Mr. Speaker, I wish to advise you that I will be splitting my time today with my colleague from Winnipeg Centre as part of what seems to be the all-party Winnipeg caucus here in the House today.
On this side of the House, we often refer to the Conservative government as being out of touch. That language is often dismissed by the government as rhetorical flourish, but if there was ever evidence of this point it is this bill, Bill C-13, and more broadly the approach of the government to the economy of this country.
Since the Canadian economy came crashing down around us in 2008, very many Canadians have been affected profoundly and in material ways. While in technical terms a recovery of sorts followed, and for some it was in material terms, what never dissipated was a sense of economic insecurity and worry.
In my riding of Beaches—East York, from the neighbourhoods where poverty and unemployment are deep and persistent, through East York and down to the beach, people from all walks of life and living in all sorts of circumstances are worried.
Those who have lived in the hope that they will someday enjoy some material comfort and security see those prospects becoming more remote. Those who have experienced material comfort and security wonder whether it will last. Those who have accumulated some savings wonder whether it will survive for its intended purpose, whether that be retirement or the kids' education.
The worry, of course, is not unfounded. In 2008 we were plunged into the worst recession in over 70 years. The recovery has been tentative and much slower than has historically been the case, with the persistent threat of a second significant economic contraction. Of course we are bombarded daily with news and images of economic catastrophes occurring or threatening to occur all around us, including with our biggest trading partners, the United States and Europe.
It was in this context of well-founded and widespread economic concern that I opened the paper the other day to read that our Minister of Finance had said he is prepared to let these circumstances persist until such time as the technocrats looking in the rear-view mirror tell him that we are, or more properly were, in economic trouble.
Now, what is it that we do not know here? We know that Canada is a small and very open economy, and therefore we are far from immune to global economic turmoil. We know that the largest economies in the world today, Europe and the United States, are in fact experiencing considerable turmoil.
We know also that they are our largest trading partners. With respect to the United States in particular, we know that there is a high correlation between its economic growth and our own. This is particularly the case in my own province of Ontario. For example, had the U.S. recovery from 2008 been a typical recovery, their GDP would be 2.5% higher, and Canadian exports would be 6.5% greater.
With European and U.S. economies struggling and our dollar remaining persistently high, it appears that we will be stuck with a massive current account deficit for some considerable time. Unemployment levels remain stubbornly high, particularly for youth, and are forecast to go higher.
We also know that things could get worse--much worse, in fact. In the quaint phraseology of the Governor of the Bank of Canada, “The risks...are skewed to the downside”.
According to a September 30 forecast from TD Economics:
In our view, there is a 40% recession risk in the United States over the next year.
This leads to the obvious conclusion that our own risk of a slip back into a recession remains heightened. Thankfully, not all economists are as technocratic and as out of touch as the government. In response to the minister's pledge to wait and see what happened, and note the past tense, BMO capital markets economist Douglas Porter said:
I think the risks of a downturn in North America are serious enough that the government should definitely have a Plan B.
That plan B is, of course, what we on this side of the House have been arguing for: government investment in infrastructure.
Mr. Porter went on to say:
Infrastructure spending is one of the most effective short-term stimulus measures a government can use, but it takes time to get it going and that’s why we should be studying a Plan B right now.
We know that economists can be just as adapt at fighting among themselves as we are in this chamber but there does seem to be near unanimous agreement with the value of infrastructure spending in economic circumstances such as those that we are experiencing today.
As was pointed out at the time of the debate over the budget, even the annex to the government's document entitled, “Canada’s Economic Action Plan Year 2: Built to keep our economy growing”, a seventh report to Canadians, confirms the potency of stimulus spending on infrastructure, particularly in comparison to other measures.
It is not as though we are lacking infrastructure in need of repair. Our cities are experiencing an infrastructure deficit in the order of $123 billion. In addition, the Federation of Canadian Municipalities has estimated new infrastructure requirements totalling $115 billion.
While economists, very gently and generously, urge the development of a plan B, it seems fair and responsible for us to call out first for a plan A, because Bill C-13 does not add up to a plan. What Bill C-13 amounts to is paralysis, not planning. Were it the case that the government was frozen with a plan in place, that would be one thing, but what is frozen in place here is policy confusion.
The central policy piece of the government's response to our economic circumstances is the cut to corporate tax rates. As a stimulus measure, that is, as a measure that is responsive to the economic circumstances of Canadians, we know that this measure does not work.
First, it does not create jobs. A study of almost 200 large Canadian corporations that benefited from corporate tax cuts starting in 2000, showed that by 2009 profits had increased by 50%. Their corporate tax remittances had decreased by 20%, or $12 billion a year, while creating jobs at a rate slower than the national average.
Second, corporate tax cuts do not stimulate investment. Capital spending in Canada has been declining as a share of GDP since the early 1980s despite corporate tax cuts that have reduced the combined federal-provincial tax rate from 50% to just less than 30% last year.
Third, the U.S. treasury loves our corporate tax rates. American corporations repatriating their profits to the United States are obligated to pay 35% corporate tax minus a credit for taxes already paid in Canada. The amount of tax revenue flowing to the U.S. treasury, which is the amount of tax revenue foregone by Canadian jurisdictions owing to our lower corporate tax rate, is estimated to be between $4 billion and $6 billion per year.
Finally, as a policy prescription for our current circumstances, corporate tax cuts miss the mark by a wide margin. In spite of the economic misery and insecurity faced by so many Canadians, corporate profits have continued to increase year over year. Corporations are now sitting on half a trillion dollars of cash, the world is awash with goods, keeping inflation numbers in check, and it is in this context of over-supply that the government is prescribing, of all things, expanding supply. It makes no sense.
The prescription for what ails us is very different. We need to boost demand. While corporate profits increased by 15% in the second quarter of this year, the real disposable income of Canada was shrinking. Real wage growth fell year over year by 1.3% in July. That includes a 2.3% decline in Ontario. Meanwhile, households are finally strapped, carrying record loads of debt.
This is why, in part, our party champions creating jobs through government investment in infrastructure, more profitable pensions for seniors, increasing EI benefit eligibility and free collective bargaining, all measures that are responsive to the needs of the Canadian economy and economic growth.
When we cast our eyes forward, it is clear that this country not only faces some economic challenges, but also some incredible opportunities. Seizing those opportunities for the benefit of Canadians to ensure health and prosperity for Canadians is the responsibility of our government. On this account, the government, like its predecessor, has failed miserably. For years, it has insisted on locking Canada into disadvantageous and disproportionate trading relationships.
Finally, I want to pick up on the words of the Governor of the Bank of Canada. He stated:
...Canada is like a ship. We can be tossed by the waves or pulled by the current, but we are still able to chart our course in even the stormiest of seas.
I do not see a course set here by the government. To the contrary, the government has left Canadians bobbing in stormy economic seas.