Madam Speaker, I have been listening to the official opposition on the budget for the last few days, and it is difficult to ascertain, at least for me, if they are Keynesians or proponents of Reaganomics.
They say that they support the emergency measures our government quickly put in place when the pandemic broke, programs that helped so many Canadians, families and businesses, but at the same time they decry the deficit while saying they would not eliminate it, nor do they specify what kind of deficit they could live with and for how long.
International experts are urging governments around the world to stay the course, to maintain the stimulus, urging all governments to learn from the 2008 financial crisis. As we know, governments put the brakes on too soon back then and it took about 10 years for economies to recover.
The government’s economic plan is working. The Bank of Canada predicts our economy will grow by 6.5% this year, an upward revision of its forecast of 4% back in January. What is more, the bank’s optimism outstrips the government’s, which expects the economy to grow by 5.8% in 2021.
We hear a great deal from the opposition about how the government’s stimulus, which obviously is contributing to the debt, is hurting future generations. However, let us not forget that a deep recession hobbles the career prospects of those about to enter the job market, not to mention of those already in the job market who have lost their jobs. This career drag can last a lifetime, and when a career gets off to a slow start, this could delay people starting a family. It could also mean lower lifetime contributions to an RRSP, which then translates into a lower future retirement income stream.
Our government is investing in the future at a time when interest rates are low. These investments, including in early learning and child care, will make Canada more productive, more competitive internationally and more prosperous. I will come back to child care in a moment.
The returns from investing in the future will be high, and what better time to invest in high future returns than when the cost of capital is low? That is business 101. Incidentally, we can also expect a better quality of life because, in addition to child care, the government is also investing in the green economy.
I would like to take a moment to bring some perspective to the deficit and debt. At the end of World War II, which preceded a period of great technological innovation and historic economic expansion, the deficit-to-GDP ratio was 21%. For 2020-21, the deficit will be $346 billion or 16.1% of GDP. This is below what was predicted by the Parliamentary Budget Officer, who forecast a deficit of $382.6 billion, and below what the government itself predicted in the fall economic statement, namely a deficit of $381.6 billion or 17.5% of GDP.
The difference between today’s deficit and the one the Conservatives left us in 1993-94 is that today’s is not structural. In other words, it is not based on long-term commitments that are politically difficult to reverse. Unlike the 1993-94 deficit, today’s will begin to fade quickly. The deficit will drop in 2021-22, to 6.4% of GDP, and then to 2.3% of GDP in 2022-23. What this means is that in 2022-23, the deficit-to-GDP ratio will be one-third of what it was at the end of the Mulroney government.
Some perspective is in order on the debt as well. At the end of World War II, the debt-to-GDP ratio was 100%. The debt-to-GDP ratio in 1993-94 was 71.9%. By contrast, the debt-to-GDP ratio for 2020-21 will be 49%, rising to 51.2% next year, and then declining as the economy grows and the pandemic eases. It is worth noting that Canada has the lowest net debt-to-GDP ratio in the G7. This includes combined net debt of all three levels of government: federal, provincial and municipal.
Now, let us turn to inflation. The member for Carleton spoke a great deal about monetary policy and inflation in his budget day speech. First, let us be clear, the government does not control monetary policy. Everyone knows that. Those who suggest that quantitative easing is Liberal government policy are being disingenuous, and it is disingenuous bordering on fearmongering to suggest that the Bank of Canada’s quantitative easing will bring Canada to the brink of German 1930s-style hyperinflation.
The budget forecasts inflation of 2.2% in 2021, 2% in 2022 and 2.1% in 2023, which is closer to a risk of deflation, I would think. The Bank of Canada, for its part, predicts inflation will ease back to 2% over the second half of 2021 and remain there on a sustained basis.
The risk of inflation is low because the money supply does not work the same way as it did in the past. The Conservatives have not caught up with that fact. Today, for example, quantitative easing involves encouraging banks to extend credit, which increases capacity and supply, and that works against inflation.
Judging from what members of the official opposition are saying, the Bank of Canada should have kept money tight, yet at the same time they agree that deficits were needed to support Canadians in a time of crisis, so what would a combination of emergency deficits and tight money look like?
Well, it would look a lot like the 1980s, a lot like the era of Reaganomics: namely, deficits with skyrocketing interest rates. What would that have done to Canadians struggling through the worst of the pandemic, lining up at their financial institutions for mortgage relief and loan extensions for their businesses? It would have meant disaster. Unfortunately, that appears to be the economic prescription of the party opposite: Reaganomics 101, to the detriment of the middle class.
I would like to turn to productivity growth and international competitiveness. Namely, I would like to turn to child care. Over the last 40 years, the rising number of women in the workforce has accounted for about a third of Canada’s real GDP per capita growth. Experts agree that our prosperity will depend on greater equality between women and men. RBC Economics has estimated that adding more women to the workforce could boost Canada’s GDP by as much as 4% and even offset expected economic declines associated with an aging population.
Any measure that would help increase women’s participation in the workforce would have a beneficial effect on the economy.
Canada’s strength and beauty lie in its federative structure. It creates a sort of laboratory where each province can implement programs that take its regional values and priorities into account, often with the federal government’s support. If one province has a good idea, the others can follow suit.
Quebec’s child care program is a good example of this type of cross-pollination, if you will. For many years, it was thought that the $7-a-day child care program was a luxury paid for through equalization payments. Thanks to an analysis performed in 2013 by renowned Quebec economist Pierre Fortin, in collaboration with Luc Godbout and Suzie St-Cerny, we now know that this is not true. I will quickly summarize the findings of the analysis, which confirms the merits of the Quebec experience that inspired the proposals in the recent budget.
According to Professor Fortin, the $7-a-day child care program allowed Quebec to increase the participation of women in workforce. In 1996, before the program was implemented, women’s participation rate was 2.5% lower than the Canadian average. Fifteen years later, it was 2.5% higher. Professor Fortin’s analysis estimated that, in 2008, approximately 70,000 working mothers were able to work specifically because of the $7-a-day child care program.
It is also estimated that this influx of women into the workforce resulted in an increase of approximately $5.1 billion in Quebec’s GDP that same year. Overall, the program had a positive effect that led to a $919-million budget surplus in 2008 for the Quebec and federal governments, thanks to an increase in individual and corporate income tax, as well as a reduction in government transfer payments in the form of tax credits and deductions for child care expenses.
In short, both the economy and taxpayers will benefit from a child care program based on the Quebec model. This is a progressive budget in terms of social justice that will also benefit Canada’s economy.
