Senator Plett on Bill C-30: Trudeau’s 2021 Budget sprays money around carelessly without targets.
June 29, 2021 (Ottawa, ON) - The Honourable Don Plett, Leader of the Opposition in the Senate, issued the following statement:
Honourable senators, I also rise today to speak to Bill C-30. My speech won’t be quite as complimentary as others have been, and you may find that surprising. Nevertheless, let me point to some of the truths and realities of Bill C-30 and not the mess we have been told here so often — first of all by the Minister of Finance, as well as by many senators — about how wonderful this bill will be and that everything will be roses from here on in, if we adopt it.
This legislation, colleagues, is a 366-page omnibus bill divided into four parts, containing 363 clauses. It amends 40 acts of Parliament and enacts one new one.
Part 1 of the bill introduces 30 income tax measures. Part 2 implements nine GST measures. Part 3 implements excise tax measures. Part 4 consists of 37 divisions covering a wide range of initiatives. Let it never be said there is a tax that the Liberals don’t like.
This bill implements only some of the programs announced in Budget 2021, so you can be certain that at some point we will be asked to examine budget implementation act, 2021, no. 2.
Among the spending measures contained in this bill are the following:
It establishes the Canada recovery hiring program, with up to $595 million for rehiring laid-off workers or new hires.
It provides $30 billion in funding over five years to establish a Canada-wide early learning and child care system.
It extends the Canada Emergency Wage Subsidy, the Canada Emergency Rent Subsidy and the Lockdown Support until September 25.
It extends the Canada Recovery Benefit and the Canada Recovery Caregiving Benefit.
It increases Old Age Security for seniors 75 and over.
It enhances the Canada workers benefit with $8.9 billion over six years in additional support for low-wage earners.
It enhances Employment Insurance sickness benefits from 15 to 26 weeks.
It establishes a $15-per-hour federal minimum wage.
It extends the waiver of interest on federal student and apprenticeship loans to March 2023.
What could possibly be wrong with this budget?
It enhances the Canada Small Business Financing Program through amendments to the Canada Small Business Financing Act, including broader eligibility and increased loan limits to facilitate greater access to financing for small businesses.
It provides an emergency top-up of $5 billion for provinces and territories — specifically, $4 billion through the Canada Health Transfer to help provinces and territories address immediate health care system pressures and $1 billion to support vaccine rollout campaigns across the country.
It provides $2.2 billion to address short-term infrastructure priorities in municipalities and First Nations communities.
It provides $4 billion to help small- and medium-sized businesses buy and adopt new technologies to increase productivity and competitiveness.
I tell you, there is no end to the gifts here. These items represent only a portion of the $497.6 billion in spending commitments made by the government in this budget and include only part of the $101.4 billion for new programs that will be rolled out over the next three years.
Colleagues, the Conservative Party has been, and continues to be, very supportive of getting financial assistance to Canadians whose health or finances have been negatively impacted by the pandemic. We have expedited the passage of every bill that was drafted to get help to those who have needed it in these unprecedented times. But after waiting two years for this budget, we are very troubled by a number of things, colleagues.
First, this bill — and the budget as a whole — is crammed with measures that are clumsily crafted, poorly thought out and extremely blunt instruments. At a time when every dollar should be spent wisely and utilized to ensure maximum impact, this government is carelessly spraying money around. This has become a habit of theirs.
Take the Canada Child Benefit, for example. Just over a month ago, we were here in this chamber and green-lighted $2.4 billion to be spent on CCB payments. But of that $2.4 billion, an estimated $300 million will go to households making — hear this — $100,000 or more per year, and over $50 million will go to families with a combined income of more than $150,000. Instead of targeting the money to those who needed it the most, the government chose to maximize the political impact of the expenditure.
This was the second time the government used the CCB program for COVID relief. The first time was in May 2020, when they sent out an additional CCB payment of $300. How many of you got that?
In her report on the Canada Child Benefit, the Auditor General of Canada noted that:
. . . the formula adopted for the additional payment allowed close to 265,000 higher-income families not previously entitled under the program to benefit from it. Payments to higher-income families amounted to almost $88 million.
The OAG’s report continued:
. . . before the formula was amended, a family with 1 child under 6 years of age could receive benefits if its net family income did not exceed $195,460. The modified formula raised the maximum to $307,960 for the May 2020 one-time payment. . . .
