EVIDENCE

[Recorded by Electronic Apparatus]

Monday, November 27, 1995

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[English]

The Chair: Order.

We welcome our presenters. With us we have, from the Social Planning Council of Metropolitan Toronto, Andrew Ranachan; from the Alliance of Seniors to Protect Canada's Social Programs (Association of Jewish Seniors), James Buller and Ray McLeod; from the Child Poverty Action Group, Brigitte Kitchen; from the 2% Solution Network, Andrew Kolodziej and Ross Healy; from the Foundation for International Training, Ranjit Kumar, Faith Williamson, and Jim Berner; from the Citizens for Public Justice, Gerald Vandezande, director of national public affairs, and Stephanie Baker Collins; from the Committee of Monetary and Economic Reform, William Krehm and Jack Biddell; individual appearing, Roland J. LaMarre; from the Metro Toronto Chinese & Southeast Asian Legal Clinic, Steven Lee and David Yee; from the Mississauga Board of Trade, Charles Coles; from Molly Maid, Kevin Hipkins; and from Romero House, Norbert Piché.

[Translation]

We are going to start. You have a maximum of two to three minutes for your opening presentations. Mr. Krehm.

[English]

Mr. William Krehm (Chairman of the Board, Committee on Monetary and Economic Reform): Yes.

The 18th president of the United States, General Ulysses Grant, said that he could recognize only two tunes. One was Yankee Doodle and the other was all the others. In that, he resembles the Bank of Canada and our government. The remedy for everything, whether it's inflation or a deficit, is higher interest rates.

We are a country that went through a great educational experience in the 1930s. That has been buried. At that time, governments were cutting expenditures to balance their budgets, but the budgets were not put into balance. They couldn't be.

Many methods were brought into play to finance the Second World War. After 20 or 30 years of unparalleled prosperity, we are told that these would not work today.

We must check the credibility of those who tell us that.

In the last three years we have had three major crises. One was the shooting down of the Canadian dollar at a vast, if undisclosed, cost to the Canadian taxpayer. That was not foreseen by the people who tell us that the methods that financed the Second World War wouldn't work.

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The next was the biggest meltdown in bonds since 1929, which took place in 1994. That was not foreseen.

The third was the meltdown of Mexico. That was not foreseen.

Ladies and gentlemen, this round table should not exclude a careful examination of the methods that financed Canada's part in the Second World War and gave us the most prosperous three decades of our history. To continue ignoring those lessons and burying those chapters of history would mean that the responsible parties are incurring a crushing moral responsibility. If it continues, it won't be long before they will have to leave town.

Thank you.

Voices: Hear, hear!

The Chair: Thank you, Mr. Krehm.

The president of the Mississauga Board of Trade, Mr. Charles Coles.

Mr. Charles Coles (President, Mississauga Board of Trade): Good morning, ladies and gentlemen, and thank you for the opportunity to speak to you today as the representative of the Mississauga Board of Trade. My name is Charles Coles and I'm president of the Mississauga Board of Trade. I have here with me Clare Halldorson, who is the research and policy adviser to the board.

The city of Mississauga has a population of 540,000 people, which makes it the eighth-largest city in the country. It's home to Pearson International Airport, which is the second-largest airport in North America and the largest airport in Canada.

The Mississauga Board of Trade is a private sector organization. We are independent of government funding, relying solely on membership fees as our source of income. We have as our members 1,300 companies that employ approximately 60,000 people in Mississauga, and as such we regard ourselves as the voice of Mississauga business.

Canada's most important issue, the national debt, is really the order of the day. We have to get it in order so we can have a stable financial base to continue to deal with all of the other issues that affect our country. The Mississauga Board of Trade would like to emphasize and present a brief that is pragmatic, realistic and fair and represents the values that are important in Canada, which is a fair, equitable and compassionate country.

On deficit reduction, we would applaud the moves taken in the 1995 budget and ask the government to continue along in that direction. We have a window of opportunity now before we have another economic slowdown or another referendum in Quebec, and before you come to the end of your mandate.

We feel you're going in the proper direction. However, we would urge the elimination of the deficit by the end of your mandate. In 1996-97, we would like to see a deficit of $24.3 billion, which is 3% of the GDP; in 1997-98, 1.5% of the GDP, which is $12.3 billion; and then a balanced budget in 1998-99. This is assuming a constant GDP of $821.3 billion.

We would remind this government that when it took office in 1993, the debt for Canada was approximately $460 billion, and when it's brought under control, even with the most aggressive means, it will be over $600 billion. This means that to service the debt, in interest alone, costs approximately $55 billion annually, which is money that should be available for programs that are needed in the country.

The board realizes that the numbers on a chart are one thing and reducing expenditures in terms of programs and people is another. But we feel that if drastic measures are not taken, they will be by the foreign lenders and money markets.

Personally, when I look at my generation, I'm embarrassed and to some degree sickened by what we have done and left for our children. We have created a deficit and debt that we're expecting our children to have to bear and come to grips with, and this all at a time when the baby boomers are going to be hitting their retirement years.

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From the point of view of the Mississauga Board of Trade, we would like to look at three areas: spending rationalization, tax reform and subsidy elimination.

I believe the unemployment insurance situation is going to be addressed by your government this week. I would remind you that in 1973 the cost for unemployment insurance was $2.1 billion. It is $14.3 billion today, and premiums bring in $19.4 billion. We would ask you to take swift action on the UI reforms that you propose this week. Return UI to what it was originally conceived to be, an insurance plan, and reduce the premiums when possible because this will stimulate employment.

We feel the federal government should be out of manpower training and should negotiate with the provinces to transfer control.

Today's Canada pension plan contributions pay for the retirees of today but do not pay for accumulated future benefits. The present unfunded liability of the Canada pension plan is $488 billion. We would recommend that the government extricate itself from the pension plan. In Chile, what they did was convert their government plan into a plan for millions of individual RRSP plans. We would ask the government to take a look at that plan because it has been quite successful.

On tax reform, we would ask that you integrate the goods and services tax with the provinces and extend the base of the current GST in order that it takes place.

With respect to subsidy elimination, we would first of all ask that you address the issues in our own bailiwick. You've planned to reduce the subsidies to business from $3.8 billion to $1.5 billion in three years. We applaud this initiative but would ask that you reduce it to zero in that particular period of time. Provide assistance to business in the way that you are working with the Business Development Bank, with a system of loans rather than subsidies.

In keeping with the initiative to eliminate subsidies to business, we would ask you to apply the same principles to other sectors of the economy. We really need to rid ourselves of the mentality that the Canadian taxpayer will subsidize special interest groups regardless of the cause.

In summary, government should eliminate subsidies in all areas. We feel Canada is a wonderful country, but there are clouds of uncertainty with respect to Quebec, and also because of our deficit and our debt. We implore you to address the issue of the deficit and the debt and make Canada a strong country that continues to provide the social services it has provided in the past.

Thank you.

The Chair: Thank you very much, Mr. Coles.

Next, we have Andrew Ranachan, from the Social Planning Council of Metropolitan Toronto.

Mr. Andrew Ranachan (Volunteer, Social Planning Council of Metropolitan Toronto): We're doing it in tandem with Brigitte Kitchen. It will be quicker in that we're actually showing great flexibility here.

The Chair: Wonderful. We like that type of cooperation. We could use it right across Canada.

Ms Brigitte Kitchen (Child Poverty Action Group): I will start off.

We agree that Canada is in a fiscal crisis. While there may not be agreement on the exact numerical target, we would concur with everyone around this table that the debt-to-GDP ratio must continue its downward spiral.

We have pointed out in previous presentations that it is a distortion of fact and history to lay the annual deficits and accumulated debt at the feet of social programs. In a report called Paying for Canada, we compiled evidence that clearly shows spending on social programs for the last twenty years has remained relatively constant in relation to size of the economy, at around 10% of gross domestic product.

The same is not true of spending on debt charges resulting from high interest rate policy since the early 1980s, and forgone tax revenue as a result of the tax holiday granted to advantaged Canadians starting in 1975. David Ross, of the Canadian Council on Social Development, has pointed to a $90 billion amount in tax expenditures. We consider this a violation of the well-established tax principles that those with greatest capacity for paying taxes should be paying their fair share of the tax load.

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It is significant that corporate and personal tax subsidies, primarily to advantaged Canadians, now total seven times the amount we currently spend on our children, as is shown in Child Poverty in Canada, Report Card 1995. I hope you have all seen, or will see, that report card. At a time of high unemployment and underemployment and of growing vulnerability of working families - as evidenced by the high child poverty rates - strong social programs are needed to protect family incomes and support family life.

Mr. Ranachan: The second thing we were asked to deal with was budget measures to create an environment for jobs and growth. We would make the following comments.

We have to maintain a stable and strong infrastructure of social programs, roads, good education and training, and universally available health care as a way to create an environment for jobs and growth. If you look at the examples....

