Debates of April 20th, 2021

Financial Statement of Minister of Finance

[Luc Thériault, Bloc, Montcalm, QC]

Madam Speaker, I am rising on a point of order because there is no interpretation. I want to make sure that I hear my colleague's answer.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

Okay.

The interpretation is working now.

The hon. parliamentary secretary has 15 seconds left.

[Arif Virani, Liberal, Parliamentary Secretary to the Minister of Justice and Attorney General of Canada]

I was saying that we are there to provide support for mental health and long-term care facilities for seniors. We are working with the provinces to meet their health care needs.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

Madam Speaker, I thank the member for Parkdale—High Park for his tip on pinning the Speaker. He and I have always worked for [Technical difficulty—Editor] in this Parliament.

Let me reassure the member that New Democrats know that a budget is a confidence question, and we have reassured Canadians that we will not force them into an election in this third wave of the pandemic. That is why I am quite disappointed that the Liberals have put some things in this budget that they know New Democrats would not normally support.

Does the member actually support cutting the emergency benefit by 40%? I have many people in my riding who work in the tourism industry. The tourism season is not coming back this year, for the second year in a row, and they are forced to depend on that emergency benefit. It is going to go from $2,000 a month to $1,200. How are they expected to survive on that pittance?

[Arif Virani, Liberal, Parkdale—High Park, ON]

Madam Speaker, what is important is that the benefits are continuing all the way to September 25, but they are doing so on a sliding scale. The phase-out is an important aspect in terms of addressing people's needs as they decrease. I would reassure the member that we have been dynamic in our responses to the pandemic thus far, and we will continue to be dynamic as the case requires.

[Greg McLean, Conservative, Calgary Centre, AB]

Madam Speaker, today, I will be sharing my time with the hon. member for Carleton.

Before I start a real speech, I want to talk about the basics, because the basics are sometimes lost. Seeing yesterday's budget, a lot of basics were lost. However, let us start with the definition of budget.

A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. To manage expenses, prepare for unpredictable events and to be able to afford big ticket items without going into debt, budgeting is important. Keeping track of how much we earn and spend does not have to be drudgery, it does not require us to be good at math and it does not mean we cannot buy the things we want. It just means we will know where our money goes and we will have greater control over one's finances. Aside from earmarking resources, a budget can also aid in setting goals, measuring outcomes and planning for contingencies.

A budget deficit occurs when expenses exceed revenue and indicate the financial health of a country. Accrued deficits form national debt. In cases where a budget deficit is identified, current expenses exceed the amount of income received through standard operations. A nation wishing to correct its budget deficit may need to cut back on certain expenditures, increase revenue-generating activities or employ a combination of the two. Certain unanticipated events and policies may cause budget deficits.

One of the primary dangers of a budget deficit is inflation, which is the continuous increase of price levels. Continued budget deficits can lead to inflationary monetary policies year after year. A nation can print additional currency to cover payments on debts by issuing securities such as treasury bills and bonds. While this provides a mechanism to make payments, it does carry the risk of devaluing the nation's currency, which can lead to hyperinflation.

Why do governments run deficits? A budget deficit planned to be this large is based on two things: tolerance from taxpayers and financial institutions that bear the risk and the notion of not having to pay back temporary support mechanisms. In effect, leading up to a federal election, the government does not want to take away the sugar bowl, but there is guaranteed to be a hangover from this sugar high.

The national debt is simply the net accumulation of the federal government's annual budget deficits. It is the total amount of money the federal government owes to its creditors, and that amount has gone from $700 billion two years ago approximately to $1.2 trillion at this point.

Debt-to-GDP is a ratio of a country's national debt to the level of economic activity in that country. It is a meaningless ratio put in place at a time when the world's central bankers could no longer find the tools to balance national budgets. The concept of permanent national debt, permanently paying institutions with taxpayer funds, became accepted by the world's bankers both private and public. The concept upended the very notion of Keynesianism, where governments were encouraged to spend in bad times and repay that spending in good times, thus maintaining an equilibrium in labour and price levels in society.

It was also a measure of comparing bad fiscal regimes with other bad fiscal regimes, as in, we are in bad shape, but as a function of our GDP, we are not in as bad shape as those other guys, which is a ridiculous point, given every national economy and democratic and financial structure are different.

