Stephen Harper

[Borrowing Authority Act, 1994-95, March 18th, 1994]

The member says ask it to give back the grant that it received to do that study. I think it would probably be willing to do that. In fact, our party has advocated, with the support of the business organizations of this country, an elimination of most, not all, the major business and industrial subsidies. I know individual firms will fight that but we found no resistance to that policy from business organizations. In fact, it is one of the reasons why many of them have been supporting the Reform Party and, I would add, in increasing numbers since the budget came out.

Those were the policies. What I did not see in that list of policies that the business community said were needed to increase jobs was any mention of an infrastructure program. I did not see any mention of increased spending. It was precisely the opposite. It did not say it needed an extra $40 billion in borrowing this year and $100 billion over the next three years. There are a few things in here that are the same as the track the government is on, but the things here are a very different policy than what the job creators say need to be done to create the jobs in this country.

Let us go back for a second to the budget which underlies this particular borrowing bill because it is important to review that and I know I have done this before. The budget is based on a series of economic assumptions. In particular are the following first year assumptions of growth at an annual rate of 3.0 per cent; that interest rates will range in the neighbourhood of 4.5 per cent for the short term benchmark to 6.4 per cent long term; that inflation will remain low in the 1 per cent to 2 per cent range; and that the ability of the tax system to generate income for the government will recover as the economy recovers. It fell last year from about 17.7 per cent down to 16.1 per cent.

These are all important assumptions and most of them are defensible. However, what happens in the subsequent year assumptions to justify these kinds of targets? Growth is projected to increase permanently to about 3.8 per cent. Inflation will continue to stay at record lows. The revenue GDP ratio that the tax system establishes will rise. Unemployment and job creation will increase. Interest rates will not only fall but stay at record lows.

I would point out, as I did in my earlier comments, that these assumptions are somewhat better than the Progressive Conservative assumptions but very much reflective of the same kind of thinking. After a very short time period we are reasonably pessimistic in the first year but after that we can be more optimistic. What we have is a pattern of record low interest rates, record low inflation, a return to growth, not as high as the Conservatives project, and job creation.

What is interesting and I emphasize it again is that overall the government's estimates are more honest than the Conservatives, although still along the same pattern. What is very interesting is the job creation estimate. It is the most realistic estimate in the budget, given the policies of this government.

It is estimated that the unemployment rate will fall from about an 11.2 annual average to 11.1 per cent this year and to 10.8 per cent next year; in other words, an extremely modest, almost no change policy on the total state of the labour force in the country. I say that is a very interesting projection for a government that claims that job creation is its primary purpose.

What this government has done and I commend it for that, although I wish it would be more frank in it, is admit that there is a link between ongoing high deficits and high spending and high levels of unemployment. It has admitted the link for the first time.

Previous governments said that they could keep these high deficits and could engage in gradual reduction strategies, keep deficits very high but the unemployment rate would fall. This government has admitted that as long as it keeps the deficit high, the unemployment rate is going to stay high.

The reason for that is the simple economic fact that the funds needed for job creation are created through private sector investment. Those are the same kinds of funds that governments hit when they go into the marketplace to borrow sums of money in the range of $40 billion a year.

One problem in the government's projections not just for future years but even for this year-it has come up in the House and I want to raise it again-is the projection on interest rates. In my initial speech on Bill C-14 I had indicated to the House that

interest rate projections were already about half a point above, on the long term, what they had been projected to be in the budget.

I said that they were between 6.8 and 6.9 per cent. I apologize to the House if I mislead the House on that. I had written that speech a few days before and by the time I had written it, interest rates were then over 7 per cent on 10 year government bonds.

It is interesting in that context to look at the pattern. There is a very definite pattern that has occurred in the financial markets since the budget was tabled and since we had our prebudget debates when the government gave an indication of its direction.

On February 1 and 2 we hit basically a trough not seen in a long time in interest rates in this country. Let me quote interest rates on government securities. We had a bank rate of 3.87 per cent. We had a rate on six month treasury bills of 3.76 per cent and we had a rate on 10 year government long term bonds of 6.4 per cent.

The government projected in its budget that for this year, 1994, the long term rate, the rate on 10 year bonds, would fall to 6.4 per cent which is actually what it was at on February 2 and that it would fall further in subsequent years to around 6.1 per cent.

It projected that the short term rate, and it used as its benchmark the rate on 90 day commercial paper, would actually rise slightly this year to 5 per cent, which is indicated by the term structure, and would stay there for the next several years. Those numbers are actually identical to the projections that the former government used in framing its last budgetary policies.

The rate on commercial paper continues to be below the rate of the government's projection, that is true, but that rate has been continually rising. It has not been rising as fast as the rate on key government securities.

According to today's Globe and Mail from the period from February 2 until today the bank rate has gone up from 3.87 per cent to 4.22 per cent. That is an increase of 35 basis points. The rate on six month treasury bills has increased from 3.76 per cent to 4.58 per cent. That is a three-quarter of a full percentage point increase in the time period every single week, most of it is since the budget was tabled. On 10 year bonds there has been an increase from 6.4 per cent to 7.38 per cent. It has been hovering around 7.4 per cent for the last several days, or a full percentage point above what the government had projected.

The government has not published all of its interest rate projections for this year, only two. The government continues to insist it can live with numbers like this and come in at the same target that was projected in the budget. I really question that.

What the government certainly cannot have is a continued increase in the rates over the next several weeks. Even since the bank rate was set last week we have had another quarter cent drop in the value of the Canadian dollar.

That is occurring. We know it and we know why. We know it as individual Canadians when talking to our friends and neighbours. We know it as public policy analysts looking at some of the financial newsletters in this country. People are taking their capital out of this country. They are taking their capital out of Canadian government bonds because they are denominated in Canadian dollars. They are putting it elsewhere because there is an increasing insecurity about the financial state of this particular institution, the Government of Canada.

This lack of caution on interest rate projections is the most serious error by this government in its financial planning. We have a debt structure where a huge percentage of our debt is loaded at the front end. The average term of government debt in Canada is two and a half years. The average term excluding treasury bills is four and a half years. These are very short timeframes and very sensitive to unforeseen increases in interest rates.

The government also provides information in the budget which underestimates the sensitivity of its borrowing to changes in interest rates. It is important to note the sensitivity analysis.

People ask me why if all interest rates went up 1 per cent the government says its debt charge would only go up $1.7 billion. Why not $5 billion? Why not 1 per cent of the debt load?

The reason of course is that the debt rolls over. It does not roll over 100 per cent in a single year, but over a very short period of two, three or four years most of it will roll over. The real underestimation in that kind of sensitivity analysis is it does not take into account the fact that the debt itself compounds, not just the interest payments. The debt itself compounds when the level of interest payments and the level of the deficit are underestimated. That is a very serious issue. It is one of the reasons we got ourselves into these kinds of problems.

I remind the government of the importance of real deficit targets. An article in yesterday's Financial Post said that the government does in fact have figures for the third and subsequent years of its financial planning period and it is prepared to table those in August. Why in August? Why do we not see them now? I suspect we will get the same story in August as we got in the budget: The situation is much more serious than government thought and it needs to re-evaluate it. We have heard that story before.

