COVID-19 Response Measures Bill Second Reading

Honourable senators, this is the seventh COVID emergency bill that we’ve discussed since March, and it’s the seventh opportunity I’ve had to make some comments. In considering those bills, we’ve received, in rather extraordinary circumstances, the bills from the House of Commons which, in a minority Parliament dealing with an emergency crisis means that, by definition, more than one group in the other place has supported the bills that we have. And quite unusually today, we are dealing with a unanimous bill and I regret the unanimity of the elected chamber will not be celebrated in this chamber. I would urge that people consider and even reconsider support for this necessary additional measure to confront the circumstances that Canadians are facing day to day.

I also want to pause and take a moment to reflect on what the Senate’s role should be in dealing with emergency legislation that comes from the House of Commons in trying times where it’s not easy to amend or otherwise improve, as we say, the various measures. It occurs to me that we should at least begin to think about what is the post-COVID context for public policy?

I want to begin by thanking Senator Dean for sponsoring this bill, all the colleagues who have spoken about the legislation and the ministers who came today and who I thought very effectively provided us the context and additional information for us to feel comfortable doing what we are in the process of doing.

I want to make three points, essentially, because I do believe that the COVID measures, both the ones today and the six earlier bills, have been necessary. However, we have to begin to determine how to distribute the burdens of these debts over time and how to fairly apportion the responsibility across sectors and groups in Canada in the years ahead.

We had a pre-COVID challenge in many areas of our economic agenda, and if you look at where the growth was coming from, we’ve had a rather tepid export of the energy sector compared to earlier years, which by the way gave us that margin in our current account surplus that we all trumpeted. We need to reflect on where is the growth going to come from.

Where we will we get the growth? I would commend for your edification a paper that was produced by David Dodge and distributed by the Public Policy Forum two weeks ago entitled: Two Mountains to Climb: Canada’s Twin Deficits and How to Scale Them.

In the paper, former Governor Dodge or Deputy Dodge, whatever you want to call him, said that there are five key priorities we must get right to raise the annual growth rate of potential GDP to well above the present trajectory of 1.8% in the pre-COVID period. He says it will involve a combined effort by governments, businesses and households.

Here are the five points he’d like to make:

One: Enhance digitization of production of goods and especially services.

Two: Extend the life of a cleaner resource sector and facilitate a higher value-added composition.

Three: Maximize participation and adaptation of labour force.

Four: Enhance effectiveness and efficiency of public services.

Five: Restore confidence in fiscal stability.

I’m not going to take the time tonight to give you my view on each of those five important questions, but I want to at least put on the table that these are the questions that should guide our Senate committee work when we come back and are able to have more normal Senate consideration.

Let’s try to shape what the other place begins to think of when they have the time and the circumstances to do that. Then we truly have added value to the conversation, rather than just deal quickly with bills that come here, and necessarily quickly. I’m not complaining about that. But our value would surely come from beginning to ask these questions and explore the range of answers before the other place or, indeed, one government comes to a point of view on these issues.

For example, Senator Deacon has talked about the digitization of the finance sector and the service sector. Maybe we should be talking more broadly about what the gig economy means for Canada and how we might accelerate, comparable to other countries, our participation therein.

Surely, the intensity of the debate we had at the last Parliament on the energy sector in terms of the reforms — which I supported, as you know — on environmental assessment, we should have the equal intensity on how we restore that Canadian advantage in our current account of the value of our energy exports. How do we take advantage of the resource sector, particularly lumber, which has had a phenomenal recent few months, as well as the agricultural sector? How do we balance the need for those markets, with all of the other issues that we have a lot of interest in, in terms of our foreign policy considerations and our trade? If we’re not going to sell our resource sectors to all of the world that wants them, we’re going to deny ourselves some of the growth that we need.

Certainly, the adaptation of the labour force to lifelong learning is something Senator Bellemare has, amongst other senators I know, given a lot of attention to. How do we improve the skills development of the Canadian work force? Maybe there’s a piece there that we can do.

In terms of effectiveness of public services, I think there’s a lot that people in this chamber can add.

I wanted to make that point as my first. Where are we going to get our growth from? How is the Senate going to contribute to that conversation with Canadians and provide a menu that’s available to our political leadership and broader federal-provincial leadership to explore this issue?

The second point I want to make is the fifth point by David Dodge, actually, on the deficit. The question I ask is: What should our fiscal anchor be? I think it’s actually not fair to simply ask the government: What’s your fiscal anchor? We should be talking about what the considerations are as we approach the need for a new fiscal anchor. It is far too easy to say, “Well, it’s a balanced budget.” No, it’s not, actually. That would be very imprudent and would bring us back into a recession that nobody would want. Certainly it’s not going to be an ever-diminishing debt-to-GDP ratio. That’s gone.