This strategy can be summed up by the idea that there is always someone who is worse off than we are.

Companies have debt-to-revenue multiple. It is about the equivalent. However, these entities deliver value to the shareholders by maintaining a balance of risk, as in too much debt and interest payments, and return. In addition, companies can expense debt before calculating taxes, the amount they owe the government for their profits.

Do governments pay taxes and have a favourable application of carrying debt on their balance sheets? No. It is only a burden transferred from today's taxpayers to tomorrow's taxpayers, or in the Liberal government's approach, when things really go south down the road and then in a huge problem scenario. The risk borne here is multiplying and the bearers of that risk are future taxpayers.

Moral hazard exists when a party to a contract takes risks without having to suffer the consequences.

On “build back better”, it turns out that build back better is not a political slogan; it refers to the official Sendai framework of disaster recovery that was adopted at the UN World Conference on Disaster Risk Reduction in Sendai, Japan in 2015. This definition is broad enough to cover any disaster scenario; build back better from which disaster in Canada, which brings us to yesterday's budget announcement.

The good news is that Canada's forecast annual deficit for last year improved by $35 billion from the fall economic statement. Those extra funds arrived in taxation revenue from businesses restarting mid-pandemic and Canadians getting back to work to pay government taxes, much that arrived from Canada's traditional strengths of mining, energy, agriculture and manufacturing, essential industries keeping the rest of the country fed, warm and solvent. I am sure the Minister of Finance should be taking credit for a million jobs coming back to Canada, given those are results that have already arrived.

Last year's deficit number is $354 billion for one level of government, the federal government, whose annual revenue is usually about that amount. This means that $2 were spent for every dollar brought in, that is in a normal year, but even more from a year when government revenues were down by around 8% to deal with the health and economic effects of a historic pandemic. To build back better and to reimagine Canada's economy, these empty slogans represent nothing but political jingo-ism.

Canada's deficit in 2019 of $27 billion in a $2.3 trillion economy was about 8.3% of government revenues. In an economic boom, Canada was overspending by 8.3%.

This is the rationale from the Liberal Prime Minister about running deficits in boom times. On March 21, 2016, he said in the House:

Mr. Speaker, record low levels of interest rates right now mean that this is an opportunity to invest in our future...This is what we are delivering to grow the economy and help the middle class.

By contrast, in this year's budget announcement, the Minister of Finance said:

The best way to pay our debts is to grow our economy....In fact, in today's low-interest rate environment, not only can we afford these investments, it would be shortsighted of us not to make them.

By “investments”, of course, she means government spending. Those two are clearly at odds, but it is obvious that neither the Prime Minister nor the finance minister understand the notion of financial risk. Clearly, the Liberal government will justify spending taxpayer funds in good times, and spending taxpayer funds in hard times. It begs the question, what times are not good for overspending taxpayer funds?

The forecast budget deficit for this fiscal year coming, according to yesterday's budget, is $154.7 billion. That is almost $50 billion higher than forecast in the fall economic statement despite last year's revenues out performing by $35 billion since the fall. Planned spending represents an increase of $136 billion over the next five years in addition to the $548 billion in spending forecasts in the fall economic statement. How is this justified? These deficits accumulate to an ongoing debt-to-GDP ratio at 50% going forward, so the plan, the fiscal anchor, is to maintain Canada's debt at half the size of our economy for the foreseeable future. Is that an anchor? The better our economy performs the deeper in debt we get to go?

We say in finance that every economic forecast is wrong from the moment it is written, and rightly so. Things change and getting close based on discipline and unforeseen extraneous events coming at people spells success. There is none of that in this budget. There is no security for our children. There is multiplying risk. It is our job to leave the country in better shape than we found it. Fiscally and in so many other ways we are failing.

What is right about the budget?

The Minister of Finance spoke about taxing foreign owners of unoccupied real estate in Canada, part of our made-in-Canada housing bubble, but also a hole in our money laundering laws in Canada, which are the loosest in the G7. They need to be tighter.

I am pleased that the Minister of Finance has followed our lead in applying an investment tax credit on carbon credit utilization and storage, one of —

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

Questions and comments, the hon. member for Kingston and the Islands.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Madam Speaker, I am not sure what carbon credit utilization is, but the Conservative plan to price pollution is one that will only give benefit to those who pollute. In fact, it encourages people to pollute.