Not only do we have to have a deficit target. Any country in financial problems has to have a debt target. I go back to the fact that the Maastricht treaty does not speak simply of a 3 per cent deficit-GDP target. It speaks of a 60 per cent debt to GDP target. If it is over 60 per cent debt to GDP the only way to achieve that target would be to run zero deficits or even surpluses.

Canada's debt to GDP ratio under this budget even under the government's own assumptions is estimated to rise to a level of 75 per cent of GDP by the end of the planning period. Once again that is only for the federal government and is on a net basis, not on a gross basis which the Maastricht treaty talks about. It talks about gross basis and about all levels of government in the country. These are unsustainable levels.

With respect to the committee and report stages, we agreed to bypass report stage because we are anxious to have meaningful debate and we did not have amendments from committee. Nevertheless I want to mention some things that could have been mentioned in a report stage debate. I did not want to hold the bill up for that, but it is important that we mention it.

Once again there are problems in the process and in some technical aspects. We agreed not to have a report stage debate. However we thought that before we had the third reading debate we would at least have the published minutes of the committee hearings. This is another problem. I point out once again how much the government views this entirely as a rubber stamp process.

I do not have those in my hands and I doubt I will today. Just before I spoke I received a transcript of our hearings on this bill. However the public and we do not have published minutes of the committee hearings and debate on the technical aspects of this bill although we went through report stage and are now on third reading.

That is inexcusable. We are not in so much of a rush here that there is not the right of Parliament and the public to have final published minutes and proceedings of the committee that are relevant to the debate we are now having in the Chamber.

Because of that I am going to take a few minutes to outline some of the technical aspects of the bill. I will indicate quickly some of the discussion in committee and how it might be helpful to the government in the future.

The budgetary deficit is projected to be $39.7 billion. Against that the government is borrowing through internal accounts a sum in the neighbourhood of $9.5 billion. That is the temporary surplus we have on non-budgetary accounts, mainly superannuation accounts.

The government must cover exchange fund earnings of $1.1 billion which are included in budgetary revenue but in fact are not available for normal budgetary purposes and a reserve of contingencies for $3 billion. This is one of the ways the government gives itself some leeway. Although it commits to keep the deficit within bounds it allows for considerable reserve so that it can have access to more borrowing without going directly to Parliament in this fiscal year. That is how we reached the total borrowing authority of $34.3 billion, which the public will note is different from the budgetary deficit.

This is not the greatest control system. The budgetary deficit itself includes $2.4 billion reserves for as yet unplanned expenditures. It is true that Parliament would have to authorize additional expenditures if they were of a non-statutory nature. However these various contingencies of $2.4 billion within the budgetary deficit and $3 billion within the borrowing authority itself provide the government with considerable flexibility to err not only in its interest rate projections but also in various other aspects of its financial planning.

There is nothing wrong with a little bit of leeway. However I would think if we got into errors of that magnitude it would be appropriate for the government to have a system whereby it came back to Parliament. It would explain those errors and ask Parliament for the appropriate authority and discuss why it had erred.

One of the problems with the present reserve and contingency requirements is that they are actually open to multiple justification for their usage. We do not have simply a margin of error on an interest rate or a margin of error on statutory spending. Most of these things can be used in one way or another. That is a serious deficiency of this particular process.

There is another important issue raised in committee which the government should examine. That is the nature of its debt management.

There were some technical questions concerning not only the term structure of the debt but also the tendency of the government to borrow almost exclusively in Canadian dollars. It does so at a time when the value of the Canadian dollar is increasingly unstable and there are risk premiums involved. This will increase the cost of this borrowing to the public, to the government and to the taxpayer.

It also encourages the government in a somewhat less than responsible attitude toward borrowing. By borrowing in Canadian dollars there is a sense of greater flexibility should there be a financial crisis. With the lower yields offered on other currencies it should consider diversifying and of course reducing that borrowing.

I will end very quickly by reminding everyone of the budgetary situation. The government faces a $40 billion deficit. It was higher than we had believed even during the election campaign. The government's response has been the smallest of expenditure cuts, even smaller tax measures and the adoption of various programs that are something probably less than effective in

getting economic recovery. As well it will only add needlessly to our burden.

I oppose the bill. I urge the government once again to reconsider this borrowing and some of the expenditure plans which underlie the borrowing. I promise we will continue to fight this bill and these kinds of policies.

I urge the government to look at its counterpart, the Democratic Party in the United States, which reconsidered in particular the strategy of adding additional spending programs on top of a deficit management situation.

[Borrowing Authority Act, 1994-95, March 18th, 1994]

Mr. Speaker, I am rising to speak on third reading of Bill C-14, the borrowing bill. I will not waste the time of the House in saying that we are opposed to this bill and opposed to the general budgetary and borrowing policies of the government.

Bill C-14, an Act to provide borrowing authority for the fiscal year beginning on April 1, 1994, will make the national debt increase again in the coming year, with the deficit reaching $40 billion and the borrowing authority $34.3 billion. This means that the national debt will grow by nearly $100 billion over the next three years. That is why we from the Reform Party continue to oppose this bill.

The parliamentary secretary for finance said in his statement earlier today that generally speaking, and I quote: "this borrowing is a normal part of government operations". That is correct. It certainly has become normal for the Government of Canada to borrow sums of this kind. It is not just a normal part of the Government of Canada, but it has become a normal part of the operations of crown corporations. It has become a normal part of the operations of provincial governments, a normal part of the operations of municipal governments to borrow millions and even billions of dollars.

What is the consequence of this? The consequence is that at the federal level we owe half a trillion dollars of debt that will increase under the current budgetary policies by another $100 billion over the next three years. As a nation we owe publicly, all levels of government, approximately the value of our entire economic output in a single year. That is the consequence of the normal activity of borrowing.

The Prime Minister said earlier this week we borrow from the left, we borrow from the right. We borrow from Canadians. We borrow from foreigners. We borrow for today. We borrow for tomorrow. We borrow to pay interest on what we borrowed yesterday. We certainly do borrow. That is the one thing that governments do. That is the one thing the government does, and

that Conservative governments have done. They borrow, borrow, borrow.

Having said that, let us look at the amount of money involved in this particular act of borrowing. The bill requests authority for fiscal year 1994-1995 for $34.3 billion borrowing representing a deficit estimated to be at this point, $39.7 billion.

The parliamentary secretary in his statement in question period suggested that the hon. member for Elk Island was incorrect in his analysis of this, that we are not borrowing any more than $34.3 billion. That is not correct. We are asking for borrowing authority to go into the marketplace to borrow $34.3 billion but as I will discuss later in my speech we are borrowing on top of that. We are borrowing from a number of non-budgetary accounts, particularly government superannuation accounts, which themselves represent liabilities of the government.

The member for Elk Island was entirely correct in his analysis although the technical borrowing requirement in this bill is somewhat lower than the borrowing stated in the deficit. I will discuss that at some length.

