-yes, incredible, the member takes the words right out of my mouth. I find it incredible that they would have the nerve to present Bill C-70 as a major tax reform, like the secretary of state did a few moments ago. All they are doing is adding a few minor positive elements and a few negative ones, again to make taxation even more complex.
I will tell you that it is a lot easier for this government to make cuts in social programs and to make outrageous cuts in the unemployment insurance fund. The federal government is no longer contributing to the unemployment insurance fund, but it will still take about $7 billion from it over the next three years.
Over the same period, that is from 1994-95 to 1997-98, it will also take from the provinces the money it cannot obtain by closing loopholes in the federal tax system because it wants to protect wealthy party cronys or the large corporations which also happen to be important contributors to the Liberal Party fund. It will cut transfers to the provinces by $12.3 billion. It is offloading onto the provinces the problems created by its mismanagement of federal public finances.
It is passing on to the provinces a possible lowering of our credit rating by the large bonds rating firms because, as Moody's has shown us, the federal government, even though it is represented by many stand-up comics, does not escape a serious analysis of our fiscal situation, of its unwillingness to correct this situation and our tax system in particular and to review all public expenditures item by item, including tax expenditures, as we have been asking since we arrived here.
Moody's has understood that, although this document is some 225 pages long, it is not with these insignificant reforms which make our tax system even more complex that we will regain control over our finances, over our tax system and over the government's present and future revenues.
Moody's has understood one thing, and we can quote that agency. It has understood that this budget contained a lot of weak measures. There were measures that were supposed to allow the Minister of Finance to meet his objective of a deficit representing 3 percent of GDP for 1997-98, or $25 billion, but
after that, there is nothing, just a big blank. We do not know where we are going. Moody's understood that.
Moody's understood that in spite of all the cuts made at the expense of the unemployed, the seniors, the students, and the provinces, there is no way we can turn the situation around with this system. As Moody's put it, they could not see how in the medium term, we could control the deficit, much less the federal government's accumulated debt.
I have a feeling that Moody's can make calculations spread over more than a few months or one year. Moody's estimated, probably just as we did, that in spite of all the sacrifices and in spite of the last budget and the one before, from which Bill C-70 stems, which are purported to be important and major steps on the way to recovery, to a reduction of the impact of the debt on the Canadian economy, in five years, the accumulated federal debt will exceed $750 billion and be closer to $800 billion. Moody's understood that.
People at Moody's have a good appreciation of our situation, and they know how to interpret figures. They know there is no hope in the medium term, and even less in the long term, that this government, with its timid reforms of the Canadian tax system, will ever regain control of our financial situation, restore fairness to the tax system, and make it work smoothly. Moody's made a proper assessment of the Canadian situation despite what the intergovernmental affairs minister said after Moody's report was made public, and despite the answers the Prime Minister gave during question period this afternoon to the effect that Canada would have the highest gross domestic product growth in industrialized countries. Despite all of that, Moody's understood many of the problems in the Canadian economy.
First of all, if Canada has the best economic growth performance of all industrialized countries this year, it is because it was so far behind. Canada was the first to go into a recession that was the direct result of the monetary policy deliberately implemented by the Bank of Canada, a policy that brought us the worst recession in the whole Canadian history. Moody's understood all of that. When a country goes into recession before other countries, a stronger economic recovery is normal, especially the technical recovery that we are supposed to have had for three years. Moody's has understood that such a surge of economic growth is only temporary.
We are glad that the more substantial recovery we have waited for so long has finally begun. We hope that this year, the economic recovery will truly lead to the creation of quality jobs for all Quebecers and Canadians. On the other hand, Moody's praises as we do the economic growth which is unrelated to this government's policies, even if the government claims the contrary at every opportunity.
Economic growth is part of a normal economic cycle where the slowing down and the trough have lasted longer than usual because, I submit to you, of structural adjustment, globalization and of the new international situation, but in fact, this is quite normal considering that we were in the basement and that we are trying to stay on the ground floor over the next year.
Moody's adds, and we agree with this analysis, that as soon as the Canadian economy slows down-not in ten years, but at the end of 1996-partly because of the slowdown of the American economy as early as next year, the effects will be very severe. This is why Moody's indicates that the deficit problem is not under control, much less the debt.
Why? Because if, in one year and a half, Canada falls back into a recession cycle, tax revenues are going to decrease, which means that investor confidence is going to diminish because the federal government's deficit problems could, as soon as 1997-98, be greater and require even more draconian cuts than the ones which have been imposed on us by the Minister of Finance these last two years and which did not solve anything.
This means that foreign investors in particular, and Moody's was speaking to them, will start asking some serious questions about the future of the Canadian federation, the future of this government, if we are still stuck with it in Quebec. They will have serious reservations. Foreign investors will start wondering whether Canadian securities are a safe investment, because when the next recession comes around, with a debt which by 1997 will probably be close to $650 billion, it is really going to hurt, because we will need an increasing amount of money to service the debt. Since Canadian savings are not enough, foreign markets become an indispensable source of financing for the Canadian government, and the interest rates we will have to pay then, as a result of Moody's downgrading our bond rating-I can tell you Quebecers and Canadians are going to feel it.