I read in London's The Sunday Times last weekend that the president of the Confederation of British Industries is saying the British government has to invest more money in infrastructure because the existing infrastructure is deteriorating. We have to really be very careful about this because it leads to a good, strong economy. Forcing the deterioration of public services through budget cuts leads to the destruction of infrastructure and impedes our progress both in creating jobs and in promoting economic growth.

Another point we'd like to make is that budget measures that result in a greater polarization of incomes and job opportunities are another major obstacle to creating a positive jobs-and-growth environment. There is ample evidence from a number of American economists, Paul Romer being the foremost one, that countries or cities with small income gaps are those that experience the greatest economic growth and prosperity. If you look at the so-called tiger economies of Asia, this is very clear. It's also true in Lars Osberg's work. In the latest issue of Canadian Business Economics, he demolishes this idea that you have to choose between equity and efficiency.

I think we also have to look at some of the experiences of economies other than the Anglo-American ones. If you look at some of the European and Japanese economies, they have shown that economic strength and vitality are not jeopardized by the existence of a strong system of income supports and social programs for families with children. In fact, their evidence proves the opposite.

The other point we'd like to make about the environment for jobs and growth is that clearly a reliance in the private sector alone to create jobs is ill-placed. It just hasn't been working. It hasn't worked in the last five years and we don't see in the foreseeable future that it is going to work. A reliance on private sector solutions alone is not going to happen. We therefore think the evidence that the private sector is capable of creating sustainable employment at wages that sustain family life is an assertion that is unburdened by proof at the present time.

The Chair: Thank you.

From Metro Toronto Chinese & Southeast Asian Legal Clinic, we have Mr. Steven Lee.

Mr. Steven Lee (Member, Metro Toronto Chinese & Southeast Asian Legal Clinic): Good morning. My name is Steven Lee, and my colleague is Mr. David Yee. We're both members of the Metro Toronto Chinese & Southeast Asian Legal Clinic and members of the board of the Chinese Canadian National Council. We've been asked by Avvy Go to speak on her behalf. We certainly hope our presence here will be more than symbolic.

We've been asked to respond to a number of questions that, to be honest, we must in large part respond to obliquely because we are not economists, nor are we fortune-tellers. We do recognize there are incredible pressures from both internal and external sources to reduce the deficit. Runaway spending and massive debt servicing are clearly not in anyone's best interests. We are very concerned, however, that the government's approach has been wrongheaded in a number of areas, and it is upon these matters that we would like to comment.

Many of the clinic's clients are immigrants and refugees; thus, immigration policies are of great concern to the clinic and the wider community that it serves. We have been involved with the campaign to protest the new immigration levy that has been imposed against immigrants and refugees. The United Nations High Commissioner for Refugees did conduct a survey last spring and found that none of the countries surveyed - including Australia, France, Germany, the Netherlands, the Scandinavian countries, the United Kingdom and the United States - charged fees to refugees. We feel it is morally reprehensible to impose fees on persons who are fleeing from persecution. If Citizenship and Immigration Canada believes there are excesses or abuses to the system, then it makes sense to tighten up the system but not to penalize legitimate asylum seekers.

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Furthermore, we are of the opinion that the fee is discriminatory, as it is much harder for persons coming from Third World countries to come up with the funds to pay.

We also find the new direction taken by the immigration department in the selection of immigrants to be troubling as well.

It was a stated promise of the governing party, prior to the election, to focus on family reunification. Not only has this promise been abandoned, but there has been a reversal of this policy in favour of so-called economic immigrants. However, these same highly skilled workers who do not have family ties here will also be the first to leave when times get difficult.

It must be recognized that attracting immigrants who will make this country home and continue to contribute well into the future requires an investment of resources. We cannot simply parachute in good citizens.

We also see people who have been denied opportunities because of their race, gender or disabilities. Provincial and even federal human rights legislation has been a tremendous disappointment in this area. Employment equity legislation has been seen as an important step in assuring that all persons, regardless of race, gender or disability, are given an equal opportunity to participate in the labour market. However, in Ontario, the government is intent on eliminating employment equity legislation, suggesting that minorities, women and the disabled can't make it on merit alone.

To exacerbate the situation, we are seeing, on the provincial level, the dismantling of many mechanisms that have permitted the disadvantaged in our society to move from reliance on the public purse, in order to survive, to productive taxpayer status.

We are very concerned that the federal government might also be tempted to give in to mean-spirited public sentiment and cut programs that are actually cost-effective or necessary investments in our future. Unfortunately, many of these progressive programs are in jeopardy when there is either an actual or a perceived lack of employment opportunities.

Unless the government is willing to put pressure on industry to take an active role in the rebuilding of this country and to take responsibility for employment, all the retraining programs in the world will not solve our economic woes.

In the same vein, multiculturalism must also be given more emphasis. One of the great strengths of this country in coming years may be its ability to play a brokerage role among the world economies. We are starting to understand that not only is linguistic interpretation necessary, but also cultural interpretation and understanding. By fostering our diverse communities, we are furthermore providing living proof that historically hostile groups can live and work together in harmony.

We are also starting to understand that a sense of community is essential to social stability and to the intellectual development of our children.

As a last word from me, the Chinese Canadian National Council has been involved in a long campaign to have the victims of the Chinese head tax and the subsequent Chinese Exclusion Act compensated in some small way for their mistreatment at the hands of previous federal governments for a period stretching from 1885 to 1947.

Last December, Secretary of State Sheila Finestone sent a form letter to the CCNC stating that redress claims would not be addressed because it simply can't afford to do so. As a result, the CCNC has been forced to send a submission to the United Nations High Commission. It is clear that the Canadian government is in violation of the International Covenant on Civil and Political Rights, to which we're a signatory.

Mr. Ianno (Trinity - Spadina): On a point of order, Mr. Chairman, within the Chinese community, there are differing opinions on that.

The Chair: Okay, we'll come to that. I was going to ask you.

Mr. Lee, for opening statements we're trying to limit everybody to three minutes.

Mr. Lee: In any event, we're stating right now that economic conditions should never be used as an excuse to ignore violations of human rights. By doing so, we are threatening our own credibility on the world stage.

The Chair: Thank you, Mr. Lee.

Mr. LaMarre, please.

Mr. Roland J. LaMarre (Individual Presentation): Good morning. I'm a senior citizen. I'm an engineer by profession. I was in management in a large industry for many years of my career. In the last ten years, I've been an entrepreneur and small businessman.

I speak for myself and for many others who share many of the views I'm about to express this morning.

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Most of us recognize that the continued accumulation of yearly deficits over time is going to present this country with an unsupportable burden that is going to destroy all of those social programs we have been concerned about and about which we have been hearing testimony this morning.

It is therefore crucial for the government to remain strongly focused on bringing this federal deficit under control. Last year, the government established a deficit target of 3% of GDP for the budget year 1996-97. At that time, I grudgingly accepted this stand, but advocated in my submission to this committee last year that the government take an even stronger position and try to cut faster.

Since that time, reflecting upon the serious nature of this debt and watching it grow inexorably year by year, each $30 billion annual deficit adds another $2.5 billion or more of expenses to the government's annual costs in moneys spent out to foreigners each year. This withdraws that much money, which would otherwise be available for social programs.

I have come to the conclusion that we have to take an even stronger stand and suggest that the government set its target at 2% of GDP for 1996-97 and make a public commitment that it's going to balance the budget by 1998-99.

In my view, the reasons for acting now are compelling. First, if we allow this deficit to drift along year by year at $25 billion to $30 billion a year, by the end of the decade we will have added another $120 billion to $150 billion of debt. That's going to increase our financing charges to the foreign community by another $8 billion to $12 billion a year. You can imagine what it's going to mean five years from now after trying to withdraw $8 billion to $12 billion a year from our programs today. It is going to be that much worse. The consequence, of course, would be catastrophic.

Second, the present growth phase of the North American economy makes it an opportune time to cut strongly. This is the best opportunity the government will ever have to do this.

Third, next year's budget is going to be approaching the time for the next federal election, so the political opportunity for cutting deficits strongly are going to be even less supportable.

So I suggest the time is right to do it now. Get those programs in place. We've now got ourselves in a stable position for reducing this monster that's got us by the throat. This will allow us to continue with the programs that we like to keep for our people.

The Chair: Thanks, Mr. LaMarre. Did you want to summarize briefly?

Mr. LaMarre: I wanted to talk about where the cuts would take place.

The Chair: Please, just very quickly enumerate them.

Mr. LaMarre: We have to take stronger measures to ensure efficiency in government operations.

I see from the announcements in the papers that Mr. Perrin Beatty is cutting 25% out of the CBC in one year, but he's not going to cut programming in the corporation. It just tells you how much fat and inefficiency there is in the system.

I submit to you that the federal government bureaucracy has the same inefficiencies built into it. We must take a stronger stand in cutting that back. That's just one area in which we can make more cuts without interfering with our programs.

In addition to that, the UI program is generating a surplus, which is a large sum of money that should be turned back into the economy once the surplus position is reached.

