moved that Bill C-213, the Constitution Act, 1996 (balanced budget and spending limit), be read the second time and referred to a committee.
Mr. Speaker, it is a great honour for me to speak on Bill C-213, which one might call the bill to prohibit deficits and limit the size of government. In order to avoid this mouthful of a description, from now on I will call it the taxpayers protection act.
This bill addresses one of the most fundamental problems facing Canada and other modern democracies. It addresses a problem which has already been taken care of by similar legislation in many of the provinces.
It is unfortunate the government has decided all we can do is speak about it for a few minutes today and publish an obscure text. It will not be made a votable bill. I am very disappointed about this. However the people of Canada will have to judge whether or not this was justified.
In the next 20 minutes I will present my arguments for the necessity of this bill. I will provide a background. I will outline briefly the main provisions of the bill. I will take care of the objections which are certain to arise in the speeches the government has prepared in response to my analyses.
The need for a taxpayers protection act has arisen since the 1970s when suddenly outside of wartime, governments in Canada and in other western democracies began to spend money that they had not raised through taxes. In other words, they ran deficits.
It is well known that very soon the federal debt will reach $600 billion. That amount of money is incomprehensible to most people. Suffice it to say that very soon, in order to service the debt approximately one-third of every dollar raised from Canadians will go to pay the interest on the debt. This is more than a transitory problem.
I have attended a large number of university seminars. I have read many studies. I am personally acquainted with a man who received the Nobel prize in economics for developing a theory which I will sketch briefly. It explains that the deficits in the western world run by governments have been called the Achilles' heel of modern democracy. It is called the public choice theory.
Governments have found it to their advantage to increase spending targeted at providing benefits to special interest groups, groups which have assembled and organized themselves for whatever reason. As a result of those spending allocations and tax concessions these groups receive benefits which in the aggregate make it very worthwhile for them to respond positively to the government. It has also led them typically to resist any opposition party which would promise in an election campaign to cut those special benefits.
Those special benefits typically are not in the interests of all of society. Clearly, they benefit the group to whom they are given but not society as a whole. In looking carefully at subsidies to industry, to agriculture, to wherever our money is going, we clearly see a pattern for many. It is such that if there were a free vote and average Canadians had been asked whether they wanted to be taxed to serve this type of program, they would have said no.
How do politicians get away with giving these benefits to special interest groups? Who is paying for it? The answer of course is that the rest of Canadians are paying for it. Why do Canadians not rise up and say to stop this? The answer is quite simple. The cost per Canadian for each individual program is very small. As a result, it does not pay for them to organize and provide politically effective opposition to these kinds of tax concessions.
What is worse, there are Canadians who will have to pay for this bribing of special interest groups, this buying of votes and these people cannot protect themselves. They are our future generations. They will have to pay the interest on the debt because some governments, rather than raising the money now to pay for the special interest groups, have found it more convenient to let future generations pay. Nobody is speaking for them.
This is the modern theory of public choice. It is widely accepted as a fair description of processes that have haunted all modern societies. While we have begun to take care of the current deficit, there is no guarantee these problems will not be repeated in the future. That is why we should have legislation, preferably constitutional requirements to limit deficits and the size of overall government spending.
In all those issues the question always arises, why did all these spending explosions take place in the 1970s? Why were governments suddenly able to get away with adding to the debt and letting the unborn and unprotected generations pay for it, rather than facing the voters and taxpayers of the day? The answer comes in two parts.
Modern communications technology has made it possible even for relatively small interest groups to get together and become very effective in making themselves known to government. They make it known that they can deliver the necessary marginal votes which will bring about a victory in crucial electoral districts.
Also, a revolution in thinking about the nature of capitalism which was brought about by Keynesianism removed the previously existing stricture on deficits. Until the 1970s deficits had been a sin for governments which they engaged in only at the expense of severe punishment by the voters.
Then came a revolution in economics. I was a graduate student at the time and learned and absorbed it. I was soon cured of it and have been fighting against it ever since. Even today there is still a generation of economists who believe that deficits do not matter, that they can be piled on to future generations in order to maximize output today. I believe this is also being reversed.