As I said in my speech at second reading it is hard for ordinary people to get a handle on exactly what these kinds of numbers mean, but let me try to do that. I did that before but let me try to do it again and be a little clearer.

When we talk about borrowing or a deficit of $40 billion we are talking about the equivalent of enough money to eliminate the goods and services tax entirely and pay it back twice. We are talking about enough money to not only pay our current old age security system but to pay it two more times to every single recipient. Another way of putting it, with money like this we could talk about increasing the budget of every single federal program by over 30 per cent.

That is the consequence of the kind of borrowing and borrowing policies that governments of all stripes and governments at all levels have been pursuing for the past generation.

What are we doing with the money? What is the alternative? One of the reasons we are borrowing as much this year is we have the famed infrastructure program that now is turning into a program for just about anything any municipality wants to do. The federal government is encouraging other levels of government also to borrow additional money to fund new infrastructure projects.

What does infrastructure include? There are traditional and clear economic definitions of what an infrastucture program is. Infrastructure is not simply investment or capital. Infrastructure is those kinds of capital investments that have a use for a wide range of future economic activities.

We began to see the broadening of this definition when we saw convention centres funded under this program. In the city of Calgary the current controversy is the possible funding of the expansion of operations and seats within the Saddledome in order to persuade people to keep the National Hockey League franchise in Calgary. It is part of the bargaining between the Saddledome Corporation, the Calgary Flames and others.

Many Canadians are hockey fans, including myself. Many of the people calling my office to protest this are also hockey fans. But is this really an infrastructure program? Is this the kind of project we want our money to be spent on?

I know it annoys other members who have served more than six years but our party puts a lot of emphasis on the need to reduce spending on things like MPs pensions and some of the other perks and even some of the salaries. In particular, we talk about the tax free expense allowances that are extremely generous, non-receiptable, that are included in the pay of every member of Parliament. Why do we talk about them? Not because we believe the deficit could be eliminated by cutting them but because of something I read on an airplane recently.

I cannot remember who said it, but it was an interesting phrase. He said that what concerned him about fiscal policy is that he wished fiscal policy was framed by people who had a stake in its outcome. That is the whole point with the pensions of members of Parliament and why it is a concern when we talk about how we are using the money we are borrowing.

Very shortly, and we will have a debate on this, and it will not be long before the value of the pensions of former members of Parliament will exceed the total amount of money that Canadian taxpayers are spending on current members of Parliament. These are the people who made the decisions that put us where we are today financially. They have made themselves permanent wards of the state so that we borrow, borrow, borrow to support this extravagant scam endlessly. That is why Canadians are concerned about these kinds of expenditures and this level of borrowing.

Let me turn to the red book. The government always insists that we read the red book. Of course we always take those suggestions to heart. Let me spend a little bit of time to talk about what the red book said about borrowing.

I quote from pages 19 and 20 where the government talked about balanced policies for jobs and growth. One quotation is from track two of its economic strategy.

A Liberal government will reduce the deficit.

Under this budgetary policy and the borrowing bill the deficit will be higher than was planned last year. It is supposed to come down after we make accounting changes. It is supposed to come

down but it is higher than it was projected to be during the time we were debating the red book in the election. In fact it is $10 billion higher. We have not reduced the deficit.

It says:

We will implement new programs only if they can be funded within existing expenditures.

I admit there has been some cutting and reallocation but expenditures are increasing. In fact program expenditures are increasing so not all new initiatives are being funded within existing expenditures.

The red book said:

Nine years of Conservative government have seen Canada's debt almost triple, from $168 billion in 1983-84 to $458 billion today. Despite repeated promises to reduce the deficit, the government has turned in deficits in the $30 billion range every year: the latest was $35.5 billion.

Of course that was all accurate. That was the best information at the time the red book was written. But what is the policy today? The policy today is to increase the deficit another $150 billion in the life of this Parliament. We are going in the same direction the Conservatives had been going in the last 10 years.

Does the budget project a deficit below $30 billion? Not quite. It says that in the third year we will finally go below $30 billion but we do not publish the data for the third year or show the columns where we can see the deficit going to $30 billion. We are merely told to accept that as an act of faith and as an extension of the boom times which we assume are coming.

On page 20 of the red book-the red ink book. I like the red ink book expression.

After nine years of Conservative budgets, the federal government's deficit is 5.2 per cent of gross domestic product. This is too high.

What is the projection in the budget for this year? It is a deficit GDP ratio higher than 5.2 per cent. Off hand I cannot remember but I believe it is close to 6 per cent.

The next statement concerns the 3 per cent target and as advocated by the member states of the European Community and the Maastricht treaty, that of course is not entirely accurate. I discussed that in previous debates and I will discuss it today if I have some time.

In any case this budget and these borrowing proposals are very different than the promises outlined in the red book. I would also note, as I have noted before, this is the highest planned deficit and the highest planned borrowing in our history. We have had higher deficits and we may in fact have a higher one after the accounting changes. Last year's deficit may still prove to be higher than this year's. This is the first time we have ever started with a deficit and with borrowing requirements this high.

The tendency has been in the past years for us to be underestimating our requirements and to be exceeding those requirements in the course of the year. Last year's borrowing authority for fiscal 1993-94, Bill C-117, that was given royal assent on May 6, 1993 had requested at the time borrowing authority of $31.5 billion based on a $26.5 billion estimated financial requirement. That was for last year. We see in fact that under this bill the borrowing requirement has increased.

The government justifies these policies, this particular level of borrowing, by saying that it really can justify it through two objectives or two goals. One is that it will help us achieve a lower deficit later and that it will help lead the government in its plans toward economic growth and job creation. Let me just express the scepticism as both a taxpayer and an economist that I have about deficits today achieving lower deficits tomorrow and in particular an interim target of 3 per cent of GDP.

I was a supporter at one time of the previous government when it first came to office which used much the same kind of rationale for not dealing with the problem quickly. What did we see in the eighties and early nineties? We saw that as governments refused to deal quickly with their debt and deficit problems they accumulated deficit on top of deficit, debt on top of debt and we have the situation today in which the biggest factor behind the long term deficit and the growth of debt in Canada is not in fact the recession. It is the accumulated debt and the interest payments on that debt.

When we have that kind of a dynamic it makes it very difficult for deficits today, which will add to debt and add to debt charge burden, to lead to lower deficits in the future.

Some members of Parliament of the governing party are apt to refer to the great early 20th century economist, Lord John Maynard Keynes, in justifying this kind of economics. I wonder how many of them have in fact read what Mr. Keynes wrote on this subject and what kind of analysis he used and what kind of circumstances under which he justified these kinds of budgetary policies.

I know the hon. member for Capilano-Howe Sound has, as I have in the past, read these things. We can certainly say that these were not the policies advocated by a learned man such as that. I do not agree with everything he wrote but he never advocated permanent, ongoing structural deficits, not at all.

It is also important to say that he wrote at a time when governments had very little permanent financial obligations of their own. Governments were in fact a source of funds rather than a drain of funds. It was a very different situation and one that cannot be justified at this point.