I understand there will be a surplus of $5 billion generated next year. That should be put back into the economy by way of cutting the premiums on the programs and by returning that to small business people and those who are paying in those moneys.

There are other government subsidies - we can talk about these later - that should be removed. VIA Rail should be privatized. Many of the overlaps we see in government spending between federal and provincial bureaucracies should be eliminated. Subsidies to businesses should be taken out altogether. I don't see why we are cutting our social programs for the poor and allowing these big businesses to continue to have the kind of subsidies they're getting.

The Chair: Thanks, Mr. LaMarre.

Next is the Alliance of Seniors to Protect Canada's Social Programs, with Ray McLeod and James Buller.

Mr. James Buller (Program Coordinator, Alliance of Seniors to Protect Canada's Social Programs (Association of Jewish Seniors)): The Alliance of Seniors to Protect Canada's Social Programs is a broad-based seniors advocacy organization that works closely with the majority of seniors' organizations in Ontario and nationally.

Following last year's overflow forum at the St. Lawrence Centre, this month we booked both auditoriums of the St. Lawrence Centre in order to accommodate the more than 1,100 concerned seniors who were in attendance.

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We are very much opposed to the regressive block funding measure in the finance minister's 1995 budget, which we feel has already paved the way for the serious weakening of decent national standards for medicare, social assistance, unemployment insurance benefits, and possibly pensions. The UI reductions are totally unjustified, because the government doesn't pay into the fund. They're taking that money they didn't put in...to cut benefits to unemployed workers.

Only half the unemployed receive UI benefits, by the way. It used to be 85%.

If the reduction of the deficit was really the finance minister's main concern, he had the option of accepting the alternative budget presented by the Paying for Canada Coalition last February. The fact that only half the unemployed receive UI benefits whereas formerly 85% received them shows the regressive nature of the cuts to the most vulnerable, even when the federal government no longer pays into the fund.

The notice of reduced block funding to the provinces has encouraged the Ontario Harris government to impose a 21.6% cut in welfare payments across the board, allowing only $90 a month for food, in many cases. This will increase hunger and child poverty enormously.

Medicare funding is being drastically reduced and national standards are undermined. It took a hospital shutdown in Calgary last week to force the Klein government to back down on imposing further cuts to health services.

The devolution of powers to the provinces, with less funding for social programs, will further decentralize Canada and could actually accelerate the break-up of Canada, as recently noted by former Prime Minister Pierre Trudeau. The last federal budget completely contradicts the pledge of Jean Chrétien to me. It stated - and I have the letter here:

The government must guarantee the protection of Canada's social, cultural, and regional development programs.

That's a categorical commitment. It has not been honoured by this government.

We have the following proposals to protect our social programs. First, close the numerous corporate tax loopholes and subsidies. This could easily raise another $5 billion a year. That is a conservative estimate.

I have the documentation here. It's from The Globe and Mail ``Report on Business''. I'd be glad to give you this, Mr. Peterson, for your assistance. This is the latest edition.

The Chair: I look forward to that.

Mr. Buller: In other words, close the loopholes and the subsidies. Otherwise, impose and enforce a minimum corporate income tax of between 14% and 17%. Low-income Canadians earning as little as $11,000 a year pay income tax at a 17% rate though they are at the poverty level. Where is the tax equity here?

Personal income tax rates for the wealthy have been reduced by as much as 26%. As a corrective action, Professor Neil Brooks of the Osgoode Hall law school calculates that by increasing the three current rates - there were formerly ten - by 4%, 3%, and 2%, starting with the highest income bracket, we would raise an additional $18 billion a year, which would go a long way to reducing the deficit without cutting back on social program funding.

Canada is the only G-7 country without a welfare inheritance tax. We urge you to introduce such a tax in the next budget, with the first $1 million being exempt from tax. This proposal was presented last February in the alternative budget of the Paying for Canada Coalition, which includes the Social Planning Council of Metropolitan Toronto. Canada also has the lowest prorated percentage of corporate tax contributions of any G-7 country, and the highest per capita number of billionaires of any country.

The Bank of Canada has contributed greatly to Canada's economic woes with high interest rates, which increase our rising national debt. We support the proposals of COMER and Mr. Krehm in this regard.

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In conclusion, we note that the last four federal budgets have cut back drastically in social program spending while granting enormous tax reductions to the wealthy and corporate elite. The majority of ordinary Canadians are getting poorer while the five largest chartered banks, after tax profits of $4.05 billion - a 48% increase last year - and their CEOs collect $10.7 billion.

The contrast and injustice in our tax system are staggering. The time for fairness is now.

Voices: Hear, hear!

The Chair: Thanks, Mr. Buller.

Mr. Norbert Piché from Romero House.

Mr. Norbert Piché (Romero House): I'll give people a chance to put on their earphones and then I will be presenting in French.

Mr. John Hotson (Committee on Monetary and Economic Reform): Mr. Chairman, why did I get left out?

The Chair: Mr. Hotson, you are here with COMER, I understand?

Mr. Hotson: That's correct.

The Chair: COMER's already made a presentation. Do you think COMER should have three presentations? How many would you like them to have?

A witness: We'd like to have three, Mr. Chairman.

The Chair: Okay, I'll ask the other participants if this is okay with them.

There's one group here called COMER. They have three individuals here at the table. They wish to make three presentations. Do the rest of the participants agree to that?

Mr. Hotson: I think everybody should be heard.

Mr. Coles: Mr. Chairman, could I make the suggestion that all the other groups get a chance to present before you hear any additional presentations from the same group? I think everybody should have a chance to be heard.

The Chair: Okay. Does everybody agree with that?

Voices: Yes.

The Chair: You'll have a chance later on.

[Translation]

Mr. Piché, please continue.

Mr. Piché: "You would have no power over me, if it had not been given to you by the Almighty." This quotation is from the Gospel according to John. It adequately reflects the situation the Canadian society is in today. There are people who become poorer and poorer while others are getting richer and richer.

I could give you all sorts of statistics to back up this fact. I could tell you how to reduce the deficit in some other way than by putting the burden on the shoulders of the disadvantaged. There are all kinds of documents which show how to go about it, particularly those presented by the Canadian Centre for Policy Alternatives, by Citizens for Public Justice, by the Adhoc Coalition Against the Head Tax, and so on.

Does the government have a look at these reports? Obviously, the government is more willing to look into its own reports so that it may refute the analysis done by others. In that case, what is the use of all these reports if the government has already made up its mind?

Clearly, an analysis can be done in such a way that the results reflect a biased opinion. Statistics and facts can be manipulated so that they translate whatever we want. In that case, why should these reports be done? This is the reason why I have decided not to use statistics but to address you in a different way.

I know that some people are without a roof over their heads, while others live in luxurious homes. I know there are some people who cannot have a decent meal, while others can afford to spend $50 to eat in a restaurant. I know that some people have only an old pair of shoes which will not last all winter, while others have 20 pairs.

I know of some who have fled their country and who are forced to pay exorbitant fees to be able to settle in Canada, while others are making exorbitant profits. Each of these people meets his or her own Pontius Pilate just as Christ did. All these Pontius Pilate would have no power over these individuals if it had not been given to them by the Almighty. All these Pontius Pilate will also be held responsible of their actions against any of the underprivileged.

They all have seen their Pontius Pilate washing his hands of their fate; the one who did not have a roof over his head at the Housing Office, the one who was hungry at the Welfare Office, the refugee at the Immigration Office. They have all been robbed of their dignity and treated with contempt. They all have been flogged and continue to bear their cross. Some of these people know what it is to be crucified. But for some of them, I can see the path to resurrection because they can count on people who love them. I can see their resurrection.

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As members of the Liberal government, you have the power given by the Almighty. What are you going to do with it?

[English]

The Chair: Mr. Vandezande, please.

Ms Stephanie Baker Collins (National Researcher, Citizens for Public Justice): I'll be giving the opening statement for Citizens for Public Justice.

We welcome the opportunity to participate in these round table discussions on the upcoming federal budget.

Unquestionably, today we examine our nation's economy in a global context. What that global context tells us is that we are a nation of enormous wealth and privilege. We speak here not just of Canada's natural and human resources, but of our historical commitment to being a compassionate and tolerant society.

It is not our wealth that forms us as a nation, but our communal commitment to using that wealth in a way that enhances human well-being and preserves the environment. This commitment holds true in prosperous times and in difficult ones.

As part of meeting this national commitment, Citizens for Public Justice would like to place on the table seven priorities for the next federal budget.

First, as part of our national commitment, the federal government must abide by its constitutional responsibilities for preserving equity between individual Canadians and between regions of Canada. This responsibility must be met in the way in which federal dollars for health, education, and welfare are distributed.

The following specific recommendations are made regarding the Canada health and social transfer: to keep the cash transfer portion of the CHST intact; to hold the negotiations around shared principles and around the allocation formula at the same table; that the reporting mechanism for the CHST be strengthened; that a portion of the CHST be designated for welfare; and that the principles of the Canada assistance plan have equal place with the principles of the Canada Health Act in the CHST.