Having set the stage for explaining the necessity for Canada to have a constitutional provision or at least an act that prohibits deficits and limits the size of government, I will sketch briefly in non-legal form the provisions in my bill.
The first provision is that the government must balance its budget every year. The second provision is that the size of government must be limited to the extent that we take today's spending and allow increases in spending only to reflect inflation and population growth.
What is innovative in the bill is the third provision. If the government does not meet the deficit target, that is, it does not have a balanced budget in any year, there will be penalties. The
penalties will be reductions in the pay of members of Parliament who voted for the budget. For example, if there is a budget of $200 billion with a deficit of $10 billion, that is 5 per cent. According to my proposed legislation, the pay for that year of members of Parliament would be reduced by 25 per cent, the 5 per cent deficit times five.
Similarly, there would be provisions for penalizing government members of Parliament who voted for a budget which resulted in an increase in the size of government going beyond that which was specified. In other words, spending in the next year must increase by no more than inflation and population growth.
Turning now to the topic of the objections I am sure both the government and the opposition will raise to my proposed bill, the first is that the sovereignty of Parliament will be violated. I must confess that for many years I was on the side which I am sure they will represent. In my naivety as a young man I believed that every four years voters had the right to throw out those bastards and therefore there was no reason at all for there to be an externally imposed limit on government. Democracy works that way.
I have written a major study and have read a lot of different thinking on this matter. One thinking is that all parliaments of the world have had limits imposed on them. We could look to England and the Magna Carta and the United States with its constitutional amendment on freedom of speech. Yes, even Canada has put limits on the freedom of Parliament.
Parliament is not able to pass legislation which violates the charter of rights and freedoms. It embodies our fundamental rights which are not to be violated by a simple majority vote in Parliament. I believe that future generations should be protected through a similar charter which would protect their right to their income, unburdened by obligations incurred by past generations over which they had no democratic influence.
An amendment to the Constitution is as important as the charter of rights and freedoms. It does no more than the charter of rights and freedoms does on certain legislation. Democracy cannot be run by simple majority on issues which affect fundamental human rights. It has to be limited because sometimes people, overrun by the heat of a current debate, by a current issue, will be tempted to ask Parliament to pass laws which in themselves will destroy the very foundation of a democracy.
That is the justification for having freedom of speech as one of the most fundamental rights; the right to a fair trial, to be innocent until proved guilty. Those are fundamental rights which no Parliament may override.
I believe that in the same vein we need protection for future generations which cannot be overridden by Parliament.
The second objection that I know will be coming is that it is impossible to balance the budget every year. Here too I had a conversion. I believe the Minister of Finance in this government has given me the clue on how it is done. The government builds in a contingency reserve. It simply makes sure that its estimates of spending are conservative, that its estimates of revenue expected are conservative. If they happen to go in the wrong direction, the government has a cushion so that it does not have a deficit.
In spite of such conservative attempts to make sure there are no deficits, there may be unforeseen contingencies. It could be an earthquake, it could be a war, it could be almost anything. Under those circumstances Parliament should be protected.
I cannot go into the details here. If Parliament is asked to define what is an acceptable contingency, it is in the same position where, in the English style democracy, the government really is a dictator and can say: "We simply define it is a contingency and therefore we can run deficits".
Other parliaments have handled those situations by requiring that there be a 75 per cent majority vote in favour of accepting what is an acceptable contingency which would permit the government to run a deficit in that year.
Similarly, on limits of spending levels I have provided a flexibility that they must be equal only over a three-year period. There will be a downward bias in overall government spending. This is all deliberate because a bias is also offset by the fact that the contingency spending every year will result in a reduction in the debt. Therefore, more money is becoming available every year because the interest cost on the debt decreases and therefore this will sort of wash out.
Finally, I know a general objection which probably will never be raised by the Liberals who have such unlimited faith in the ability and honesty of government. The Canadian public is cynical. They will say: "What good does it do to pass such a bill?" I am an accountant and I could cook the books such that whatever the limits are, they can be got around by redefinition and by the shifting of expenses between periods and categories and all that kind of thing. I was very much aware of this. Therefore I have some technical provisions which suggest that it should not be possible to do so.
I hope we will have a lively debate on this subject and I look forward to the comments from the other members who are here taking their Friday afternoon to debate with me.