I know the member for Carleton has spent a lot of time talking about the price on pollution. I admire my Conservative colleagues' willingness to come in here to try to defend such a plan after five years of talking about how a price on pollution was not the right way to go. Now they have this grand plan of putting people's money into a savings account and then letting them choose from the CPC boutique what they would like to spend.

The reality is that is not a plan to fight pollution. That is not a plan to price carbon. That is the Conservatives trying to give to people who are wealthy and have money to ensure they can keep the money in their pockets rather than ensuring we take all the funds and distribute them equally, as we are currently doing.

[Greg McLean, Conservative, Calgary Centre, AB]

Madam Speaker, I thank the member for Kingston and the Islands for pointing out my stumble.

I am pleased that the Minister of Finance has followed our lead in applying an investment tax credit for carbon capture utilization and storage, one of Canada's most tangible opportunities to reduce our greenhouse gas emissions. A 90-day consultation period has been announced. I encourage the government to consider the benefits associated with enhanced oil recovery as part of that strategy, as it is in the United States, and to move toward an environmental strategy that halts the flow of jobs and investments, including technological advances like carbon capture, to foreign jurisdictions, with no positive effect on the environment.

Canada needs regulatory certainty, particularly regarding our environmental objectives. Having a carbon capture strategy that moves jobs and investment to our largest trading partner is not a viable environmental strategy for Canada. I encourage the Minister of Finance to get this right so it actually results in effective policy.

[Kristina Michaud, Bloc, Avignon—La Mitis—Matane—Matapédia, QC]

Madam Speaker, I thank my colleague for his speech. I would like to hear what he has to say about the assistance for seniors in this budget.

The government deliberately chose to create two classes of seniors by increasing the old age security pension starting at age 75 rather than at age 65. This is unfair to thousands of seniors across the country. The government has also chosen to send a single cheque for $500 at the end of the summer, which is a very strange time, possibly right before an election is called.

Does my colleague think that the Liberals are playing politics at the expense of seniors in Quebec and Canada with these measures?

[Greg McLean, Conservative, Calgary Centre, AB]

Madam Speaker, it is strange, the timing of all the expenses that seem to be flowing out of the Liberals at this point in time and attaching themselves to the budget.

There is something that we need to do for our seniors. The pandemic has exposed one thing, and that is how we have had a hole in the health treatment to our seniors to which we did not pay enough attention. Adjusting those structural problems going forward is fundamentally important. For a long time, seniors at all levels have required more support in our society. I am not sure the old age security is the best way to approach that, but it should be examined, with all the tools we have in our kit.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

Madam Speaker, it may surprise the hon. member for Calgary Centre that I also share his concern about continually running large deficits. I consider myself a Tommy Douglas New Democrat. Tommy ran 17 balanced budgets in his 17 years as premier.

However, this is the situation in which we find ourselves. Canadians need help to get through the pandemic. Businesses need assistance to ensure they survive and can hire back their workers.

We have two choices. We can either deny that assistance, which the Conservatives seem to favour, or we can put in place a tax on those who have made excess profits during the pandemic, the ultra-rich. We could restore corporate income tax rates to the levels from 30 years ago, which the Conservatives and Liberals both cut.

Which is it? Do the Conservatives want to deny Canadians the aid they need to maintain a balanced budget? Are they prepared to join New Democrats in calling for a wealth and excess profits tax?

[Greg McLean, Conservative, Calgary Centre, AB]

Madam Speaker, we were very much engaged with the government on the changes that we brought to it on the emergency wage subsidy. We were very happy it was able to deliver those to Canadians who needed those during the pandemic. We were quite proud that as a caucus and as a party we were able to deliver aid after the Liberals had initially put forward a package that—

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

Resuming debate, the hon. member for Carleton.

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, today is an occasion for us to pay a visit to the newly renewed popular idea called “modern” monetary theory. We put “modern” in quotation marks because it is a very old idea. It is thousands of years old, if the truth be told, but once again it is being presented as new.

Modern monetary theory is the idea that governments can spend as much as they want, and to pay for it they simply print the cash. They create the money because, of course, the bank, which it owns, in our case the Bank of Canada, has a monopoly on the creation of that currency. Why not just create more money in order to spend it?