A second priority is fairness in taxation. Citizens for Public Justice holds the government to the promise made in the 1995 budget to look at tax expenditures in the next round, in the view of making the tax system fairer.

We recommend that the following tax expenditures be examined, and we outline our recommendations in more detail in our brief: the maximum annual tax deduction for RRSP and RPP contributions; the tax exemption for lottery and gambling winnings; and the tax deduction for business meals and entertainment.

This government held firm to its spending cuts to social programs, which have the potential to affect the most vulnerable. We remind this government that it should also remain firm to its goals for tax fairness.

A third priority is to link unemployment insurance with job creation. Even in times of scarce resources, much can be done to change the incentive structure in the way in which government raises revenue and spends dollars. We point out particularly that the way in which employer premiums are levied rewards capital-intensive firms at the expense of labour-intensive ones.

CPJ urges the federal government to broaden the basis on which employer UI contributions are calculated, to include capital as well as labour income. We also recommend that the savings that will result from reforms -

The Chair: It's a wonderful presentation, but just in terms of fairness to every participant, could I ask you to summarize very quickly rather than elaborating on each of these specifics?

Ms Baker Collins: Yes. I have just a minute more.

Our fourth priority is caring for poor children, and we're echoing other groups around the table. We recommend specifically that an enhanced child tax benefit be put in place.

Our fifth priority is preserving the environment through the examination of including green taxes.

Our sixth priority is rescinding the right-of-landing fee for refugees and immigrants.

The seventh, echoing the statements of World Vision, is to act on our foreign aid commitments.

Thank you.

The Chair: Thanks, Ms Baker Collins.

Ranjit Kumar, please.

Mr. Ranjit Kumar (Executive Director, Foundation for International Training for Third World Countries): My brief this morning concerns a request to the committee to review and amend section 260 of the Excise Tax Act, which concerns the levy of GST on goods and services exported from this country.

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The foundation, like many other charities engaged in overseas work, is engaged in sending professionals overseas quite often to provide services to their partners there. Some of our work, like that of many other charities, involves bringing our overseas partners here to provide services to them which are essentially exported from here in the way of technological know-how.

As originally visualized, subsection 260(1) would suggest that charities should be exempted from the GST, and zero-rated on the basis of export goods and services. However, subsequent policy statement B-132 has tended to restrict the meaning of this particular section and excludes the zero-rating of services for the charities.

Much of our work and of many other charities is paid for by overseas partners or on their behalf by some other agencies. They can be construed as exports in much the same way many commercial activities are. The work does generate foreign exchange for the country and therefore incentives ought to be provided for exporting of certain services.

We are therefore requesting that subsection 260(1) be reviewed to allow services as well as goods to be exempt from the 100% GST. In effect, we are requesting the rescission of policy statement B-132 so the charities could enjoy parity of treatment with commercial activities.

Thank you, sir.

The Chair: Thank you, Mr. Kumar.

Our next witnesses are.... I'm sorry. Are you both with the centre? Will you be making presentations as well?

Mr. Jim Berner (Accountant, Foundation for International Training for Third World Countries): No.

The Chair: You will have that right afterwards. After we've gone through the whole thing each of you will have three minutes. I've met Dr....I apologize to you.

Our next witness is Mr. Ross Healy. Welcome. I've seen you before. I look forward to your presentation.

Mr. Ross Healy (President and CEO, The 2% Solution Network Solvency Analysis Corporation): Thank you, Jim.

Mr. Chairman, distinguished members of the committee and fellow Canadians, we have been asked to respond to three questions from this committee that are essentially concerned with deficit reduction and job creation.

In this regard, we contend that no budget or other plan of action should be considered unless it meets three specific goals. Any deficit solution must do the following: solve the deficit problem by dealing with its underlying cause, which is the rapidly mounting debt in this country; honour all contracts, both economic and social, that the government currently has with its citizens; and create the necessary conditions for sustainable growth, namely low interest rates, a stable currency, no competition for the nation's savings from government and an environment in which steadily falling tax rates become possible.

To answer the questions to which this committee asked us to respond, we have placed them in this framework. What should the deficit reduction target be? As far as the chronic deficit is concerned the answer is clearly that it must be reduced to zero. Every economist in Canada, every think-tank, and the Governor of the Bank of Canada all agree that Canada's chronic deficit has taxed it, is taxing, has acted, is acting and will continue to act as a drag on the economic potential of the country.

As a consequence, setting part-way targets for deficit reduction remains an act of self-delusion. As we enter 1996, the current economic expansion is becoming mature, with a highly probable recession due by 1998, or roughly eight years after the last recession began.

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Now here's the problem. With every single recession in this country since 1969, when Canada began to run a chronic deficit, government deficits have had a strong tendency to roughly triple. The current federal deficit reduction target to $25 billion - plus whatever remains of that in Ontario and Quebec in particular, the other provinces having dealt with this problem more aggressively - calls for a deficit forecast in 1999 that in unprintable and unspeakable. Whether it is financeable or not is an interesting question.

But there is a problem with deficit reduction alone. In our last presentation to this committee, we pointed out that reducing the deficit to zero without dealing with the underlying debt, which is to say the cause of chronic deficits, will result in what we call the New Zealand solution, as it was first executed down there. It will lead us inevitably to the same eight-year nightmare in which unemployment in that country went to depression highs and real economic growth averaged less than 0.25% per annum before that country finally came out of its economic horror.

As the evidence is overwhelmingly against deficit reductions alone, this committee must deal with the debt question.

The Chair: Could you wrap up your remarks, please, Mr. Healy?

Mr. Healy: Can I take about another 30 or 40 seconds?

The Chair: Sure.

Mr. Healy: We are the authors of a detailed monograph entitled Phoenix Rising: The 2% Solution. It is a plan to eliminate the debt of the Canadian federal and provincial governments through conversion into an equity-based instrument. It is a plan based on sound business principles and is in essence one that is followed by one company or another virtually every day of the year.

For those who have not read or read about this plan, I should note that it has been carefully and thoroughly pre-tested and pre-screened by legal, investment, and actuarial communities across this country. Many of the best and brightest minds in these areas in Canada have helped us by addressing several important issues that were raised in our original paper.

I would like to raise just one small issue and a word of concern and caution. Short weeks ago, Canada as we know it nearly ran out of time when Quebec came close to determining that it might be better off on its own. This committee cannot, must not, allow those in that province who argue that our federal system is costing them more than the value they receive back to be proven correct.

If we enter a recession in 1998 without a permanent solution to our debt crisis, if our deficit does blow sky high and we are forced to have a New Zealand solution imposed upon us, then you will play into the hands of those who are considered to be demagogues. Indeed, without respite, without a debt and deficit solution, it is arguable that Quebec may well be correct in choosing a solitary course, particularly if it gets some sound financial leadership.

We urge you to focus on the real problem, the staggering debt burden. Canada as we know it is too close to the end for our comfort.

The Chair: Thanks, Mr. Healy.

Now we have two more witnesses from COMER. Who would like to start off, Mr. Biddell or Mr. Hotson?

Mr. Jack Biddell (Committee on Monetary and Economic Reform): Mr. Chairman, I think almost 13 months to the day ago, my colleague Jordan Grant, who couldn't be here today, and I presented a brief to your committee in Ottawa. That was a 62-page brief. We were given an hour, but for reasons I won't go into, we had about 25 minutes.

We had sent that brief to your committee some 10 days in advance. Of the small group of members who were there to listen to us, some of them had glanced at it, apparently. In the final analysis, that brief was not reported in the report you made in December of last year. There was a reference in the index at the back that a brief had been submitted.

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Now, on October 30 of this year we almost lost this country. One of the major purposes of that brief was to try to avoid that and present a series of solutions that would be extremely attractive to all Canadians, to every province of this country, in order to change our ways.

I may say that the only reference I heard to what we had submitted was that there was a meeting convened of economists, representatives of the Bank of Canada and so on. The majority of the people, I understand, were those in favour of the status quo, and they decided that the proposals we put forward were wildly inflationary. We were not given any chance to explain that, although we did have a paper in there on the subject of inflation.

As to inflation, I think I know something about it. I was pulled out of my firm, a pretty responsible job, back in 1975 by the then Prime Minister and asked to be the Ontario representative on the Anti-inflation Board. After I retired in 1982 I was asked by the Premier of Ontario to chair the Ontario Inflation Restraint Board in the 6 and 5 program. I spent two or three years working and breathing and speaking about inflation; and in my brief, and in subsequent papers, I have demonstrated that the proposals we've put forward are not inflationary, they work just the other way around. But no one will look at them, no one will ask questions, no one will discuss them.

The Chair: You've taken 2 minutes and 45 seconds to make your point. It's entirely up to you how you use your time, but I would find it much more constructive if you told the world what your ideas were.

Mr. Biddell: The ideas were how we could quickly resolve our government deficit problems.

