44th Parl. 1st Sess.

June 21, 2023 02:00PM

Context: House Hansard - 218 - Jun/21/23

Jun/21/23 6:37:56 p.m.
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Madam Speaker, I will follow up on the fine speech by my colleague, who let the cat out of the bag: We will be voting in favour of this motion. The arguments contained in the motion, and I think that he elaborated on them, are obviously not to our liking. However, we agree with the conclusion: that “the House call on the government to table a plan to return to balanced budgets”. When it comes to inflation and interest rates, things can get quite complicated. What better way to simplify issues than with populism and things that seem obvious to everyone, when they are actually not? Why do we have inflation? Some will say that inflation is caused by government spending. I want to sound a note of caution, however. Inflation happens if the government spends money and if it creates deficits. Some people will therefore be tempted to say that deficits lead to inflation. That is not necessarily true. This is what is known in economics as the crowding-out effect, a term we do not often hear. It means that government deficits might not result in inflation because there is a crowding-out effect, meaning consumers save money to make up for the government deficit. The result is that there is no impact on inflation. The crowding-out effect may mean that there might be an impact on interest rates, however. Why am I saying this? I am saying it because the thing is not so easy to understand. We could spend a long time discussing economic theories. Furthermore, some theories clash. Keynesianism is different from classical or neo-liberal economics, and so on. We have to be careful to avoid simplistic analyses or we run the risk of ignoring real solutions. Is government spending to blame for the deficit? Is the Government of Canada responsible for global inflation? Did it ride around on a scooter, waving its arms, saying it was going to send us money and create inflation, before running away like Batman and Robin? The answer is no. I just spelled it out in simple terms. The government is not to blame. The fault lies with the global pandemic, and with the fact that governments were forced to spend like never before in history. I never saw anything like it before. Governments were spending money hand over fist, like it was going out of style. That is the reality. Faced with an extraordinary situation, we came up with what we believed were the best solutions at the time. That is why we have inflation. I have the figures. Inflation rose to 6.8% in 2022 and fell to 4.4% in June 2023. We can therefore agree that inflation was mainly caused by a pandemic. Why is that? It is because we have economists who are monetarists. Monetarists believe that inflation is caused by printing money and that abundance reduces value. The more money is printed, the less that money is worth. This means that the value of money is eroded by inflation. That is the view of monetarists. A lot of people agree with this. That is why it is the Bank of Canada that finds solutions to Canada's inflation. Our colleague, the leader of the official opposition, believes that it has fangs and prowls around at night, but in reality, the Bank of Canada is one of the most renowned banks in the world. When we travel abroad, for example to universities, we only have to mention the Bank of Canada and the audience applauds for half an hour. It is unbelievable. It is so renowned that the English decided that they wanted the Governor of the Bank of Canada for themselves. It is a little like Bedard in the world of hockey. He was that sought after. I am just talking, but if members want to read something that is well done, they should read the Bank of Canada Review. It is well done. When they finish their university degree in economics, good economists often end up at the Bank of Canada—except for me, because I escaped. I was in the washroom when the recruiters came by. Some say that they are crazy, but they really do know their stuff. It is a renowned bank. In 1991, they said that the only way to fight inflation effectively is to tweak interest rates. Starting in 1991, the Bank of Canada was the second bank, after New Zealand, to say that it would adjust interest rates to keep inflation between 1% and 3%. That worked beautifully until the pandemic hit. It was going so well. We were a model for the world. Now, with the increases, what did they do? They were forced to raise interest rates. It is a bit complicated. When a government adjusts monetary policy and plays with interest rates, it takes 18 months for it to have an impact on the economy and 24 months for it to have an impact on inflation. This requires projecting two years in advance before starting to play with things. That is the reality. It is not easy. Having said that, we could all go for a beer and tell ourselves that there is no point in us being here because the Bank of Canada manages inflation. Wait a minute. That is not true. There are things that the government can do. First, the government can introduce well-defined policies. If wages are very high and workers are scarce, then perhaps workers could be found if the government offered tax exemptions to older people who want to go back to work. Is that complicated? A guy with glasses and a computer can do that. No, the government would rather use the stick. They bleed dry seniors between the ages of 65 and 75 and hope that once they are at the end of their rope, they will surely want to go to work. No, that is not how to create jobs and ensure that these people can go to work. Let us talk about housing. There is a lack of housing. It is a matter of supply and demand. We need more supply. The government needs to invest in housing. That is the smart way to fight inflation. As for oil, we have been ripped off by shameless increases in the price of oil. Perhaps it is because we should be doing something other than burning oil. Perhaps we should be investing in the energy transition of oil companies. With regard to productivity, we have to increase worker productivity without making more widgets. If we make more widgets, then there are more widgets on the market and the value of widgets will drop. This is not complicated. People are wondering where I stand because I have not talked about it yet. The last part of the motion reads, “the House call on the government to table a plan to return to balanced budgets.” I would like to emphasize two things. We need restraint, not austerity. The government must stop wasting, stop encroaching on the jurisdictions of Quebec and the provinces, stop proposing one-size-fits-all measures, and stop giving money to oil companies because doing so is wrong. It has to get smart about its spending. That does not mean embracing austerity. Most of all, it must not achieve these things on the backs of Quebec and the provinces, or else services to the public will be disrupted. Most public services are delivered by Quebec and the provinces. The government must not try to rebalance its budget by cutting back on health transfers to the provinces like Jean Chrétien and Paul Martin did in the past. That must not happen. There is something called the fiscal imbalance, which proves beyond a reasonable doubt that the needs are in Quebec City and in the provinces, and that the money is in Ottawa. This means that, even if the government remains virtually static, it will be so drowning in money thanks to the taxes it collects and the fact that it has few areas of responsibility that 40 years from now, in addition to not having a deficit, it will no longer have any debt, and some provinces will not even be solvent. They will be forced to start from scratch under another name. I do not know if they will, but they will no longer be solvent. There is a problem somewhere. Some think that a plan to return to a balanced budget means austerity measures. That should not be the case. There is no reason why it should be, for the reasons I outlined. This government must become responsible in how it spends money. No one can claim that it is an example. I understand that the country has weathered the COVID‑19 pandemic, but after returning to normal, no one can say that it has been rigorous and intelligent in its spending choices. I just mentioned some ways in which the government could have done better. Some people spoke earlier about how the government provides its services. Let us just say there is a lot of room for improvement. To impose a plan would make this government more serious, less frivolous and less careless. The government needs to make do with the amount of money it has available. It must be intelligent. It must not cut transfers to the provinces, because they are the ones who deliver the most important services to the public. It must be preventive with regard to inflation, which is currently eroding the purchasing power of those least well-off. As I said, this government needs to have targeted, intelligent spending to protect people in need. Doubling the GST tax credit was the right thing to do. I applaud that. However, we also need to fight inflation intelligently, not in a populist way.

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House Hansard - 218