The second point the government has made is that these borrowing policies will lead to economic growth.

Just as an alternative opinion-our party has a very different economic philosophy-let me read what the job creators of this country said about economic growth and job creation. We know that with governments being as insolvent or increasingly insolvent as they are jobs will come in the future from the private sector. I think the Liberal Party generally acknowledges that fact.

The Canadian Chamber of Commerce in a news released dated February 14 said a million jobs can be created according to preliminary results from entrepreneurs in a study the chamber had conducted. It had 658 responses so far from employers representing a range of sizes of firms, all the way from very small firms to some of the very large firms. It indicated that with the right kinds of economic policies there were capacities within these firms for a total increase of employment of one million Canadians.

The kinds of economic policies it said were necessary, if the debt and deficit were reduced, if payroll taxes and corporate tax rates were lowered, if the government regulatory burden were eased and training and education of the labour force improved, could create an average of 14 jobs per firm in the next three years.

[Points Of Order, March 16th, 1994]

Mr. Speaker, I appreciate that you are trying to clarify this and I appreciate the parliamentary secretary for bringing it up.

Maybe you could also clarify something for him. In his answer to me yesterday during question period he raised the fact that the matter had been brought up in committee. I wish you would clarify that as well, both the question and the answer.

[Interest Rates, March 15th, 1994]

Mr. Speaker, we observed a very negative response to this budget in the private sector.

For example, let us look at interest rates. Since the tabling of the budget, in the last six weeks interest rates have risen 35 basis points. The bank rate went up 9 points today. We have had a three-quarter per cent raise in six-month government bond rates and over a full percentage point in long term rates.

Will the Prime Minister admit that not only will this cost the country in terms of job creation it will also endanger the public debt charge cost to taxpayers. It is also important to note that already it is costing Canadians millions of dollars in higher mortgage payments.

[Interest Rates, March 15th, 1994]

Mr. Speaker, I would like to hear from the Prime Minister regardless of who is in the House.

Last week the Minister of Finance said on page 2042 of Hansard that the interest rate assumptions in the budget are interest rates which at the present time are higher than those in existence. That statement was completely false. We know for example that long term rates today are over a point above what they were predicted to be in the budget.

The Prime Minister today has professed a great interest in private sector job creation. Will he admit that these errors in arithmetic will mean the loss of hundreds of thousands of private sector jobs and private sector job creation funds?

[Interest Rates, March 15th, 1994]

Mr. Speaker, my question is for the Prime Minister in the absence of the Minister of Finance.

[Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions Act, March 9th, 1994]

Mr. Speaker, before I discuss Bill C-3, the bill to renew the equalization provisions of fiscal transfers for the next five years, I would like to thank the government for allowing us to have this debate tonight.

Originally the government had wanted to discuss this bill on Friday when I and the critic for the Bloc would be unable to attend. We were able to reach an agreement to debate this bill this evening. I say that in all sincerity in spite of the fact that I will oppose the bill. I will also express some concerns about the process not so much on this bill but the general process followed in reviewing such pieces of legislation.

As I have indicated my party opposes the bill. I want to take the time tonight to reiterate the nature of that opposition and also to review concerns about the process of discussion and debate used here in deciding some of these matters.

Our party does support some elements of this bill and it is important to indicate that. We support for example the concept a ceiling. It is important for anybody who is serious about fiscal responsibility and the nature of the problems we find ourselves in to not have a situation where the federal government finds itself liable for open-ended transfer payments. That certainly could be the case without some kind of a ceiling.

We also support the concept in this bill of some kind of compensation for excessive tax back of unique resource sources in the equalization formula.

While making these remarks, I would also like to say that the position of my party is not that of the Bloc Quebecois or that of the member from Mégantic-Compton-Stanstead. Despite his well-thought out remarks, our views are totally different.

I would like to take a few minutes to mention those differences in perspectives. As a party we support the concept of equalization. I would point out to all here that the concept of equalization is embedded as a principle in the Constitution Act, 1982, which our party recognizes and which we believe all provinces of Canada are part of. I understand that is a very different position from that of the Bloc Quebecois.

I also want to point out that in spite of whatever shortcomings this bill or other federal programs may have, this particular program is very generous to the province of Quebec. This has come up before. This year roughly $3.8 billion of the $8.4 billion spent under this program will be directed to the Government of Quebec, none to the Government of Alberta and none to the Government of British Columbia. While there may be shortcomings in the bill it is important to acknowledge that. All Canadians should acknowledge the importance of these transfers not only symbolically but in dollar terms.

I also point out, although we will get into this debate at a later date, that the Bloc Quebecois at some point is going to have to address more seriously than it has its support for independence and opposition to the Constitution Act on the one hand and its apparent love for some of these social programs and some of this spending on the other. In spite of the considered words of my friend there is a contradiction in not liking Canada and having such great love of the Canadian dollar. However we will discuss that at a later date.

The nature of our opposition is primarily the expenditure size involved and the fact we are making enormous commitments without proposals for comprehensive reform in this area. Our zero in three plan had called for reductions in the area of equalization as part of some fairly small reductions over all to the level of transfers to the provinces.

I note with this program even with the ceiling that the projected growth rates for equalization are about 5 per cent per year. That is very high in comparison with the expected rate of growth for spending on federal programs generally. It is certainly higher than most programs which involve federal transfer payments to the provinces. The cost of the equalization program will grow from $8.4 billion to about $10.4 billion over the five year period, fiscal years 1995 through 1999.

On top of that we are making these kinds of commitments in the absence of a comprehensive reform proposal. This bill was tabled and second reading debate occurred before the tabling of the budget, before the infamous red ink book.

We know the federal government in making this announcement reiterated its commitment to federal transfer programs. It implied as it had during the election that it would never consider cuts to social programs or to federal transfers. However the budget revealed that despite the renewal of this particular program, the renewal of the current dollar levels, there were going to be planned cuts in transfer payments in other areas, some of which we do not particularly support.

I note, for example, the budget talks about additional caps to the Canada assistance plan that would kick in the 1995-96 fiscal year. We would begin to limit spending in absolute dollar terms to the level of 1994-95 combined with established programs financing for post-secondary education. In 1996-97 the combined total of CAP and EPF post-secondary will not be allowed under the budget to exceed spending for those two programs combined in 1993-94.

This raises the spectre of something I think has been missed in much analysis of the budget, that is planned expenditure reduction by the government in the area of post-secondary education which is not a target that we deficit cutters have specified. We certainly have not found support in the country for making that a priority for reduction.

It is very funny that while we advocate some cuts in our plan the government is saying it is renewing this program. It is planning cuts to transfer payments to the provinces but there is no particular plan for any kind of comprehensive reform or rationale.

This is interesting considering that debate on the bill both at second reading and in committee has raised the fact that there needs to be such an examination in the case of equalization as well as in the case of other transfer programs. Generally speaking there is a lack of clarity on the objectives and the operations of the equalization program.

