Cormac MacSweeney grills the federal finance minister on whether income-splitting policy is fiscally responsible
The Peace Tower is framed in an archway on the East Block of Parliament Buildings on Parliament Hil in Ottawa, Thursday September 10, 2009. Opposition MPs, and even some Conservatives, agree Canada’s parliamentary committee system is broken.They just don’t agree on what’s gone wrong or who’s to blame. THE CANADIAN PRESS/Adrian Wyld
As part of this week’s Maclean’s On The Hill politics podcast, Cormac MacSweeney spoke with federal finance minister Joe Oliver over the phone from Davos, where he was attending the World Economic Forum. They discussed the impact of plunging oil prices on the economy, fiscal responsibility in the face of a grim Bank of Canada outlook, and why a surplus is so important to the federal government. A transcript follows the audio below.
Well, the economy is in pretty good shape. What we’ve had is an externally induced shock which has implications both positive and negative. The World Economic forum just downgraded Canada’s economic prospects for next year but only by one tenth of one percent. We see the implications benefitting some sectors, hurting others, and having, broadly speaking in the intermediate term, a neutral impact on the real economy.
Well look, yes he has certainly outlined those issues, and we’re very much aware of that, I just want to put the whole issue in perspective. We’re still looking forward to growth which will be better than most G7 countries, we still are in a very solid fiscal situation with our debt-to-GDP, half that of the G7, and we’re looking forward to a budgetary balance next year. So while these negatives are real, they have to be put in perspective in the broader performance of the Canadian market.
Well it is a slowdown, but it’s not a huge slowdown as a percentage. As I said, the World Economic Forum marked it down by a tenth of a point and we have somewhat different views. We will hear from the 50 private-sector economists prior to the budget. We will base our estimates on their projections, and as we do, we’ll come up with an approach that takes into account, in an objective way, what people believe will be the growth, and then translate that down into the fiscal framework, that is to say how it impacts our bottom line.
I would say—no, we’re not looking at that. The first point I’d make is what they’re saying is we’re in pretty good shape because they think a deficit wouldn’t be that harmful. But we agree we’re in pretty good shape, but we feel it’s important to have a budgetary surplus. We promised Canadians in the depths of the recession when we had to stimulate the economy to create jobs to create economic activity that we would get back to economic balance when we could. And we’ve taken a lot of measures to get there. But those measures have no included cutting transfers to the province and they’ve continued to go up and they will continue to go up, for social programs and health care and equalization. We’ve announced the biggest and longest infrastructure program in the history of Canada, and we’ve introduced significant tax benefits for families with children—all 4 million of them. We’ve managed to do all that even though our flexibility has been reduced, and have a budgetary balance and we intend to get there, and we think that’s the right thing to do.
We’re spending a lot on infrastructure and we’re providing a lot to provinces and individuals and we’re stimulating the economy through low taxes. But just to address the point about avoiding the deficit: we think it’s important to avoid transferring the debt to our children and our grandchildren, that intergenerational transfer is unfair, we think it sends a negative signal to investors and the Canadian public if we reduce confidence in the Canadian economy. We think it’s important to have interest rates come down—I mean the interest obligations come down so that the money can be used for social programs. It’s very important that our country has the fiscal strength to withstand shocks, of which the oil decline is one and because we’re in good fiscal shape, we’re able to withstand that and to deal with the longer term challenges such as an aging population.
That’s something we’ll be discussing in a budget whether or not we have the flexibility to do that.
We will not be increasing taxes, that I can tell you.
I can’t answer that today, but I can say the contingency fund is there for unexpected and unavoidable events.
Well, it is unexpected and unavoidable, but whether we need to dip into it is something we’ll disclose in the budget.
Well look—I’m just not in a position to get into these details now, because the whole point of having the budget no earlier than April is to see some stability in a rather unstable commodity price in the market and in the end we’ll be in a much better position to know where we can go, what we’re getting, in our forecasts, and our independent economists will take the average and we’ll make decisions accordingly.
Well, we think it was the responsible thing to do. After all, surpluses are not there to look at, they’re there to provide benefits to Canadians. We have the flexibility to honour that commitment and we will and we’ll be able to do that without going into a deficit.
Well, what we have most certainly is an idea—we’ve made our preliminary calculations and we’ll be finalizing those, but we’re comfortable that we will have a budgetary balance, and we will be honouring our commitments to Canadian families.