I would begin a few remarks by simply quoting from the PBO’s report of earlier this week, which is, again, a document worth reading. He says we now have a better idea of the costs involved in Canada’s fight against COVID-19, but the document is only what he describes as a hazy view into the future. There’s no projection of future spending, and there’s no fiscal anchor for government spending in his report. That’s not his job. But it is a legislator’s job, I would argue.

The PBO’s report states that the deficit is on track to hit $328.5 billion this year, a number that is slightly lower than former Minister of Finance Morneau’s recent economic snapshot. The reason for this discrepancy is that the PBO is more optimistic regarding the strength of Canada’s revenues, and you saw that in the last two monthly reports of both exports and revenues.

The PBO’s projected deficit amounts to 15% of GDP, the largest number in 50 years of making this calculation. The budget deficit is projected to fall to $73.8 billion next year and continue to fall after that, with deficits averaging in the $40 billion range or slightly higher, perhaps.

These numbers are based on three assumptions, and they are worth keeping in mind: one, that the public health measures that have been put in place will continue for the next 12 to 18 months; two, that COVID support measures are withdrawn as scheduled — that’s a big if that depends on the first, doesn’t it? — and three is that monetary policy — that is, interest rates — remain basically as they are now, which is low.

The PBO projects real GDP will return to pre-crisis levels by early 2021. However, it is noted that the oil price shock and COVID-19 will have a permanent impact on Canada’s economy, going back to my earlier comments about the current account deficit from our energy sector.

The federal debt-to-GDP ratio will peak at 48.3% in 2022-23, up from 18.3%, where it was in 2019, so 30 percentage points higher. The predicted ratio will rise and then decline in the medium term. This is due to the expiry, we should hope, of measures that we have voted for in the last seven bills before us.

It should be noted that the PBO’s report of last week doesn’t take into account the SFT measures. We had some discussion about that with the minister today.

My point in saying this is that we need to figure out what we would recommend or what options are available to good public policy as to what a fiscal anchor should be. I would suggest that we might wish to again consider what David Dodge has to say on that measure.

He would recommend that the government taper its deficit spending and borrowing needs in deliberate steps over the next two to three years, with the objective of bringing deficits down to 1% of GDP, or $20 billion; move from using debt to GDP as its sole fiscal anchor to adopting one based on debt servicing costs; and that the government therefore tie future borrowing expenditure and revenue plans to the rock of sustainable debt service costs not to exceed 10% of annual government revenues.

I think that’s a rather innovative suggestion from former Governor Dodge. It would be one that would merit, in my view, Senate consideration to host some discussion amongst experts to give guidance to what a fiscal anchor should be. Because if we are just having the rhetorical “we will govern and balance the budget within the next Parliament,” we’re not having a serious conversation.

How do we have sustainable and healthy public programs that also come with the discipline of a fiscal anchor and the ability to distinguish between musts and wishes? That’s my second point.

My third and final point is to underscore that we’re a federation. I was delighted to see that Minister Freeland began her remarks, in response to Senator Plett’s question, by noting the cooperation between the levels of government on the measures that Canadians have seen.

If we are a federation, I think there’s a special obligation on this chamber, which claims to be the representative of the regions, to think through the implication on good Canadian public policy in a post-pandemic period, of having that discussion of what is the role of provinces and what is in the domain of the federal government.

Many of the measures that the government has taken have actually been in the provincial jurisdiction. Much of the criticism of what the government hasn’t done is in the provincial jurisdiction, including waiting times for necessary testing.

I don’t think, frankly, that we as parliamentarians have helped Canadians understand how federalism works in Canada, in terms of who should be accountable for what.

I think we might want to think through what contribution we can make to a better understanding of federalism in a post-COVID period.

I just want to briefly suggest that you might want to take a look at a book that recently came out by Bill Macdonald. I don’t know if you know him. He’s no longer eligible for appointment to this chamber, but he’s a wonderful public intellect. He has just published a book, Might Nature Be Canadian? He’s got some post-COVID advice for us as to how we would benefit from an economic conference parallel to the Confederation of Tomorrow Conference that Robarts and Pépin did how many years ago, and that we have a conversation, outside the political parameters of a federal-provincial meeting, to discuss the matters of best programming and best collective public policy thinking in the constraints and the opportunities that the COVID brings us.

Colleagues, I leave you with those three points. But I think it’s one way the Senate, rather than simply dealing with bills that come to us, can help shape the context of, frankly, the very significant and hard work of restoring Canada to a post-COVID world in which we can build better — yes — but in a fiscally responsible fashion.

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