The hon. member for Lethbridge pointed out during second reading and in committee that if the formula created equity in federal programs, if we had equalization for that purpose, why would we then support in a number of ways special funding over and above this that recognized have not provinces in particular programs in other areas? I think, for example, of the infrastructure program, RRAP or the cap on CAP in the case of the have provinces. There is definitely a duplication of efforts and clear objectives.

As well there are problems that go back to the very beginning of equalization. Professor Tremblay of the University of Montreal pointed out to the finance committee in his presentation the original economic justifications for programs like equalization based on economic deficits and surpluses created by the system of tariff payments in the country. Those things are now obsolete, particularly with the implementation of free trade. That is not to say the program is unnecessary but the original economic justification of the program has been eclipsed.

Important questions were raised not only by Professor Tremblay but by other people in committee and at second reading: the impacts of equalization on regional dependency and on structural unemployment and whether it prevents natural adjustment to market forces and outward migration of population from areas with low income potential.

These are all very important questions. We are undergoing an examination in certain federal programs-unemployment insurance and welfare-of the effects of these programs on individuals and the restructuring of incentives. It certainly would be appropriate to undertake a similar study here on the effects of these programs on large governments both provincial as well as municipal.

The government in its defence of the bill has said that it now requires certainty in the area of federal transfer payments to the provinces, in particular certainty on the equalization formula. This is one reason it is anxious to support it and one reason government members gave for supporting it.

I would point out to the Chair that in the course of our committee hearing one government representative we did hear from, Mr. Neumann of the Intergovernmental Affairs Office of Manitoba, indicated considerable doubt about that as the previous speaker from the Bloc indicated. There is not unanimous provincial agreement with this particular approach. Governments are expressing some doubt about the issue of certainty. Mr. Neumann had indicated over and above his concerns about the ceiling, which I do not share, that some particulars in the calculations lend themselves to uncertainty about future receipts and that we should be examining those sorts of things. Of course we did not.

There are other specifics that are difficult with this. This bill leaves on an indefinite basis choices between two different kinds of equalization options for certain Atlantic provinces. We continue to have inequities in the equalization formula. They are well documented.

The treatment of natural resource revenues can be very different depending whether they are owned by crown corporations or private enterprise. The formula is extremely complex, difficult to understand and administer. On top of that, the formula does not use any kind of standard measures of fiscal capacity. It is a very unique formula developed only for this type of transfer and once again, there is no particularly clear rationale, at least to myself and to others I have talked to, between the particulars of the program and the objectives of the equalization program.

I have tried to lay out not only our general objection to the cost but also the fair range of issues that this bill really provoked both at second reading and in committee. I point this out because this is my first time as a new parliamentarian being a critic for a particular piece of legislation and being part of the system and seeing how it works.

We had the debate here. We went to committee with these bills. Points were made in the committee by members of the

opposition in both parties in opposition to the bill. Points were made, concerns were raised about the bill and about the philosophy of the bill by witnesses who appeared before the committee.

What was quite interesting to me was that the government members, generally speaking, who engaged in debate here and who talked in committee generally made no effort or only the most minimal effort to refute or to comment on any of the points raised.

I am not trying to be critical of any individual but the general defence of the bill offered by government members was certainty. The other was that equalization is about sharing and sharing is good, therefore let us pass the bill.

With that kind of orientation, we proceeded to pass the bill. We had two committee hearings and then proceeded to move to clause by clause, somewhere between 30 seconds and a minute, sums of money totalling $45 billion to $50 billion over the next few years.

I suppose an option available to myself or to members of the Bloc Quebec or other members of the Reform Party or perhaps any member would be to endlessly filibuster the bill, to bring speakers forward, to continue to raise these points in committee and in the House.

I follow our leader's example on this. There is no point saying that one is going to practise economy in government if one cannot practise economy in words. I am not interested in endlessly filibustering this bill but surely the point of the process is that we do an examination and even if we do not reach agreement that we at least sharpen our arguments so that we can better rationalize this bill.

Of course this does not happen because in our system with the pattern we have fallen into of government confidence on every motion and lack of free votes, the issue becomes not the substance of legislation but simply what party one belongs to.

Unlike in other legislatures, for example in the Congress of the United States, the one closest to us, it is unnecessary for us as individual members to defend or explain our position on pieces of legislation, even pieces of legislation that we are personally responsible for. All we have to know is that the government voted for it. If one is a government member, they had to support it.

That disappoints me. I am not suggesting that there are not members of the government who do not understand the equalization bill or who could not give good defences of this piece of legislation but this certainly did not transpire in the debates that I was involved in.

Why are we rushing this? This has all occurred very quickly. The bill was tabled before the budget. The government originally wanted it through committee around budget time. It certainly wants the bill through this House and has our limited co-operation to do so because as I say we are not interested in endless filibustering. It wants the bill through the House by March 31. Why? Because the program is slated to kick in on April 1 and is to go for so many years. In spite of the fact that we do not really have full provincial agreement this decision has been taken.

The bill had only been debated or on the order paper for a couple of weeks when I was contacted by Professor Boothe of the University of Alberta who has written extensively on federal transfer programs to the provinces. He would have liked to have said something on this but the committee hearings were done before he was aware we had a bill.

Why does this occur? This kind of rush occurs not because there is any real necessity or that there will be any collapse of the federal-provincial system if we do not pass this bill by March 31. It is because there is an attitude of the government, an attitude passed over from Parliaments in the past, that this process is a formality. This is a rubber stamp. It does not matter the sums of money that are involved, the objective is to pass it. In fact the decisions have been rendered in the executive. They were rendered in some other forum and there is no particular need to become knowledgeable only to get it through and maybe we will defend it at the next election.

These kinds of things concern me. I do not make these criticisms of the bill or of the process here as attacks on any particular government member or even on this government. This is the pattern of legislative process that we have fallen into in this country. It does not work. It is how we got ourselves into the kind of financial mess we have in this country.

I remind members once again that in many, many areas of public policy we spend more money than just about every country in the world, whether it is on education or health or unemployment insurance, transfer payments to lesser levels of government or whatever. We are spending as much or more than our competitors. The results are simply not comparable to what is required to compete in the international marketplace.

I think I have said my piece on that, Mr. Speaker. As I said, we anticipate the bill will pass. We oppose it on principle and will oppose it on division.

[Borrowing Authority Act, 1994-95, February 25th, 1994]

Mr. Speaker, I am rising today to address Bill C-14, an act to extend to the government borrowing authority for the next fiscal year, borrowing authority in the order of $34.3 billion with a contingency for an additional $3 billion.

For those who have trouble grasping some of these numbers, and I think that is probably most Canadians, I will just spell it out. We are talking here initially, to put it in number terms, 34,300,000,000.00 dollars and cents. That kind of money, to give it some practical significance, would be enough to eliminate the GST and then pay it back twice to all Canadians. It would be enough to halve the income tax. It would be enough to pay old age security for an entire year without any additional revenue sources.

This is the highest planned borrowing. As far as I know, it is certainly the highest planned deficit on which this is borrowing based in Canadian history. We have had higher deficits in the end, but this is the highest we have ever had to begin with.