Colleagues, in the early days of the pandemic there was a legitimate argument that blunt instruments were unavoidable as we scrambled to make sure Canadians were taken care of in the midst of very uncertain times. But one year later, Canadians can rightfully expect, and should rightfully expect, that the government would be a little more targeted in their spending. Yet, once again, we see this same careless lack of precision in the bill before us today.
Division 32 of Part 4 of the bill proposes to increase the Old Age Security pension by 10% for seniors aged 75 and over, and provide a one-time payment of $500. The 10% increase will cost $3 billion a year and will most certainly be welcomed by all who receive it. But if you are trying to help those seniors who need it most, why would you not spend the money on increasing the Guaranteed Income Supplement, which goes directly to low-income seniors rather than increasing the Old Age Security, which is a universal benefit for all seniors regardless of their income?
This question was raised by senator after senator in the Social Affairs Committee, as they tried unsuccessfully to get answers from a government official. Does that sound familiar? First, Senator Frum tried, asking:
Ms. Underwood, can you help us understand why the government decided to increase the OAS for Canadians over 75 instead of choosing to increase the Guaranteed Income Supplement for seniors, which targets the most vulnerable seniors? It’s hard to understand the policy rationale for a universal benefit versus a targeted benefit. I see the political rationale, particularly with the one-time payment in August of $500, but what is the policy rationale for this?
Think there might be an election called in August?
Ms. Underwood replied:
As you know, the Old Age Security pension is a universal benefit for all seniors and, in this case, for all seniors over age 75. The policy rationale was to support that universal benefit and to support seniors as a large group of important contributors to our society.
Since that was obviously an attempt to sidestep the question, Senator Frum tried a second time and received a similar non‑answer. So, then Senator Bovey tried; then Senator Forest-Niesing; then Senator Black, Senator Manning, Senator Kutcher, Senator Dasko and Senator Omidvar. In spite of the committee’s valiant efforts, there was no suitable answer given because, quite frankly, the policy is indefensible. It was another example of a clumsily crafted, poorly thought-out and extremely blunt instrument designed for political ends rather than public good.
This has become a very familiar pattern with this government. Take, for example, the plan to implement a flat federal minimum wage across the country. Division 23 of Part 4 of Bill C-30 establishes a federal minimum wage across Canada of $15 an hour. At first glance, this might sound like a good idea. For those who don’t know, there already is a federal minimum wage. It is the general adult minimum wage established in each province and territory.
The advantage of this existing approach is that it reflects the regional differences in the cost of living. Minimum wages vary across the country because the cost of living varies. Now you are going to have one flat rate across the country for those who work in a federally regulated sector, which in most cases will differ from provincial rates.
For example, Alberta already has a $15 minimum wage, so nothing changes there. But Manitoba’s minimum wage is currently $11.90 an hour, while Nunavut’s is $16 an hour and Prince Edward Island’s is $13 an hour. How does it make sense to introduce a federal minimum wage which will have no correlation to the regional ones? It does not. It is a blunt instrument designed to make it look like the government is helping when really they are just causing more harm.
This policy is expected to cost $44.1 million, but it is not the federal government who will be covering the cost. It is the business owners. So just as we begin to come out of the worst public health crisis in 100 years, when businesses are struggling to make ends meet and have piled up hundreds of thousands of dollars of debt just to stay afloat, the government decides to increase the cost of doing business. It is an absurd measure which is tone-deaf to provinces, insulting to businesses and could not come at a worse time.
This government’s promise to provide $100 billion in economic stimulus to help Canada recover from the impact of the pandemic is another example of this pattern. In the Fall Economic Statement, the government said:
To ensure a robust and resilient recovery, the government is developing the details of a plan to help Canada build back better, by preparing to invest up to $100 billion over the next three fiscal years . . . .
The problem is that according to the Parliamentary Budget Officer, this so-called stimulus comes too late. In the PBO’s December Fall Economic Statement 2020: Issues for Parliamentarian, the PBO warned, “. . . the size and timing of the planned fiscal stimulus may be mis-calibrated.” It is going to be too much too late.
The PBO repeated this warning again in May, in Budget 2021, Issues for Parliamentarians, where he said, “. . . we maintain our judgment that the stimulus in Budget 2021 could be mis-calibrated . . . .”
