44th Parl. 1st Sess.
November 29, 2021 11:00AM
- Nov/29/21 12:32:29 p.m.
- Watch
- Re: Bill C-2
Madam Speaker, I congratulate all of my colleagues for winning their election in this 44th Parliament and making sure that we come here to discuss Canada's issues in Parliament. I am looking forward to that and more debate in the House of Commons.
First, as it is the first time I have risen in the House since the election, I would like to thank the constituents of Calgary Centre for giving me the honour of coming back here to represent their interests in the House of Commons, in the debates that we are going to have here, and make sure that we have better legislation for Canadians going forward. I also want to thank my campaign team and my wife, in particular, who has always been my biggest supporter.
Today, we are talking about Bill C-2 and how we can try to make it better. This is about government spending, and it is one of the main things the government does. I also want to talk about inflation, especially monetary inflation, the cost-of-living increases and, of course, asset inflation.
I will start with the fiscal situation and federal government debt.
When I ran for Parliament in 2019, I decided to become a candidate because I thought Canada was overspending. We were spending our children's money, and going deeper into debt to pay for today's programming at the expense of tomorrow's taxpayers. In 2019, Canada's debt was $721 billion. Where is it now? It is $1.234 trillion.
I will note that I will be splitting my time with the hon. member for Edmonton West.
We have $1.234 trillion in debt, which is $500 billion more in debt than we had two years ago. The government has based this on what it wants to continue, a debt-to-GDP ratio of around 53%, which is up from 30% only a few years ago. That is a ridiculous increase, and the government plans to leave it there in its spending plans for the foreseeable future. It is as if arriving at a 53% debt-to-GDP ratio is the goal, and we just keep adding debt so the debt ratio of our country is kept high, and it is very high. This is a government that believes it does not have to make choices about where it spends taxpayers' dollars or borrows funds from future generations.
Interest rates are low, because the debt issued is held by the Bank of Canada. Interestingly, in a technocrat approach to access leverage, a Canadian Crown corporation buys the debt that it issues to the government to pay for its spending. It is a nice balance-sheet trick where the entity that is setting the market rate for issuing government debt actually participates in the market as a buyer to ensure that the debt is bought at that market rate. The end result of this is that the Bank of Canada, a funded subsidiary of the Government of Canada whose debts are guaranteed by the taxpayers of Canada, has grown its balance sheet from $105 billion in 2020 to over $500 billion today. Of course, it has the bonds on its balance sheet guaranteed by the taxpayers of Canada as well, but let us remember that it bought these bonds, some from bond sellers in the open market, at a rate that it set at very low.
I will give a little background to understand this concept. Low interest rates, or “coupons” as they are sometimes called, equate to higher bond prices. The correlation is automatic. When the government is buying bonds from market participants at a low market rate that it set, it is overpaying for the bond. Eventually, rates will reset higher. Higher rates equal lower prices for the bonds on the Bank of Canada's balance sheet. What does that mean? It means that the adjustment to reducing the quantitative easing experiment in which the government is participating is going to be very expensive. We are buying high and we will need to sell lower. How much lower? Well, with an increase of $400 billion on its balance sheet, normalization will require a loss of billions of dollars of value for the Bank of Canada per year until $400 billion of Government of Canada debt has been sold into the market. This quantitative easing, a way for central bankers to keep public spending ratcheting higher, in any iteration, in any country, has never shown a path out. We are experimenting here without any concept of the outcome.
Remember that Canada's debt total is $1.234 trillion. About 40% of that is now held by the Bank of Canada, so we, the people of Canada, have become the de facto only buyer of Canada's debt. We must add those billions in impacted losses onto Canada's fiscal deficits going forward, because they are not included in any of the fiscal plans at this time. These are the plans continuing to have a debt-to-GDP ratio above 50% for the foreseeable future. Even after the recession of 2008-09, that ratio was only 30%.
Canada is on a train to a cliff, and the conductor is not looking ahead. There is no magic money tree.
Canadians will recall the last time in our recent history when government spending grew out of control, which was from the Trudeau government deficits in the 1970s and 1980s.
With rising interest rates, payments on our national debt became the government's largest expense line item. Taxpayers were paying bondholders from around the world excessive amounts of interest. Those tens of billions of dollars per year that taxpayers contributed could not be allocated to programs like improvements in our health care system.
The final outcome of this period was the Chrétien Liberal government cutting federal funding to health care in 1996. At the time, it was Canada's second-largest budget line item after interest payments on debt. Is this foreshadowing?