The Chair: I understand that, but if you'd give us the approach, I think all members at the table and the media would welcome what those ideas are.

Mr. Biddell: The major measure would be that which Mr. Krehm referred to, and that is to have the Bank of Canada do what it did in Canada's last great national emergency back in 1939, and make very low interest rate loans available to our governments, which would quickly enable all of our provincial governments to balance their budgets.

The Chair: Thank you very much, Mr. Biddell.

Mr. Hotson.

Mr. Hotson: To get to the very nub of things, yes, we're entirely in favour of reducing the deficit, and the only way to do that is to get to full employment, just as the red book says it's the only way to do it. If you look at history, the only time since World War II in which the government was able to achieve a balanced or surplus budget were years in which unemployment was less than 6%, and every year in which unemployment exceeded 6% the government ran deficits. Doesn't it appear self-evident that the way to reduce and eliminate deficits is to restore full employment, as I said, and just as the red book says?

Indeed, restoring full employment may be the only way to end deficits. The slash and burn policy the federal and provincial governments have followed, especially when accompanied by too-high interest rates, cut employment and output and thus tax receipts, while swelling UI and welfare.

Until the government, specifically the Minister of Finance, has the wisdom and courage to seize control of the Bank of Canada from the bastard monetarists who have dictated its policy since about 1975, all hope of full employment, stable prices and sustainable budget balances must be abandoned. Had the bank continued the policies of the first governor, Graham Towers, Canada's foreign and domestic debts would be far less and the country would not have sacrificed the $2 trillion - I'll say that again, $2 trillion - we have lost by running this country at 15% to 20% below capacity for 20 years.

In 1940 the Bank of Canada created over 76% of that year's addition to the broad money supply. In 1951 it produced 78% of the money added to the broad money supply. I'm talking about M3. In 1994 it added only 2%, thus the suggestion that it be instructed to produce one-half of the additions to the broad money supply. The broad money supply needs to grow about $30 billion next year to avoid a recession. If they produce then $15 billion, there would be ample funds to make big contributions to reducing the deficits of Quebec and Ontario, financing them, let's say, at 1% interest or whatever they want to do.

You would also need - it's very important to make this point - to restore the required reserves. Canada's one of the very few countries in the world that got rid of a requirement that banks keeps some of the official money of the country on hand on reserve.

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I wonder how many people around the room even realize this, that the Tories sneaked a provision through in 1991 that allowed the banks to multiply a dollar of Bank of Canada money to 50 times or 70 times, and that's what they're doing now. We privatized our money supply, and it was the biggest mistake, the worst privatization of all.

Now, there's even a worse idea floating around - that we let the Americans run the Bank of Canada, that we become the thirteenth Federal Reserve district. Tom D'Aquino of the Business Council on National Issues has floated that trial balloon, I kid you not. It'd be crazy to do that, but there's talk of doing so.

How much time do I have?

The Chair: You've taken your three minutes.

Mr. Hotson: All right, thank you. Some of my points I've already touched on and the financial transactions tax that Mr. Biddell has spoken about had a 65-page brief.

The Chair: Thank you very much.

Yes, Mr. Buller.

Mr. Buller: I apologize, I neglected to mention that Mr. Ray McLeod from our Alliance of Seniors will deal with the pension issues. We should have been in tandem. I neglected to tell you that.

The Chair: I think we'd like to hear from Mr. McLeod, then, and anybody else who is at the table and has not spoken will be given equal opportunity.

Why don't you start, Mr. McLeod, and welcome.

Mr. Ray McLeod (Pension Advocate, Alliance of Seniors to Protect Canada's Social Programs (Association of Jewish Seniors)): Thank you. I'm going to skip along. Jim mentioned pensions. I'm going to make some general comments, but just with the headlines rather than going in on detail, because they have pretty well been covered.

Most of the material I'm going to give you on pensions I've already given to you. I'm giving it again with the hope that this time maybe it'll be read.

The Chair: Mr. McLeod, I have always read everything you've given me. I've met with you at least on three different occasions and I welcome you for the fourth.

Mr. McLeod: One of the first things I would suggest is that the Liberal Party should have a vision of what it expects Canada to be and to become. We have picked on the separatists in saying that after 25 years they don't have a vision of what they want for Quebec. I think we are equally at fault in the rest of Canada in terms of not having expressed our vision. Are we looking for an egalitarian country as we have had for the last 50 years or are we going into a class-structured society? I think that's a critical thing for us. What is our model? Is it the United States?

It seems that maybe that is where our business leaders are pushing us towards. I think it's critical we recognize that it is not the vision we want. Just skipping along, I'll mention, as others have, that we are not a poor society, that Canada's social programs are not the cause of our deficit and debt.

Turning to the old age security pensions, I want to object to the clawback. I want to point out that it has never been admitted until about two months ago at a meeting in Ottawa that the Liberal government does not have a background paper on old age security. They were not preparing one and did not intend to.

I know for a fact that the Tory government introduced clawbacks without having a background paper. I think we gave them one and they have not even bothered to comment on it.

The only Liberal I know to whom I spoke on this subject was James Brown. You of course know him; he was the tax adviser to the policy committee in Chrétien's campaign in 1992-93. I spoke to him in depth, and he agreed entirely with what I have said. No one else has indicated why they don't also.

The Chair: I've indicated to you that I agree with the reason that you've given. I don't think it necessarily leads to the same conclusion, but that's fine.

Mr. McLeod: I would like to raise another question. At what income level are seniors considered wealthy? Any time there's talk of clawback it's always said that we are only taxing wealthy seniors. Then they define wealth as $53,000 at this point in time.

Are all MPs wealthy? The latest StatsCan figures I have seen, from November 17, say that families made an average $54,000 last year. Are all families in Canada wealthy? So I'd like to know why, when you talk about the clawback, seniors are always called wealthy at $54,000 of income?

In The Toronto Star on November 22, the Prime Minister was quoted as saying he's not prepared to dismantle the federal government to appease Quebec separatists or Reform Party MPs. However, we would point out that we are much concerned that the devolution of powers from the federal government to the provinces is surely going to weaken the federal government beyond the role it now has.

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Along that line, another article in the paper on the same day mentioned that Roy MacLaren was hosting a meeting of trade ministers to promote the creation - I'm summarizing - of a global treaty on the World Trade Organization that will give transnational corporations unprecedented power over the world's citizens. I think that is a greater threat to Canada's sovereignty than any questions we have about devolution.

I would like to make one point about the Canada pension plan. It seems to be lost sight of that it is a pay-as-you-go pension plan. For that reason the reserves are not a significant part of the program. Someone referred to the amount of unfunded.... It is not a funded pension plan, basically; it is a pay-as-you-go plan.

The rate for 1996 has been set at 5.6%, and there are suggestions it will double and maybe go higher. I would point out that for RRSPs it's considered that you should be putting in 18% of your income in order to have a reasonable pension. That's 18%, whereas we're talking of the Canada pension plan at 5.6%, which may double; and of that doubling, half of it is paid for by the employer. To the employees it is still a very attractive plan, one that is a godsend to people at lower income levels.

The Chair: Thank you, Mr. McLeod.

Mr. Gerald Vandezande, please.

Mr. Gerald Vandezande (Director, National Public Affairs, Citizens for Public Justice): Thank you, Mr. Chairman.

I am deeply conscious that we live in a post-referendum society. I'm also conscious that we meet in the Pearson Room. Mr. Pearson and his cabinet ministers at the time did some very good things for this country. In my view, the red book was an attempt to continue that historical commitment made by Mr. Pearson and others to national commitments and priorities.

One of my major concerns is that unless policies are changed and reversed, we will witness the Balkanization of Canada, the provincialization of power, the minimization of the federal government's responsibility, and the disintegration of a national society.

As a finance committee, you in your sixteenth report to Parliament made some major recommendations, and at the time we commended you and wrote in support to the different cabinet ministers. On behalf of CPJ, we strongly recommend that this committee repeat some of those recommendations and again urge the cabinet and Parliament in general to fight for the maintenance and enforcement of standards, both those under the Health Act and those that are still in effect under the Canadian assistance plan; that those CAP standards be included under the CHST; and thatMr. Martin, in correspondence with us as well as Mr. Peters and others in the cabinet, indeed carry out their commitment that there be an adequate cash commitment in the CHST transfer so there can be an effective enforcement of both the health and the social assistance standards in future years.

Some people object to national standards. I'm prepared to call them intergovernmental standards. Call them whatever you may, there ought to be a consensus across this country, given our historic commitment that we will not abandon the poor, that there will be a very strong safety net that doesn't allow anyone to fall through the cracks.

In order to help finance that - and our brief has referred to it - the government can eliminate tax expenditures. I want to mention quickly lotteries and casinos, but also the tax expenditures on health plans and others. From our perspective, income is income and it ought to be taxed.