I will not waste a lot of time in telling the Chair that I will be opposing this bill on that ground. It is safe to say that every member of the Reform caucus and I will be opposing it for like reasons.

In my speech and in the speeches of other members of my party who will follow today and subsequently, we will not restrict our comments merely to the borrowing aspect, but we will comment on and evaluate the general budgetary policies of the government from which are flowing these tremendous borrowing requirements.

This of course all comes from the red book which I think is widely becoming known now, upon presentation of the budget, as the red ink book.

The Liberal Party talked about its red book throughout the election campaign. But now we see what a red ink book is all about. With this bill, we will be increasing the national debt of our country by more than $34 billion. Over the next three years, we are talking about an increase of at least $100 billion.

That is a lot of money.

I want to make my remarks on four particular categories. I will start by evaluating the stated targets in the budget and give an evaluation of those. Second, I want to look very carefully at the economic assumptions and the projections behind the targets. Third, I want to look at where we are headed financially and economically, particularly on the issue of this bill, the borrowing authority, the debt. Finally, I would like to summarize in some detail by looking at what the market is saying and where the government may be going.

In his budget speech the minister spoke about achieving targets rather than having illusions and falling short. I want to evaluate some of those targets and the data used to obtain them. Let me make a general comment. The government, unlike the previous government, has provided some measurable targets. It has also provided in the short term more realistic data than were provided by the previous government. It is better data that are much easier to evaluate.

However, to summarize, the targets are very soft; the action is somewhat overstated; the achievement is not at all clear. The minister has spoken of a two-part budget and of course we have no long term or even medium term financial projections in this budget. We have only an empty third year column in which we are told we will reach the target. That is a general comment.

Let me go back to previous experience on this matter. In April 1993 the former Progressive Conservative Party and government brought down its final budget. In that budget it promised to balance the books in six years. This would mainly be achieved through spectacular economic growth.

The House will recall that at the time the budget only laid out projections for five years. It showed that by fiscal year 1997-98

we would have a deficit of about $8 billion and extrapolating the economic projections we reached a budget balance in fiscal year 1998-99.

In the specific projections that were made we had this tremendous prediction of an average rate of growth of almost 4.5 per cent per year until the end of the century. We had rapidly declining unemployment rates which would fall to about 7.5 per cent by the end of the century. We had spectacular falls in interest rates, both nominal and real, and of course we had an income tax system that would generate all the spectacular revenue increases that these assumptions implied.

The former Conservative budget of 1993 called for a deficit in fiscal year 1994-95 of $29 billion. In the election campaign our party said, and I want to give a realistic evaluation of this situation, that the Conservatives were grossly underestimating the seriousness of the problem. We said that the Tory plan would not reduce the deficit. In fact we said that the Tory and the Liberal plans were pretty much identical in macroeconomic terms.

This is not the first time when one political party, the Conservative Party, talked like born again right wingers about the seriousness of the deficit and how this had to be stomped out at all costs and the Liberal Party talked about jobs and social democratic priorities.

Of course in reality the numbers that they were proposing were very close. When one extracted out of the Conservative projections the unrealistic assumptions, one found that one reached a target of about 3 per cent of GDP by the end of the century. That was the real Conservative target in that budget although they did not say that. The Liberals said this was excessively harsh and that they would do things differently. We Reformers said this was not good enough, the deficit was more serious than either of these parties was saying.

Interestingly, if I look back at some of our own studies, and I can take some credit and blame for this, I see that the trend we had established in our evaluation of the likely deficit for fiscal year 1994-95 was $31.2 billion. We were told that we were excessively pessimistic, that we had grossly overstated the problem.

Now we have the revelations of the past few months about the doctoring of the books that occurred in the later days of the last Parliament. We are now admitting, and the government is admitting, that we are looking at a trend deficit figure, with no policy adjustments, of $41.2 billion or exactly $10 billion above the Reform Party's estimate of how serious this problem was only a year ago; $10 billion above what we thought one year ago, we who were most concerned about this and were labelled hysterical about our evaluation of the situation.

This is one of many signs of the very serious and rapid deterioration we are now about to enter upon if we do not get a handle on this problem.

Just as an aside, why did the Reform Party so underestimate the deficit for 1994-95? I would like to comment on that as the finance minister has made some reference to it in the House. He has said that we had unrealistic growth assumptions. In fact we did not have unrealistic growth assumptions. Our growth assumptions for last year were modestly above what transpired. Our growth assumptions in the longer run were not over estimates. In fact they are lower than the growth assumptions that the government is presenting today.

What happened was that we had overestimated the ability of the tax system in general to extract revenues from economic growth. Last year we had a dramatic collapse in the revenue GDP ratio which indicates a significantly lower revenue potential that is now recognized. We had a collapse of over 1.5 per cent of the ability of the tax system to extract revenue from growth in the gross domestic product.

That is something I will be talking about more. It is now a recognized problem. It was not at the time. It is indicative once again of the underground economy, smuggling, tax avoidance and the impact of sustained recession are problems we are beginning to understand better.

Let me move on to the second issue I wanted to address. We talked about the targets the government set. Let us now talk about the specific economic assumptions and projections that the government has made in saying it will reach these targets by the end of the third year.

This government, and I want to be fair here, unlike the previous government has not spectacularly exaggerated its estimates. Its record is mixed. It is better than the previous government but there is still a lot to be desired.

I am going to talk about some subjects: economic growth projections, unemployment projections, interest rate projections, revenue projections and the efficiency of the tax system. I wrote most of what I have to say today prior to reading the Globe and Mail article this morning.

Economists all over the country are in the process of studying the budget, of examining these tables and estimates very carefully. I should say that in the last two or three days it is increasingly obvious that some of the deficiencies in the assumptions of this budget are being exposed.

Let me mention a few, not all, because there is going to be more debate about this in the upcoming days. First, the government's most positive feature in its planning, job creation, is definitely not exaggerated in the budget. Unemployment is projected to fall to only 10.8 per cent in 1995, with modest job recovery thereafter.

I think it is probably accurate. It is a very interesting projection coming from a government that says that creating jobs is the major priority of the budget, and continues to insist there is

somehow a link between jobs and debt. That somehow, if the government spends money, if we continue to run these deficits, we will create jobs. The budget indicates what we in the Reform Party are saying is correct. The longer these deficits stay high the longer job creation will stay low.

I can be a little more critical when it comes to its projections for economic growth. The government has forecast 3.0 per cent economic growth for 1994 and 3.8 per cent economic growth for 1995. It has avoided making explicit projections for the period after that but its documents as well as the minister's responses earlier this week would indicate that it expects growth in the order of 3.8 per cent to continue in years 1996 and after.

The basis of these growth projections is said to be in median or even below median assessment of the forecasts of private sector economists and forecasters. This is said to be a brand new approach to budget planning. This is not the case. This is not a brand new approach. The previous government also cited private sector forecasters in making its own more exaggerated and unrealistic growth projections.