The PBO further explained the problem by saying that:
Based on PBO’s pre-budget projection of the fiscal guardrail indicators, almost all of the ground lost in the labour market due to the pandemic will be made up by the end of 2021-22, the first year of the stimulus measures in Budget 2021.
So basically, even though the ground lost during the pandemic will have already been made up, the government’s so-called stimulus will continue for another two years. But it gets worse: Because the so-called stimulus spending is going to come too late, the PBO notes that it will have an inflationary impact by increasing consumer demand relative to the economy’s potential supply.
The PBO projects that this miscalibrated spending of $100 billion in borrowed money will bump inflation by 0.1% in 2021, 0.3% in 2022 and 0.1% again in 2023, and this will result in an increase in the Bank of Canada policy rate of 50 basis points in order to keep inflation in check, which will then “. . . directly increase public debt charges as existing debt is refinanced and future borrowing requirements are financed at higher rates. . . .”
So here we have a government that plans on borrowing $100 billion to stimulate an economy that won’t need to be stimulated. Instead, they will overstimulate it, driving up interest rates by half a percentage point, increasing costs for every Canadian and escalating our public debt charges in the process. Welcome to “Trudeau-nomics.”
Colleagues, as I said, this bill and the budget as a whole are crammed with measures that are clumsily crafted, poorly thought-out and extremely blunt instruments. At a time when every dollar should be spent wisely and utilized to ensure maximum impact, this government is being very careless with taxpayers’ money.
Our second concern with this bill and this budget is that it contains no plan to secure the long-term prosperity of Canadians.
The first place you see this is the fact that the government has no plan to stop running deficits. Last year, the deficit was $354.2 billion. This year, it will be $154.7 billion. Most of us can accept that these deficits were primarily due to the impact of the global pandemic.
However, over the following four years, the government is planning an addition of $177 billion in deficit spending, and it appears to have no intention of balancing the budget as far as the eye can see, because we’ve been told, “We believe it will balance itself.” All of this is based on the rosiest of economic forecasts.
Senator Marshall described it accurately when she said the following to the finance minister during her appearance at the National Finance Committee:
Your budget is based on the assumptions of strong economic growth and low interest rates, but even slight changes in economic growth and interest rates can dramatically change your fiscal projections and your debt burden to an even-worse-case scenario than what’s included in your budget. So your projected economic growth might not materialize and the interest rates may rise. In fact, if you look at your Fall Economic Statement and Budget 2021, the projected debt servicing costs increased in the mere four months between the two documents.
Senator Marshall went on:
Your projections for the next five years show continuing deficits and more debt, even though you’re counting on a healthy economy. Our debt load over the next three years, leading up to 2024, will increase by 50% to almost $2 trillion.
A few years ago, colleagues, we had no idea what $2 trillion was.
There is no indication that there will be any repayment of any of this debt by our generation. Rather, the plan is to pass it on to our children, our grandchildren and our great-grandchildren.
Like with $2 trillion, we don’t even know how many great-grandchildren we have to go down.
Colleagues, the C.D. Howe Institute echoed similar concerns in their presentation to the Committee on National Finance. They said this:
. . . our own preliminary modelling at the C.D. Howe Institute shows that slight changes in economic growth and interest rate assumptions can dramatically change the course of the debt burden to the worst scenario. Under credible assumptions for potential economic growth and assuming quite reasonably that the interest rate on the debt will eventually catch up to economic growth over time, the debt burden can easily be shown to rise over time instead of decreasing, thus violating the budget’s own fiscal anchor. All of these scenarios assume unchanged spending policies over the years, which is obviously highly unlikely given provincial demands for higher federal health transfers.
In a nutshell, our internal modelling shows that the federal debt burden could very well return to the peak of the mid-1990 fiscal crisis under alternative — but perhaps more reasonable — assumptions about the future path of growth and interest rates. The combined federal-provincial debt ratio may cross 100% of GDP before 2040, on its way toward 150% by 2055.
It makes you think you are in Venezuela.
Colleagues, this government has no plan to stop running deficits, has based its future economic modelling on the rosiest of forecasts and has no intention of reducing our national debt. After cutting the ship of state loose from every existing fiscal anchor, this Liberal government has increased our debt-to-GDP level from 31.2% to 51.2%, with no plan to return us to where we were before the exceptional circumstances of the pandemic were forced upon us.