The only limit on the amount that can be spent is when said money creation leads to inflation, at which point modern monetary theorists say the solution is to simply raise taxes to reduce the demand that was driving up the inflation in the first place. Once too much of that printed money starts chasing too few goods, the government taxes the money back and slows down the inflation. Effectively, it is a roundabout way to massively expand government up front while claiming there is no cost, and then, when prices spiral out of control, to try to tax them back into submission.

The government and the finance minister claim they do not believe in modern monetary theory, but we have to suspect that the minister believes in some version of it because she has imposed literally no limit whatsoever on her spending in the form of a fiscal anchor. There is only one difference between her version of modern monetary theory and its original theorists. The original proponents said that banks should simply give the money to the government to spend, whereas under the current model the government has set up, the bank sells the debt to the marketplace and then buys it right back at a higher price only weeks later, to the great profit of the investors with whom it carried out that transaction.

All of this sounds magical, as we are creating something from nothing, but as it has been said, there is nothing new except what is forgotten. To quote Reinhart and Rogoff, two Harvard professors who have studied 800 years of debt crises, “Early on across the world, as already noted, the main device for defaulting on government obligations was that of debasing the content of the coinage. Modern currency presses are just a technologically advanced and more efficient approach to achieving the same end.”

Perhaps the most creative of all of the modern monetary theorists was an emperor named Dionysius, from 2,500 years ago. He thought it was a modern idea then too. He was the dictator of the city state of Syracuse, and of course because of all of his sumptuous living and his ridiculous war fighting, he needed cash. He took the drachmas from his people, and on every one-drachma coin he stamped the number two. Then all of a sudden he had twice as much money.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

The hon. member for Kingston and the Islands has a point of order.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Madam Speaker, I just want to know if there is going to be a test on this history lesson afterward. Should I be expecting that to come when the member is done?

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

That is hardly a point of order.

The hon. member for Carleton.

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, the test has been running for four years now, and the Liberals have been getting an F year after year after year.

Dionysius gets an A for creativity. He took one-drachma coins and stamped them with the number two, and all of a sudden he had twice as much money. However, of course, all of the workers of his city state were earning half as much in real terms because everything costs twice as much when we double the amount of currency in circulation.

Throughout the Napoleonic Wars, the exact same thing happened. The amount of silver in the average coin dropped by two-thirds during Napoleon's reign because all of the emperors and kings were trying to debase their coinage to fund their wars. Of course, their people became much poorer because their money did not go as far.

The most recent and extreme case was that of Germany in the immediate aftermath of the First World War. After the war was done, there was 10 times as much paper currency in circulation as immediately before the war. The result was hyperinflation. People needed wheelbarrows to carry their cash off to the baker to buy just one loaf of bread. If someone went to the bar to get a beer, they ordered all of their evening's drinks at once, because if they waited even a few hours, the beer would be more expensive. It was a good investment to load up a table right when they got there, immediately after work, to save a fortune on inflation.

We are told that such inflation will never happen here and that all of these things about printing money causing inflation amount to old thinking. Members should remember that history does not repeat itself, except that it is already repeating itself.

Let us start with housing prices. From December 2019, the last month before COVID started to circulate in Canada, to March 2021, the average house went from $518,000 to $716,000. This is a massive 38% increase at a time when the economy dropped by $120 billion. The economy went down, but somehow housing prices went up.

Lumber prices are up 118%. Here is a quote from a contractor: “Oh, it’s ridiculous. A 2×4 stud used to be $3.50; now they’re $9.80. A sheet of OSB plywood was $12 two years ago; now it’s $56 per sheet”.

Here is a quote from an article in the Financial Post just yesterday, entitled “Central banks and government out of touch with Main Street when it comes to rising cost of living”: “the latest Canada’s Food Price Report shows that food costs increased 2.7 per cent last year with an expected 4.5 to 6.5 per cent increase in meat, 3.5 to 5.5 per cent in bakery, and 4.5 to 6.5 per cent in vegetables this year.” As for gas prices, they have gone from 78¢ a litre to $1.18 a litre.

All of these things are rising vastly more than the Bank of Canada's target. There is something interesting about the Bank of Canada. I asked about the core rate of inflation when the governor of the bank appeared at the finance committee not so long ago. He told us not to worry about core inflation and that he only worries about CPI. Well, I will tell members something. I have a prediction: This month CPI will be way above the 2% target. I will make another prediction: The Bank of Canada will suddenly say not to worry about CPI and that they use core inflation. Whatever is lowest is the measurement they use.

