is passed, as it will be within the next few months, we will witness the undeniable signs of "bananization". Obviously, we cannot support this reform package.