In his publication, Budget 2021: Issues for Parliamentarians, the Parliamentary Budget Officer, or PBO, put it this way:
Over the medium-term horizon, the Government projects the federal debt-to-GDP ratio to decline marginally to 49.2 per cent from a peak of 51.2 per cent, and remain well above its pre-pandemic level of 31.2 per cent. Long-term projections presented in the budget also show the federal debt ratio remaining above its pre-pandemic level through 2055.
Colleagues, the year 2055 is 34 years into the future. My youngest grandchild, who is 5 years of age today, will by then be 39 years old. By 2055, every senator in this place will have retired, and most of us will have passed away, so at least a quarter of a century earlier. Senator Munson, you’re right there with us.
Justin Trudeau himself will be 83 years old, and his children will be in their forties. Yet, according to the forecast laid out by this government, Canada’s fiscal balance sheet will still not have recovered — not because of the pandemic but simply because this government has no plan for it to recover.
You may recall that in June of last year, the Parliamentary Budget Officer issued a warning to parliamentarians when he said this:
In the context of fiscal sustainability, it is essential to distinguish between temporary and permanent budgetary measures. . . .
Once the budgetary measures expire and the economy recovers, the federal debt-to-GDP ratio should stabilize and then start declining under pre-crisis fiscal policy settings. However, should some of the measures be extended or made permanent, the federal debt ratio could keep rising.
The PBO reiterated his warning in his Economic and Fiscal Outlook — September 2020, and he said this:
Should these [temporary pandemic spending] commitments translate into new programs that are deficit financed, there is a risk that the sustainable debt-to-GDP trajectory over the medium term [will be] reversed.
Eight months later, after reviewing the government’s budget documents, the Parliamentary Budget Officer flagged for parliamentarians that his warnings had not been heeded and that, under the current forecast, the federal debt ratio would indeed remain above its pre-pandemic level through 2055. He said:
This suggests that the Government has decided to effectively stabilize the federal debt ratio at a higher level, potentially exhausting its fiscal room over the medium- and long-term.
Furthermore, in the briefing call provided by the PBO on their budget analysis, the Parliamentary Budget Officer expressed grave concerns that the government was moving into dangerous waters by establishing new, permanent programs that would be financed by deficit borrowing.
Colleagues, if I had an alarm bell I would be ringing it loudly right now. This government’s failure to table a plan to restore the nation’s balance sheet to a healthy state puts us on a very dangerous course. The only reason that Canada was able to respond quickly and adequately to the challenge posed by the pandemic was because of the fiscal room made available by the careful stewardship of former prime ministers Paul Martin and Stephen Harper.
Contrary to popular mythology, after the first Prime Minister Trudeau’s careless implementation of structural deficits in the 1970s, the budget did not balance itself. It never does. Even a plumber knows that.
Instead, the health of our balance sheet steadily declined over the next 20 years, with the International Monetary Fund knocking at our door, threatening to intervene in our financial affairs in the mid-1990s. The deficit was finally wrestled into balance and kept there through very difficult decisions, unrelenting determination and strict discipline.
It was partly because of that fiscal discipline that when Canada was hit with the financial crisis of 2008, we had the fiscal stability and the financial health necessary to weather the storm that followed. We came through it much quicker than either the United States or Europe, and our recession was less severe than that of either the early 1980s or the early 1990s.
Although the second Trudeau began chipping away at the health of our balance sheet as soon as he took office in 2015, he was fortunate that when we were hit with a global pandemic in 2019, we still retained enough fiscal capacity to act quickly and decisively in a national emergency.
Colleagues, that capacity is almost gone now, and this government has no plan to restore it. We have no way of knowing when the next pandemic will hit. But it will. It is not a question of if; it is a question of when. We have no way of knowing when the next market crash will hit. But it will. It is just a question of time.
It is the responsibility of every government to prepare for such contingencies, and yet this government has no plan to be ready. Instead, Finance Minister Chrystia Freeland says she believes that the COVID crisis has created a window of political opportunity for the government to launch new, permanent initiatives that will add billions of dollars in expenses to our bottom line.
This sentiment is shared by the Prime Minister who described the pandemic as an “opportunity for a reset . . .” and “. . . our chance to accelerate our pre-pandemic efforts, to re-imagine economic systems . . . .”
I don’t know what that means.