Canadians still have health care, although the federal government's share has fallen from the conventional 50% to 22%. The rest has been thrust onto the backs of the provinces unilaterally. The provinces' finances have suffered ever since.
Let us think about the Liberal government's promises on spending in provincial government jurisdiction, on borrowed money. What happens to these services when the bill becomes due?
Debt ratio metrics are only relevant when we are comparing to other countries. As far as balance sheets of governments go, the measure is irrelevant. Corporations have debt-to-value ratios because it is a measure of how they can leverage their operations with cheaper tax-assisted financing and therefore earn a higher return for their owners. That notion does not exist for governments, and no government should ever embrace the notion that a country accumulates debt it will never pay back.
It is an excuse to have future generations of Canadians pay for today's expenses, as if our children will not have their own bills to pay with their own taxes. They will be paying for decades for services we delivered today.
Let us remember that a country's debt profile is not just the federal government's debt, we need to include provincial government debt, which has skyrocketed during COVID because of the provinces' needs to increase health care funding during a health crisis. It also includes corporate debt, which has increased remarkably, and household debt.
In total, Canada's debt-to-GDP ratio rose by 80% in 2020, by far the largest increase in the world. The closest runner-up in this ratcheting metric was Japan at a 50% increase. The U.S. saw a 45% increase, the U.K. saw a 35% increase, China saw a 30% increase and Australia only saw a 12% increase. Comparably, Canada stands alone in its profligacy.
Monetary inflation leads to asset inflation, which is most exemplified by the housing market. Mortgage debt increased by $100 billion. Canadian households are personally in debt for $2.5 trillion, or $64,000 per capita. Mortgage debt has increased by 22%. Single-family home prices have increased by a similar amount of 23% over the past year.
Canada now stands at the top of the most overvalued housing markets in the world. Whereas in the U.S. the increase in real disposable income slightly exceeds real home prices, in Canada housing prices have increased at a rate almost double the increase in real disposable income.
This is trouble we need to address here at this level so we understand what the future looks like for Canada's finances. We need to examine this bill closely in an actual team Canada approach.
In that respect, I am looking forward to this bill's review at the House of Commons Standing on Finance, where all members of the House of Commons will be able to provide input to ensure the bill meets the needs and expectations of Canadians.
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- Nov/29/21 12:43:27 p.m.
- Watch
- Re: Bill C-2
Madam Speaker, I am happy to see my colleague back in the House of Commons for his debate. I hope we can continue to have this debate in the House of Commons.
There are some issues around Bill C-2 that we need to address. I would like to address them in committee, so we could get to the details on them. We do need to provide some support for some Canadians going forward to make sure we come out of this transition. We need to do so very effectively. We have overspent in many ways.
We could talk about the money that has gone out in fraudulent payments. We could talk about organized crime and its participation in the targeted programs that were delivered during COVID. We need to make sure we look at this. We also need to acknowledge the provinces and how much they have had to increase their spending to deal with the actual on-the-ground expenses of health care.
Those are things that I hope we could address very clearly in committee.
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- Nov/29/21 12:45:29 p.m.
- Watch
- Re: Bill C-2
Madam Speaker, there are a lot of things in that question that I want to address here, one of which we call in economic theory the “Gini coefficient”. What has happened during this pandemic is an outflow of funds has gone into the richest Canadians' pockets. We could take a look at the increase in price of houses in Canada, and it has gone up by 24%. If we look at the increase in the stock market since COVID started, and it has gone up by 62%.
What percentage of Canadians actually participate in owning these assets? It is about the top quarter. The top quarter of Canadians have gotten excessively rich in this process. The bottom 75%, shall we say, a ballpark figure, have not done that well. The assets they have to pay for have gone up in price, and as a result there is less income equality happening in Canada. We need to address that. That has been part of the failure of COVID spending, and what we need to address in making sure we get this programming correct going forward.
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- Nov/29/21 12:47:15 p.m.
- Watch
- Re: Bill C-2
Madam Speaker, there had been an interruption in supply and demand during the brief three-month period where there was an actual total lockdown. The adjustment to that period occurred.
We are now looking at an adjustment to continue going forward and making sure that supply and demand continues to be met. We are talking about ratcheting prices here for everyday Canadians. This is something that is going to be reflected in their cost of living. It is exactly what we are driving at here.
If their cost of living continues to increase, where does that actually spiral? It actually spirals into more inflation. It is not deflation, as the government's financial team seemed to think it was not so long ago. It is inflationary, as my party has said. The outcome of monetary policy, of course, is always going to be inflation. Loose monetary policy leads to inflation. We have escalating prices.
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