What is similar here and what needs to be pointed out, if we are going to rely on the projections of private sector forecasters is that it would be useful to have some additional information, such as who are the private sector forecasters that are being sampled in these kinds of growth projections, precisely what kind of adjustments have they made to their own economic models in light of recent evidence, and most important, if that is your only basis of forecasting, what is in fact the record of some of these private sector forecasters in terms of their own evaluation of economic growth and other economic variables.

I would like to mention that in a recent article in the Financial Post entitled ``Deficit and Jobs Cloud Optimism'' private sector forecasters were quoted as saying that their projections for the next fiscal year were the following: for 1994 the median projection was 3.5 per cent, but for the years thereafter the average median forecast was 3.2 per cent which is considerably below the government's forecast.

Our position has been that budgetary planning should be based on very firm conservative budgeting principles. Those principles are the following: That we should select the lesser of two different pieces of information, the lesser of the forecasts that are out there among evaluators and recent economic history and experience. It would ensure a very conservative planning path over an entire economic cycle and is the approach we have used to estimate growth paths and recessionary deficits.

Using this, let me convey to the House the planning forecast that we have been using. As I say the Minister of Finance has inadvertently misrepresented this.

The planning forecast we have been using for the past several months, since the minister's statement in November, has been a forecast of 3.0 per cent for 1994. That is in agreement with the government. However, we suggest that the second and subsequent year forecasts are optimistic rather than conservative. We have projected those growths to range in the area of about 3.2 per cent on average as predicted by private sector forecasters.

The third issue I want to look at is the interest rate issue where the statistical games being played are much more serious. They certainly involve more distortion and potentially much more danger for the government. That is the assumption on interest rates.

Using the rate on 90-day commercial paper as its benchmark, the government is saying that short-term rates will be about 4.5 per cent in 1994, rising modestly to 5.0 per cent in 1995. Longer term interest rates, with the 10-year rate on government bonds as the benchmark, will fall from 1993-94 to 6.4 per cent and will continue to fall in 1995 to 6.1 per cent and staying thereabout thereafter.

In our view once again we should be using a conservative approach that would look at some of the forecasts out there-I suggest that these are exaggerations of the forecasts-as well as the clear market data which exist on interest rate expectations. There is in the marketplace an elaborate term structure for interest rates and an elaborate set of variables on which the market forecasts present and future interest rates.

Looking at that data we can see they reflect the government's short term forecasts. We see that interest rates are expected to rise gradually in the short end over the next few years. The reason for that is quite straightforward.

There is general concern about inflation, particularly if we are going to have recovery. That is reflected in interest rate projections. More significantly, there is no clear sign in the marketplace that long term interest rates are going to fall dramatically. Long term interest rates have had a pattern of falling and rising in recent years with the inflation pattern we have had.

At present the 10-year rate on government bonds has been ranging between 6.8 and 6.9 per cent. There is no sign of a decline in real medium term and long term interest rates. Maybe there will be but certainly for an organization that is experiencing the kind of debt levels we have here, we would not want to underestimate the possible debt charges as a way of balancing the budget.

This is the most serious deficiency. Other speakers particularly from the Bloc Quebecois have commented on the overestimation of the revenue forecasts. That is something serious. For a government that finds itself with a half a trillion dollar debt which will rise rapidly even under its own projections, to underestimate the potential debt charge on that is a very serious

and imprudent planning assumption, particularly when that deficit on average has a term of about two and a half years. It is now a very short term debt.

To concentrate that debt on the front end, while we face referendums and other economic and political uncertainties in this country, makes us vulnerable to rises in interest burdens. In our own case, as I have said, in our forecast of interest rates we have suggested we should look at the term structure.

We can take factors such as the overestimation of growth rates into the second and third year and the underestimation of interest rates at the long end into account. These factors alone would have an effect of adding half a billion dollars to the planning assumption for 1994-95 and at least $1.5 billion to the planning assumption for 1995-96. Because these imprudent assumptions are concentrated in the area of interest and debt charge, we can assume that any such understatement will compound rapidly into the future.

While these assumptions are somewhat of an improvement over the previous government, once we get into the second year in particular-and the government says those can be extended indefinitely into the third year-the overall pattern is not that different.

We have growth forecasts below those of the Conservatives but well above market forecasts and well above recent historical experience. We have interest rate forecasts that are identical to what the Conservatives proposed. And we have the most dubious of all assumptions which is the tremendous revenue generating capacity of the tax system, even though we continue to have one of the highest tax burdens in the industrialized world.

Where are we headed if we take all of these things into account? Our assessment is that we are probably headed for a very modest deficit reduction this year. It will be lucky to come under $40 billion. Our assessment is we will certainly not be achieving a 3 per cent debt to GDP ratio in 1996-97.

Based on this budget we will not achieve all the things the government wants: rapidly falling deficits, modest to high economic growth, extraordinarily low inflation, nominal and lower interest rates, et cetera. It is a very optimistic pattern by the time we get to the second and third year and there is very little to suggest it will be achieved.

In all honesty I would suggest to government members that if the government felt this were achievable, it would have published the figures. The fact it has decided to leave the third year column out of most of the tables is no accident.

The minister says he does not want to be hoisted with his own petard. Those were not his exact words but in other words, he does not want to repeat the mistakes of the Conservatives. He does not want to repeat the mistakes of making these forecasts, putting them on paper and then having them not come true. Therefore, rather than provide us with conservative or prudent forecasts he provides us with no forecast whatsoever and says that way he will not be held up on this.

On top of this another good question which should come out of all this is why is there a second stage to this budget if it will already achieve its objectives?

That is another reason I asked the minister to admit that the projections show the deficit will not fall below $30 billion. If he could achieve this objective and if it was based on realistic assumptions, there would obviously be no need to hide them. Furthermore, there would be no need to announce a second stage in the 1995 budget. Clearly, some of these excuses are wearing thin.

My personal view is that the government would be advised to provide the House with realistic information and to suggest that perhaps these targets are not going to be achieved. That is a far better way to do it than to play a shell game with the numbers.

I will comment a little more particularly on some of the critical ratios that are going to be affected by this borrowing bill. I recommend to the House once again chapter 5 of the 1993 Auditor General's report. It identifies five critical ratios in terms of evaluating federal fiscal policy. These are a set of operating ratios: Overall spending to revenue; program spending to revenue; deficit financing to revenue; as well as some more macro-ratios: the deficit to GDP target; and the debt to GDP target.

Commenting briefly on the operating revenues the former government was so fond of using, under this budget the operating ratios are forecast by the government to improve very modestly on the way they have been trending. With adjusted projections based on more realistic assumptions those ratios will be flat at best and they are at very high levels.

In terms of the deficit-GDP ratio, in spite of what the government says, with the actions strictly contained in this budget that ratio will be around 4 per cent of GDP by the time we hit 1996-97.

The debt-GDP ratio is a very critical one. It is the level of our debt relative to our ability to pay. The debt-GDP ratio is forecast at about 75 per cent for 1995-96 and flattening. Our calculations suggest this debt-GDP ratio will be closer to 76 per cent in the subsequent fiscal year and will be rising. This is the most critical ratio of all because ultimately this is the ratio on which the long run ability of the federal government to sustain its spending and financial policies is based.