A major hidden expenditure that is seldom talked about but that we deal with in our brief is the reality that large technology- and capital-intensive corporations don't contribute their fair share to the creation of the unemployment they continually help to bring about. A labour-intensive operation carries the major burden of financing Canada's unemployment problems. Those who continue to reduce their workforce by relying on technology and yet make enormous profits - and the banks are among them - don't carry their proportionate share.

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I think that is a hidden tax subsidy to technology-intensive industries and operations in this country that ought to be addressed, ought to be eliminated, so that in a real way we will supply the money needed to finance an adequate social program. In that context, we think that the UI fund should be outside of the budget.

As a cost accountant by training, I think Canadians are entitled to know where their taxes go. I think we should demonstrate that the UI fund is adequate and self-supporting, is producing a surplus. Canadians should also be told that we have an operating surplus within the budget, and that the major problem now is how we can finance the debt.

One way of cutting the debt - and I'm unequivocally committed to that - and eliminating the deficit is to have the courage of conviction to eliminate the very tax loopholes that you yourself and the Minister of Finance highlighted.

The Chair: Thank you very much.

Mr. Vandezande: Your credibility, given the red book commitments, is on the line.

The Chair: Mr. Vandezande, we understand that. We accept that responsibility. I don't think every other party will.

Now, Mr. Healy and Mr. Kolodziej. Perhaps Mr. Kolodziej would like to explain what the Phoenix Rising proposal is so that people will have the benefit of it.

Mr. Andrew Kolodziej (Consultant, The 2% Solution Network Solvency Analysis Corporation): Briefly, it's a conversion of the total debt of federal government and provincial government into the equity that is tagged as a certain percent of the Canadian economy. It's raising money at the level of 2%, 4%, depending on what amount of debt we want to repay.

How it's structured, simply, is that we would ask the current debt holders to convert their government debt, immediately annulling all interest payment obligations on that debt, into equity instruments that would be comprised of 30 or maybe 35 payments into the future at a certain percentage of the economy. The stream of payments cut back into today's volume would equal the debt being repaid.

It's that simple.

The risk that's associated with the debt that the taxpayer carries would be conveyed onto the investors who would assume the risk of the growth of the economy.

The investors, hence, would benefit only when we benefit. What we propose would move the economy forward at, let's say, 5% to 7% annually in terms of growth. The future payments to the equity you need for the investors would benefit them as well. It would provide for greater capital gains than the one that is assumed at the start. The economy would benefit. As it is, the economy underperforms by about 20%.

We have a potential of employing a million to a million and a half people in this country. The added GNP would allow for greater tax collection. It would allow for the government to honour its commitments and it would allow extra taxation that would result from employment of extra people, to reduce taxes in the future.

We expect that within two years of strong growth this government could eliminate the GST entirely, without replacing it by any other tax or, for that matter, combining it with the provincial tax, thanks to us.

The Chair: Thank you very much.

[Translation]

Please, let's start with the questions.

[English]

Mr. Lee: We had a further presentation on behalf of our organization.

The Chair: Okay. You're entitled to it. Will Mr. Yee make that presentation?

Mr. Lee: Yes.

Mr. David Yee (Member, Metro Toronto Chinese & Southeast Asian Legal Clinic): We feel that as a government for the Canadian people, the federal government has a responsibility to act in the best interests of all Canadians. It's in the best interests of all Canadians to reduce the federal deficit; of that there's no doubt. This can best be achieved if all Canadians are asked to contribute to this objective. When I say this, I need to emphasize that certain weaker and more vulnerable segments of the Canadian population should not be asked to suffer to benefit the more privileged.

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When there is talk of reductions to UI premiums, changes to the CAP program, reductions to welfare programs, and massive reductions in transfer payments for health, education and social programs, you need to consider which segments of the Canadian population are going to feel the negative effects of these changes the most.

The answer in each case is the same. The poor, visible minorities, immigrants, women, aboriginals and the disabled are those who use these services the most. This is not asking all Canadians to contribute to the problem of the deficit, and this is not in the best interest of all Canadians. This is something we must never lose sight of, especially in this political and economic climate, where blame is freely distributed for the economic woes all Canadians face.

By targeting certain segments of the Canadian population more than others, there is a dangerous inference that certain Canadians are not as valuable or worthy as other Canadians, which violates the Canadian Constitution.

The federal government must ensure this does not happen, and it has the means to do so. By also focusing on such things as under-collection of tax revenue, tax breaks, tax holidays, government inefficiencies, tax fraud, etc., the federal government can adjust the debt problem in a way that is in the best interest of all Canadians and not just some Canadians.

To create an environment for jobs and growth, the federal government must look at the long-term effects of its policies on the economy. For example, simply cutting funds to the CAP program does not equal positive effects on the national debt and the economy.

By eliminating CAP, the federal government is abdicating its responsibility to maintain national standards crucial to the social safety network of Canada. This is a system that was built through years of effort because Canadians believe in sharing collective responsibilities.

The imposition of the CHST will result in the disintegration of what Canada stands for. Canadians rejected Meech Lake for all of these reasons. The federal government has no mandate from its people to sneak in these changes through the back door. Our constitutional structure reflects these values and no one should tamper with it.

Indiscriminate cuts result in indiscriminate suffering. The federal government will properly manage the economy if it cuts only ineffective programs, based on objective evidence, while encouraging and supporting programs that have net positive effects on the system. Thank you.

The Chair: Thank you Mr. Yee.

[Translation]

Mr. Crête.

Mr. Crête (Kamouraska - Rivière-du-Loup): Mr. Vandezande brought us back to the time when Pearson was in power. I would say that during those years, the federal government took the time to maintain a lot of contacts with provincial governments. In those days, there was an openness of mind which allowed, for instance, for the creation of the Quebec Pension Plan and the Quebec Deposit and Investment Fund. So, initiatives showing confidence in the provinces were taken and that, in turn, had interesting results. This is the comment I wanted to make.

As far as my question is concerned, it is directed to any of the witnesses who might want to answer it. I would like you to suggest ways of increasing our revenue or reducing our expenses so that we can reach our objective, because when you budget, you will always have only two solutions: increase revenue or reduce expenses. The rest if often merely padding.

Does any one want to take up this challenge?

[English]

Mr. Vandezande: Excuse me,

[Translation]

I don't speak French.

[English]

With respect to the expenditure side, I think it is important for us to realize that the government forgoes all kinds of revenues that would increase the revenue side and increase its ability to meet federal obligations, such as the pension fund and other things. The finance department, Mr. Martin and this committee itself have gone on record as saying we have to eliminate these illegitimate tax expenditures and subsidies. I think it is important that be done.

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Then we need to be prepared to confront Canadians with the need for fair taxes paid according to income. Currently that is not the case. Higher-income people pay less proportionally than lower-income people. We need to come to grips with that and be prepared to challenge higher-income Canadians, in view of the need for more revenue to meet national commitments and obligations, to pay according to income.

Given the new situation we confront in Canada, the federal government's commitment to not only Quebec but the other provinces, and the implications in Bill C-76 that there be consultations on what kinds of conditions, criteria, standards, etc., should be obtained with respect to the implementation and enforcement of social programs, we need something of the Pearson era, but also more creative attempts to really reach interprovincial agreement on what Canadian citizenship means in the 21st century.

We're now in the process of establishing second- and third-rate citizenships, and I can't imagine the Liberals wanting to do that.

The Chair: Mr. LaMarre, please.

Mr. LaMarre: Picking up on areas where there appears to be inequitable taxation, the deductible RRSP contributions should be reduced from the present proposal of $15,000. Let's face it, the average low-income Canadian cannot put $15,000 a year in an RRSP and get a tax deduction from it, so that really is a benefit to the wealthier citizens of this country. I suggest that limit should be reduced to at least $10,000. That would put an additional tax burden on the wealthier members of our society.

In addition, we should look at our military spending. Canada is supposed to be a peace-loving nation, and we talk about peace and the peaceful people we are. We should not be spending the kind of money we're spending on our military programs. We should be spending only sufficient amounts to maintain civil obedience in the country, control our offshore fisheries and so on.

There are many duplications of military bases in this country, and we shouldn't be spending money on high-technology items.

The Chair: Thanks, Mr. LaMarre.

[Translation]

Thank you, Mr. Crête.

[English]

Mr. Grubel, please.

Mr. Grubel (Capilano - Howe Sound): I can understand that witnesses are here arguing in favour of benefits for the groups they represent, but I must say I'm very saddened when these specialists, people who allegedly know what they're talking about for their groups, are not even aware of the basic facts.

I wish it were different - we all wish it were different - but the average person in Canada working in manufacturing is making $30,000 a year. Listen to this, Mr. McLeod. This is the average person raising two or three children. You were complaining that $50,000 for a retired person is not a high income.

I will also remind you - and I'm prepared to send this to anyone who wishes, if you leave me your name - of information from Statistics Canada that if you make more than $50,000 a year as an individual, you belong to the top 10% of income earners in Canada.