This completely ignores the recent warnings of the Parliamentary Budget Officer and ignores the fact that even if we never experience another pandemic or market crash, we are headed toward some very difficult waters, and we are completely unprepared.
Consider the Parliamentary Budget Officer’s last fiscal sustainability report, which was published in February 2020.
These reports were first published in 2010, at which time the PBO raised the alarm, noting, “The Government’s current fiscal structure is not sustainable over the long term. . . .”
How many warnings do they need?
The following year, the PBO warned again that not only was the federal government’s fiscal structure unsustainable but so too were those of the provincial and territorial governments. If something did not change, Canada was headed for trouble.
Colleagues, we are well down that road. The reasons for this are well-known and underappreciated. The 2010 Fiscal Sustainability Report put it this way:
. . . in Canada, as in other industrialized countries, a major demographic transition is underway that will strain government finances. During this time, the ageing of the population will move an increasing share of Canadians out of their prime working-age and into their retirement years. With an older population, spending pressures in areas such as health care and elderly benefits are projected to intensify. At the same time, slower labour force growth is projected to restrain growth in the economy, which will in turn slow the growth of government revenue.
In other words, colleagues, Canada is heading into a demographic perfect storm in slow motion.
The Harper government took this warning seriously. Two years later, in 2012, the PBO reported that due to changes made by the Conservative government, the federal government’s fiscal structure was now sustainable, although the provinces and territories still were not.
This annual report card remained largely unchanged every year since.
In the most recent fiscal sustainability report released one month before the pandemic, the PBO said the following:
From the perspective of the government sector as a whole (that is, federal and subnational governments and public pension plans combined), current fiscal policy in Canada is sustainable over the long term. Relative to the size of the Canadian economy, total government net debt is projected to remain below its current level over the long term.
But then came the warning:
This perspective, however, masks fiscal policy at the subnational level that is not sustainable—albeit to a modest extent. Under current policy, we project that the federal government will eliminate its net debt and shift into a net asset position. Combined with the public pension plans, this net asset accumulation more than offsets the projected increase in subnational government net debt.
In other words, colleagues, the fiscal sustainability of the nation hangs on the federal government eliminating its net debt and shifting into a net asset position. By doing so, it will ensure that Canada has the fiscal resources to “more than [offset] the projected increase in subnational government debt.”
Can you call this a fiscal life jacket?
The only problem, colleagues, is that the government just decided to pitch that life jacket overboard. Instead of tabling a budget that would return Canada’s balance sheet to health and ensure fiscal sustainability going forward, the Prime Minister has abandoned every fiscal anchor and set our lifeboat adrift. Without a course correction, we are headed in a direction that we do not want to go, and our children and our grandchildren are going to arrive somewhere they will not want to be.
Colleagues, I am not exaggerating. When finance minister Paul Martin introduced what has been called the “budget that changed Canada” in 1995, Canada’s debt to GDP level was 66.8%, and interest payments consumed 35.2 cents of every tax dollar. He was able to balance the budget within three years, but he did so primarily by unloading the costs on to provinces.
Today, the provinces have no such fiscal room to absorb additional costs. They were running deficits before COVID and have been stretched to the max by the pandemic. Going forward, they are going to face unprecedented challenges caused by rising health care costs, an aging population and a declining growth of their labour force.
Yet, knowing all of this, the federal government has not only failed to get its own house in order, but it has unilaterally decided to launch a national child care initiative that will impose billions more in new costs on provincial governments.
Instead of being part of the solution, this government has become the problem.
Colleagues, the Conservative caucus in this Senate cannot and will not support this budget or this bill. The government has demonstrated once again that they have no strategy, no wisdom and no understanding of what lies ahead. They are carelessly spraying money around with no plan to balance the budget, no plan to reduce our national debt and no plan to secure long-term prosperity for Canadians. Instead, they simply insist on burying their heads in the sand and pretending everything is fine when it is not. This should alarm us all, colleagues.
Sometime in the next year, Canadians are going to make a choice. They will go to the polls to decide if they want to keep this Liberal government at the helm of a ship of state that is sinking or whether they want a Conservative government that will protect our economy and prepare us for an uncertain future. Colleagues, it is my sincere hope that everyone in this chamber, when people in the other place have not been able to realize this, that everybody in this chamber — we talk about non-partisanship — let’s put the partisanship aside and let’s vote for Canada and vote against this budget. Thank you.