Here is the consequence of all of these numbers. When governments print money, they drive up the price of two things. One is the things that the rich own. The second is the things that everyone else buys. If someone is a millionaire mansion owner, they are getting extremely rich. Their house is making a lot more money than they are. They are sitting in their rocking chair and cash is just falling out of their attic onto their head. However, if someone is a working-class person who rents in order to have a roof overhead, their rent is going up, their cost of food is going up and their cost of gas is going up. Everything they buy is going up, except their wages are not and that dream of owning a house is getting further and further away because of asset price inflation.

What we have is a government that claims it is doing all of this deficit spending to help the less fortunate, but is actually carrying out one of the largest wealth transfers from the working class to the super rich, from the have-nots to the have-yachts, in Canadian history. The solution to this is to control the spending, unleash free-market production, replace the credit card economy with a paycheque economy and restore the principle of sound money so that the dollars people earn are worth what they are supposed to be worth and so that people get ahead through their labour and effort, not through their privilege and aristocracy.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the President of the Queen’s Privy Council for Canada and Minister of Intergovernmental Affairs and to the Leader of the Government in the House of Commons]

Madam Speaker, this is interesting. We have learned through the pandemic that we needed to be there in a very real and tangible way for Canadians. That is why we came up with the emergency wage subsidy, the rent subsidy, the business account, the credit availability program and the CERB for over nine million Canadians, putting money in the pockets of people during a difficult time. If we had not done that, we would have had far more issues relating to bankruptcies, personal financial problems and all sorts of issues. Government made the decision to go ahead and spend the money that was necessary.

Will the Conservatives come clean with Canadians and indicate clearly if they support those initiatives to have the backs of Canadians? If so, how can they honestly be critical of the fact that we needed to borrow money?

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, I regret that the government made it necessary, through its mismanagement of the pandemic, to plunge so deeply into this deficit. It made it necessary by leaving the borders open and allowing 60,000 people to enter from China after the military had warned there was a pandemic brewing in that country. It made it necessary by failing to deliver rapid testing that could have allowed businesses to reopen months before they did. It is making it necessary now because it has failed to deliver vaccines that are widely available around the world. Just yesterday, images splashed across the Internet of pubs opening in London, England, of flights going back and forth seamlessly between New Zealand and Australia and of countries all around the world returning to normal with people returning to work, while here in Canada we are locked in our basements and terrified of a third wave that is the result of the government's failures. We wish it had not made these deficits necessary.

[Louise Charbonneau, Bloc, Trois-Rivières, QC]

Madam Speaker, I thank the member for Carleton for that lesson in economics 101.

I would have liked to hear his thoughts on health transfers, a topic the Liberals mostly ignored in this budget.

What are my colleague's thoughts on that?

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, I thank the member for her question.

Once again, I can see that the Bloc Québécois wants the federal government to be more involved in the health sector. This is another example of how the Bloc Québécois often wants more federal intervention in areas under provincial jurisdiction.

I think the provinces should be able to spend their own money without federal interference, and I believe in provincial autonomy. The governments that are closest to the people are the ones that should have the most power.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Madam Speaker, I appreciate some of the points that my hon. colleague made. Certainly in my riding people have less to get by. They are terrified that they will not be able to make their mortgage or rent payments. The skyrocketing housing prices are leaving them out of any sort of dream of owning a home or keeping it.

I have heard from seniors in particular. Some do not know where to turn and are in fear of losing their homes. In this budget, the government has split those who are 65 to 75 from those 75 and above in a very unfair way, and it has only provided them with a very small amount of money that will not do anything to help them cover the additional costs.

Could the member talk about how that is impacting his residents and the unfairness of the divide among our seniors?

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, what she is seeing is the consequence of the government's policies. The Bank of Canada has purchased $300 billion worth of government debt. The government's deficit is $356 billion. In other words, about 85% of all the borrowing the government has done in the last year has simply been generated by the Bank of Canada. That has increased the money supply by 20% and has driven up the costs of food, fuel and housing for the seniors who live in her riding.

While this has been very good news for the very wealthy, who have watched their financial and real estate assets explode in value because of all this printing, it has been very bad news for the poor and the working class.