I would also like to let Mr. McLeod and others know that we are presently engaged in one of the most criminal redistributions of income to our generation from future generations. The cost of old age security, CPP and medicare that we have in place right now in a short thirty years will require working generations, our children and grandchildren, to pay an extra $50 billion a year in taxes. That is 50% more than they are now paying in personal income tax. On top of that, we already are leaving them $565 billion worth of debt as of today, rising very rapidly to the tune of $100 million a day.

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Ladies and gentlemen, we are being very unfair to future generations.

I have one last word on being saddened about people not knowing what they are recommending.

We hear of cutting back RRSP and other so-called loopholes for the poor. We also hear we should have higher taxes. We also know as a universally accepted fact that the future of Canada lies in attracting high-tech business.

Let me tell you a fact reported in The Financial Post. Seattle and Vancouver may be only three hours apart, but they're light years away from each other in their ability to grow high-tech companies. While the U.S. city revels in its reputation as Silicon Valley North, its Canadian neighbour is struggling to keep its critical mass. You might ask why.

Vancouver's high taxes discourage investment. In the end, companies and the talented people who work for them are unwilling to come.

Mr. Vandezande, what would you say to the young people in Vancouver who can't get any jobs because our taxes are so high, that you're recommending to them that we raise the taxes even further by eliminating RRSPs and other tax-increasing measures? They cannot get these people to come and they can't get jobs.

Mr. Vandezande: Mr. Grubel, I'll be glad to respond. We didn't say an across-the-board tax increase. We said let Canadian taxpayers begin to pay according to income.

Mr. Grubel: Mr. Vandezande, I beg your pardon, but this is exactly the point. High-tech people -

Mr. Vandezande: Let me finish, Mr. Grubel.

Mr. Grubel: - with high incomes are using RRSPs to have lower taxes. That's what you're complaining about.

Mr. Vandezande: No, I'm complaining about the reality that when a $100,000 income executive claims a $13,500 RRSP contribution as an income tax deduction, that person gets an unfair tax advantage.

Our proposal is that it be capped at $7,500 and that the RRSP contribution be converted to a tax credit so the credit given by the federal treasury is in proportion to the income earned. That way higher-income people don't gain an unfair advantage and lower-income people who also want to save for the future get the same equitable tax treatment as MPs and other higher-income people do. So our proposal is -

Mr. Grubel: Mr. Vandezande, I understood it. We have all heard it. We can read your material.

I want to tell you that we have had numerous witnesses here telling us that when you make the system more equitable in the way you wish to do it, you run smack into the fact that we have a neighbour to which people and business are going. That neighbour has considerably lower taxes on everyone, but especially on the higher-income people.

If we stop this, we will find we will not get the business that keeps our people employed. I don't know what the answer is, but I'm telling you you're going to make the future worse for the future generation and the people who are unemployed now.

The Chair: Herb, could we give Brigitte Kitchen a chance to respond?

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Ms Kitchen: I would like to draw attention to the study by Ernst & Young that pointed out that the tax law was not a major consideration for companies in deciding where to locate for their place of business. That's one piece of evidence from a very respectable company, which I would think you would agree with.

I would also like to make a point about the debt load we are going to leave to our children. I think everybody around the table has mentioned that the downward spiral of the deficit has to be continued. We're all concerned about what happens to our children. What we cannot tolerate, however, is that the protection for all our children is bought on the back of denying any future to 1.5 million children in Canada. That's what we are complaining about.

We are here to raise the point to you that there are other ways of dealing with the reduction of the deficit, and I don't think it makes any sense to deny the future of 1.5 million children. We don't know how many geniuses are amongst this group of people, who we would be denying education, who we would be denying a productive membership in this society. I think where the responsibility lies is also to those children.

Voices: Hear, hear!

The Chair: This has provoked a lot of reaction. I see 62 hands up around the table to respond. In the interest of fairness to everyone, I'm going to limit it to one more response, if you don't mind, and then we'll go on.

Since your name was taken in vain, Mr. McLeod, you will have the right to the last word, very briefly. After that we'll go on to Mr. Reed.

Each one of you will have a chance to sum up, but you'll have to tell me whether you're going to do it as individuals or as the united voice for each group. You'll have to make that decision before you sum up.

Okay, Mr. McLeod is last.

Mr. McLeod: He raised a couple of points on the question of families with children. I'm sorry I had to give you a brief comment when I was speaking the first time. In my written material, I make the comment that the people who are really taxed to death in the country are the low- and middle-income families with children, and something the alliance has agreed on is that there should be much more allowance. There used to be. It was taken away in 1983 and it should at least be restored to the level it was at before that time.

My point in talking about the level of income, which he referred to as $50,000, is that I recognize that at $50,000 one is very fortunate, but at the same time I'm talking about fairness in taxation. The effects on me of the clawback of old age security put my marginal tax rate 8% higher than that of someone else. So what I'm talking about is a fair taxation rate.

Yes, I agree that the tax rate probably should be higher. I have a quotation in here that taxes are what we pay for civilized society. That's a fair statement.

The Chair: Thanks, Mr. McLeod.

Mr. Reed.

Mr. Reed (Halton - Peel): Thank you, Mr. Chairman.

As one who leaves his household finances largely in the care of his dear wife, I feel very much humbled to be surrounded by so many experts presenting so many different points of view.

There are a few things that have jumped out at me in this set of hearings, and I would just like to clarify some of these. Mr. Coles mentioned that the Chamber of Commerce really wanted UI to get back to being insurance per se. I think that was the term he used.

I wonder if you have canvassed your own membership to find out what their response to that point of view would be. Some of your membership must be utilizing UI as an income supplement.

Mr. Coles: That's right. The only thing we have done with respect to the suggestions presented in this brief is presented it to our executive. We did not have time to submit it to the entire membership.

Mr. Reed: All right. In the interest of brevity, I'll move on.

Mr. Ranachan, you made the statement that total reliance on the private sector for job creation was unsustainable. I would just like to ask you what proposals you might bring to the table to supplement the private sector job creation area.

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Mr. Ranachan: In keeping with some of the other speakers who talked about how if we are facing a fiscal crisis right now - and we are facing a crisis: a fiscal crisis, a political crisis, and an identity crisis - it seems to me at other times when we have faced these kinds of crises we have come up with a plan to do something about them. It seems to me the government had a role during the Second World War, and it should examine that role again and look at unemployment.

I am not saying to ignore the private sector. All I was trying to point out is that I think there'd have to be a partnership that has to be done in conjunction.... You cannot rely on the private sector alone to create enough jobs to get us out of this financial mess.

Mr. Reed: You realize, of course, we're trying to attack the deficit and reduce it, God willing, to zero in order to begin to pay down the debt. Where do we find the balance there?

Mr. Ranachan: There are different kinds of cuts. There are smart cuts and there are stupid cuts. I think you really have to look at.... To make cuts that are going to cost you more money down the line in increased mental health problems, increased incarceration, increased costs to the justice system, increased costs for remedial education - if you cut indiscriminately, you're going to cause all these problems later on and you're going to have to face them tenfold. It seems to me you really have to think about what are smart investments and what aren't such smart investments.

Mr. Reed: I just heard a comment about the inheritance tax. Currently when there is a death the capital gains tax comes into play. I certainly would not advocate a return to the day when I see my neighbours losing their farms, which happened when we did have an inheritance tax.

Mr. Buller: Could I respond to that?

The Chair: I'll tell you what I'm going to do. I'll give you a chance now to respond in any way you want. You each have thirty seconds as we go around the table. But you have to answer me first: do you respond as individuals or as groups?

A witness: I'm here with a group, Mr. Chairman.

The Chair: Okay. COMER has suggested we respond only as groups. Who would like to lead off for COMER? Mr. Biddell.

Mr. Biddell: The question was raised over here, Mr. Chairman, how do we sensibly cut expenditures and resolve the deficit? The only cut in expenditures that the government can make and that doesn't immediately result in kicking people out of their jobs when practically no jobs are to be found is to cut the cost of servicing government debt. All of our provincial governments are in the same bind, and they have no way of resolving that problem. So they are forced to get rid of people, to treat people as commodities, in order to resolve their deficit problem.

The only way it can be done without doing that is to reduce the tremendous expenditure every one of them has in servicing their debt. The only government that can respond to that in a sensible way - and it was done before, in 1939 - is the federal government. All provincial governments, and very soon all municipal governments, are going to be caught in a trap that only the federal government can open; and the federal government will not look at it.

The Chair: Thanks, Mr. Biddell.

Mr. Healy.

Mr. Healy: I would like to leave this committee with a sort of metaphor, as it were; that is, think of Canada as being in what I might call a lifeboat. At the bottom of the boat, at one end, there is an extremely large and heavy anchor. It happens to be at the end of the federal government. As the anchor begins to pull away the floorboards and the waters sink in and it sinks lower and lower, there is a very strong tendency from the federal government to say, gosh, we have to get rid of this weight at this end. So they push it over to the end where the provincial governments sit, in the form of reduced transfer payments. The provincial governments have no option except to push it down farther, to the municipalities, and of course those they serve, namely the disadvantaged, the poor, and our children. Of course, they being least able to cope, that's where the weight comes to rest. That's what is happening.