Let me repeat for the benefit of all members the criteria on some of these variables contained in the Maastricht treaty in the negotiations for the European Community. The government is fond of quoting 3 per cent. Where did this 3 per cent concept come from? We are told that 3 per cent of GDP is a reasonable interim target. Why? We are told it is because that was the target used by the European Community in the Maastricht treaty. By the way, the European Community targets were not achieved but those targets were a 3 per cent deficit to GDP ratio and a 60 per cent debt to GDP ratio, 60 per cent of all national debt to gross domestic product. It was gross, 60 per cent gross.

Excluding the provinces and the municipalities, under this budget the federal government alone will have a public debt ratio of 75 per cent. It will be a net ratio, not a gross ratio. The government is well short. If it were to meet the Maastricht targets it would be expected to run a significant surplus in the upcoming financial years, not move toward a mere 3 per cent target.

Let me also talk about the size of the borrowing because it is important as well. The deficit is projected by the government to be in the order of $39.7 billion. Government members and others fondly point out that this borrowing bill is only asking for $34.3 billion more or less. They say our borrowing requirement is less than the actual deficit and therefore is not as serious and we should not worry about it. We have these non-budgetary transactions that are generating surpluses and if we take those into account we are in much better shape.

I caution government members very carefully against using that logic. I would call it Kim Campbell logic. Kim Campbell made some reference to this in her leadership campaign.

The surpluses on the non-budgetary transactions mainly concern pension and superannuation accounts. In spite of their cash surpluses in recent years these accounts have had very serious actuarial liabilities. Far from there being a solution in these non-budgetary accounts, they are a completely separate problem in addition to the deficit and debt problems we face and will have to be addressed in the future.

There are significant actuarial liability problems. To suggest for a minute we can borrow from the non-budgetary accounts in order to finance or reduce our deficit and thereby solve the problem is completely false. It is an extremely dangerous suggestion for anyone to send out to financial markets.

I want to give a blunt summary of my reading of this budget, not just an economic one but a political one. The government has provided small cuts in this budget. It has provided smaller taxation measures. It has provided a very, very modest fiscal stimulus program. Most important, it has deferred major decisions about the budget and fiscal policy to subsequent years. Let me comment generally on some of those points.

The government talks about having reduced expenditures much more than it has increased taxes. There are $5 of spending cuts for every $1 of revenue increase. There are five cents of spending cuts for every one cent of revenue increase. The budget has effected very small magnitudes. They are measured against planned expenditure levels. We all know that can be a highly distorted pattern because we then say we are not going to spend something we never really spent.

On top of that, if we actually look at the figures, at the end product and not these ridiculous cumulative measures, and take into account that a large portion of these measures was actually Conservative policy, the government will have reduced its planned spending by less than $6.5 billion by the end of the third year. The actual discretionary increases of revenue are less than $1 billion. These are very small magnitudes. We can compare that with an expected $25 billion gain in revenue from economic turnaround. The measures in the budget are absolutely dwarfed by what is expected to occur in the economy.

Then there is the fiscal stimulus program. I do not know how the government categorizes these, but there are 15 or so new spending initiatives in the budget, the major one of which is the infrastructure program. It is also a small package by any standards. I do not have to comment at length on the deferring of major decisions to subsequent years. We have had 18 studies.

I am sometimes amused by the rhetoric used by politicians. The minister said that we were taking action directly, that we were constituting a study or a committee or a commission. This is a very interesting concept of immediate action. The bottom line is that the deferral of decisions will cost $100 billion in new debt and associated service charges over the planning period.

In doing these things, particularly the small cuts, the smaller taxation measures and the fiscal stimulus, the budget is actually very close to the concept President Clinton had in mind though his magnitudes were much bolder. There is not an identical problem in the United States but a similar and serious problem.

The congressional process in that country caused a much more sensible budget package to emerge. It included some of the expenditure reduction measures and, in the case of the United States in which there is more tax room, some tax increases. The congressional process eliminated the stimulus program which was, as it will be here, an absolutely ineffective use of additional money to convince people the government is doing something.

What has happened in the United States has been a relatively high success. Growth in the United States is beginning and has been in the past several quarters to significantly outflank Canada's growth. On top of that its job rate is improving. Its unemployment rate is falling. Its budgetary deficits although still serious are dropping very dramatically. I point to the

congressional process which listened to opposition parties, the Republicans, and which produced a much better policy.

On that last point let me just make another summary of the budget, a political summary. As deficient as the budget is there are some improvements. The improvements are not in the dollars. They are the improvements in the philosophy embedded in the budget.

The finance minister may have spoken like a New Democrat, but many of the measures are in the direction of Reform Party policy. I look at what the government has done to old age programs, the direction in which it is moving. I look at the direction on unemployment insurance which I think is very sound. I look at the direction on industrial subsidies, the direction on social programs and transfers to the provinces. The fact of the matter is that these are just directions and with one or two exceptions the dollars involved are not significant.

The government is laying the groundwork in the budget-and that is what the market expects-to shedding its election campaign pledge and moving toward adopting real budgetary measures in the subsequent year. That is what the market hopes. The market hopes that these UI cuts are a sign from the government of a much more serious attitude toward the big spending programs. The government is hoping that it will get some breathing room.

I would suggest that buying time is a very dangerous way to proceed. We know what buying time has done to us in the past. I was with the Conservative Party in the mid-eighties when its members decided to buy time. We know what happened both to the their budget as well as to their party.

In summary, the budget has weak goals. The goals are not clearly attainable. There is some exaggeration in the expectations. It is somewhat better than before but still exaggeration. More than anything the government is taking a big gamble with everybody's future by putting off these decisions.

I would suggest that politically this gamble is not likely to work. It will probably benefit the opposition in political terms. Let me also point out that if it does not work out it is going to benefit members of the Official Opposition more than anybody. It is going to benefit their ultimate goals which will be hinged on the economic performance of the country much more than they will be hinged on the religion of official bilingualism.

I hope the government remembers that. I hope it takes very seriously the concerns expressed in this debate and in the debates in the months to follow, not only as we complete this budgetary process but as we begin the next one.

[The Budget, February 24th, 1994]

Mr. Speaker, I wonder if there would be unanimous consent to have a 10-minute question and answer period.

Daily we have the opportunity in the Chamber to question cabinet ministers and any other member who makes a speech, including the leader of the Reform Party. The government in particular is always saying that the Leader of the Opposition is somehow responsible for every policy that occurs around here.

Maybe there would be unanimous consent to allow a 10-minute question and answer period.

[The Budget, February 23rd, 1994]

I have a supplementary question, Mr. Speaker. That is an interesting answer. I agree there are tracings of the third year in the budget, but there are no economic projections or detailed third year data for any of the tables.

Will the minister admit-and I know he will want to consider carefully this answer-that if he provides realistic economic projections, combined with the data in the budget, it will show that from this budget the deficit will in fact not go below $30 billion in the third year and will remain close to 4 per cent of GDP?