And what caused all this? The Minister of Finance, instead of indulging in theatrics and looking only at the short term, should have looked beyond the next federal election and beyond the referendum campaign in Quebec. He should have acted responsibly and done more than this superficial patching. He should have proceeded, as we requested, with a genuine review of public spending and the tax system, the tax loopholes he has yet to close after almost two years of Liberal government. That is what caused all this trouble.
It is not a question of what will happen in the short term. The financial community looked at the short term. Everything is fine, but that will not be the case next year and in two years, it will be even worse. Moody's takes a much longer view. I respect
this firm because it had the guts to do this, although it was under political pressure, because as you know, bond rating firms are regularly approached by lobbyists. Lobbyists are not just on Parliament Hill. There are lobbyists on Parliament Hill who go to see these people or the firms go directly to the Minister of Finance. They realize what is going on.
Those who today blithely say that Moody's downgrade will have no short term effect are also irresponsible because of the message they are sending to the government. I am talking about large financial institutions in Quebec and elsewhere in Canada; some are arm-in-arm with the Liberal Party while others have a certain integrity we can respect. However they behave in an irresponsible manner when they say that all is well, that the financial sector anticipated Moody's downgrade and that the federal government was forewarned on February 11 of the impending downgrade but was reassured that the economic growth was there to offset it.
In my opinion, all partisanship and opinions on the constitutional debate aside, saying such things is irresponsible. Some people are irresponsible enough to say that all is well. They are applauding the government even though it has failed to make the structural reforms, the deep structural changes that such a disaster calls for. Two years from now, these same people-I have them on record-these very people will be saying: "Two years ago the federal government should have taken more effective measures, stricter measures to get the public finances in order. It should have reformed the tax system two years ago. We could have avoided this utter tax mess. We would also not be stuck with a recession made twice as bad as a normal recession because investors holding Canadian securities have lost confidence in our system and in the government's ability to manage the public purse". These people in two years are going to say exactly the opposite to what they said last week or even last weekend about the impact of Moody's reduced rating.
I would ask them, if they still have a sense of responsibility, to remind the federal government that it should not take short term holidays. It should set in motion what we have been asking it to set in motion since it took office. It must review everything it does here while awaiting Quebec's decision to leave the system. It is a system we consider to have no future, one that has shown itself to be, in the absence of tax reform alone in the past two years, immovable and, in terms of the constitution, irreformable and inflexible.
Even with respect to tax reform, it is immovable. Perhaps because of the size of the machine and of the task, but it is immovable primarily because the government is defending interests other than those of Canadians and Quebeckers, I believe. The lack of a clear stand in favour of fairness in the tax system, in favour of a complete review of taxation and in favour of the establishment of a parliamentary committee to review the whole matter tells us it is time to "get the heck out", as the current expression has it, and I am talking to Quebeckers here, it is time to get out before choices are made for us.
You only have to look at the history of Argentina or Mexico. People say that countries in Latin America cannot be used for comparison purposes. But it is not true. In the early seventies, Argentina was thought to have a brilliant future, a country rich in resources, just like Brazil. Remember, until the early eighties, we were talking about the Brazilian miracle. Opportunities were endless.
The same went for Mexico. When Pemex was created, enthusiasm ran high. Wealth was assured. The debt problem was not nearly as serious as the one we now face in Canada. And yet, these countries collapsed and the International Monetary Fund imposed on them measures that they should have imposed on themselves, but in a more humane and gradual way, to cause as little hardship as possible to individuals as well as businesses. Radical cuts were imposed on them.
I remember in 1984, before joining GATT, which is now known as the World Trade Organization, Mexico was told to cut its education expenditures by half. All at one, expenditures had to be cut by 50 per cent in education, 30 per cent in health and 45 per cent in rural development-and in Mexico, the rural sector is extremely important, much more so than in Canada. Yet, this is the kind of measures that were imposed on Mexico.
If, according to Moody's in particular, but also many others who, before the budget was tabled, shared Moody's views and those of the Official Opposition, the federal system is presently in shambles, with $548 billion in accumulated debt, just imagine what it is going to be like five years from now, when the debt will reach and possibly exceed $800 billion. This growth, from $548 billion to $800 billion in five years, not counting inflation, will cause a serious problem.
All this to say that we are ashamed of the only reform measure before us and not a very substantial one at that, changing a few minor aspects of the Canadian tax system and a few minor regulations, when what is needed is a comprehensive reform, if Canadians agree to keep this system. But when these changes are said to be urgently required by the Canadian tax system, that is too much.
I will therefore suggest that my colleagues from the Official Opposition vote against Bill C-70 because, in our opinion, in terms of tax loopholes, redressing inequities in the Canadian tax system and the sacrifices big businesses that shirk their fiscal duty as well as some extremely wealthy Canadian families are asked to make, it does not go far enough. We have been calling for much more than that in the past 15 months. We want real reform, we want the red book promises regarding tax reform to
be carried out and true tax justice to be felt in this country before Quebecers leave it.