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I ask why Canada should sink with this debt anchor when we can simply throw it overboard. That's what a debt-equity conversion always achieves.

The Chair: Thanks, Mr. Healy.

Mr. Kumar, please.

Mr. Kumar: Just for the record, I want to read our specific request for the review of policy statement B-132, in regard to the application of GST to charities. We are requesting that this particular policy statement be changed so that any [it*Technical Difficulty - Editor] that presently have come about between the treatment of export services between the private sector and charities have the same parity.

The Chair: Thank you very much, Mr. Kumar.

Ms Baker Collins.

Ms Baker Collins: I have a few brief comments.

Canada is a national community and its citizens share a mutual responsibility to ensure that all have access to the resources needed to live a responsible life. This government has shown itself committed to reducing the unsustainable fiscal deficit. It must now show that it is equally committed to addressing unsustainable deficits in social and environmental well-being.

One specific way to do that is to reduce the RRSP tax expenditure and use those dollars to address child poverty. In that way, every sector of society would more fairly carry the burden.

Thank you.

The Chair: Thank you, Ms Baker Collins.

[Translation]

Mr. Norbert Piché, please.

Mr. Piché: Various ways to reduce the deficit have already been mentioned. Nevertheless, there are people who are more disadvantaged than others. When we contemplate cuts, it is important to keep this fact in mind. Thank you.

The Chair: Thank you, Mr. Piché.

[English]

Mr. Buller.

Mr. Buller: We feel that today's submissions from the socially conscious groups preserve our social programs and are realizable. and we feel the federal government has an obligation to honour that commitment.

Regarding the debt, it's obvious that as long as you have high interest rates the debt will rise. It will not go down. The Governor of the Bank of Canada must be summoned to meet with the Prime Minister and Mr. Martin and told to have a lower interest rate policy.

I also believe - I saw it on cable TV - that your committee had a submission from the Business Council on National Issues. I don't know whether it was you who asked the question of the head of the BCNI about how they would create jobs. The Financial Post has revealed that the BCNI corporations have cut 215,000 jobs, and when you or one of your MPs asked the head of the BCNI how he would create jobs, he said, ``Vicariously.'' This was the answer from the business community.

The Funk & Wagnalls dictionary defines this. ``Vicarious'' is defined as ``an imagined participation in an experience not his own''. That's the official definition.

Some hon. members: Oh, oh!

The Chair: Thanks, Mr. Buller.

Mr. LaMarre.

Mr. LaMarre: Listening to this group and the group that preceded us, I can't help drawing on my own roots. I'm from pioneering stock in western Canada. Most of the pioneers who built this country, as well as the immigrants who have come to this country and have helped build it up, have one thing in common. They sacrificed their own individual desires for the sake of their children and the future of their grandchildren.

I think we have become a nation of addicts. In particular, for the last 30 years my generation has spent money we did not have, and we did it by borrowing it from the future, from our children and our grandchildren. We're paying the price right now and we're going to pay a much bigger price if we don't get this deficit under control.

The best thing we can do to generate jobs is reduce our deficit. That will communicate a signal to the business community that this is a country that is serious about getting its finances under control and the interest rates will come down. And when those interest rates come down, jobs will come because the housing industry and the small businesses will be encouraged, and that's where employment will come from.

The Chair: Thanks, Mr. LaMarre.

Mr. Lee.

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Mr. Lee: Thank you. I'll be very brief.

I want to emphasize the points mentioned earlier about cuts. If they have to be made, certainly we expect that they be made in an intelligent fashion. Our fear is that, given the current political climate, the government may be willing to give in to mean-spirited and poorly informed public sentiment against a lot of the disadvantaged groups in our society.

We're not naïve enough to think a government can succeed without public support, but we do feel there is an obligation to do public education where there are problems in that respect and to recognize that there are going to be serious costs if we do not have equal rights for the disadvantaged in our society. In doing whatever you have to do, keep in mind what your vision of a Canada of the future will be.

Thank you.

The Chair: Thank you very much.

Mr. Ranachan.

Ms Kitchen: No, I'm speaking on behalf of the Child Poverty Action Group and he's speaking on behalf of the Social Planning Council.

The Chair: Oh, fine.

Ms Kitchen: Every time I see the list in Forbes magazine of the ten richest men - and they're all men - in the world, I'm always amazed at how many Canadians manage to creep in there. Our economy is the smallest amongst the G-7 countries. Obviously something is wrong with our tax system.

That reminds me of something. When I was a PhD student at the London School of Economics, I took a course on tax policy. My professor always said Canada must have tax geniuses develop our tax policy, because our system looks as if it is equitable, but it is not, because of all the tax expenditures we have.

I would like to leave you with the recommendation that when you make your decision, think about some of the steps that have been taken, for instance, by some of the states in the U.S., which have introduced a surtax on incomes of $250,000 and up.

As to the inheritance tax, most people would consider an inheritance a gift. Why should we not be paying taxes on it?

As to the loss of the family farm, there could be exemptions to make sure that those who will continue operating their family farms would be exempted from taxes.

The Chair: Thank you, Ms Kitchen.

Mr. Ranachan.

Mr. Ranachan: I'd like to make two points.

One is in response to Mr. Grubel. He talked about the difficulties Vancouver businesses seem to be having vis-à-vis the U.S. I have a copy of a KPMG report - and as far as I know they haven't gone over to the voluntary sector so far - done on international trade in Ottawa, which does a comparison of business costs in Canada and the United States. It's staggering, when you read this document, how competitive we are, over a whole range of business costs, compared to the U.S., whether you're looking at electricity, transportation or employer-sponsored benefit plans. On a whole host of things, we're all ahead of the U.S. Maybe he should have a look at this report.

The second point I'd like to make is that it seems to me members of this committee, but also members of the Parliament of Canada, really.... The phrase ``We're cursed to live in interesting times'' has a lot of resonance. You clearly have decisions to make about who to listen to.

If I read the Ekos survey about reinventing government, I look at what the Canadian elite sees as priorities and at what the so-called ``rest of us'' feel. There were 800 so-called elite surveyed, and the other 2,000 people surveyed were ordinary Canadians. You find an incredible chasm between what the elite insiders think are important issues and what ordinary Canadians, the so-called general public, think.

I'd like to isolate a few of them. Where does the elite rank competitiveness? They rank it as the number one value the federal government should be pursuing. They rank minimal government as the number three value the federal government should be pursuing.

You then ask the general public what they think. Well, they think competitiveness is number 20 out of 22. They think minimal government is 22 out of 22 values. There has to be some kind of reconciliation of this gap.

Unfortunately for a lot of us, the Martin budgets of 1994 and 1995 reflect David Dodge's views on where this country is going. It's largely a reflection of the elite perspective.

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I think most of us here agree that we have to rethink the way in which we approach spending, government expenditures and income. However, I think it's rethinking as opposed reinventing. Reinventing is the Gingrich polarization-social disintegrative view. We have to rethink, not reinvent. Thank you.

The Chair: Thank you, Mr. Ranachan.

Mr. Coles: Mr. Chairman, on behalf of the Mississauga Board of Trade and all of us here, I appreciate the opportunity to make this presentation.

We've heard from a lot of different sources that we have an issue, not only with the deficit but more importantly with the debt, which will be $600 billion before this situation is turned around. That results in debt carrying costs of $55 billion a year. You have the unenviable task of coming to grips with that, but we feel it has to be done because it's a burden on our society.

Mr. Healy pointed out that we're well into the economic cycle and could be into a severe downturn in the next few years, so it would be important to get the situation in hand prior to that. We don't want to be in the situation New Zealand was in a few years ago and not be the masters of our own destiny.

The other issue is that we in business must be competitive. It's a global economy and we're working to do that. The report just mentioned indicates that we're not as bad in Canada, but we don't want to get any worse either. We have to be competitive in order to provide the jobs that are so desperately needed and provide people with dignity and an honourable profession.

The Chair: Thanks, Mr. Coles.

Mr. Krehm: Mr. Chairman, may I be allowed a question - not a speech?

The Chair: We're 15 minutes late, Mr. Krehm.

Mr. Krehm: I will be no more than one minute.

Can we pay off the debt when we read on page 22-6 of the Canada Yearbook that when the federal government acquires buildings, land or equipment, it writes it off in a single year and enters the value on its balance sheet at $1? Apply that non-accountancy to the private sector and what would you get?

The Chair: Poverty.

Mr. Krehm: I'm concerned about the debt, but that is why we should introduce capital budgeting in the federal accountancy, as was proposed by the Auditor General of Canada in 1986.

The Chair: Thanks, Mr. Krehm. It's an interesting concept.

Mr. Krehm: Have you an answer?

The Chair: Yes, I will talk to you about it after. Thank you.

I regret that we don't have more time. I know that is probably a disservice to some of our witnesses. I wish we did have more time.

Let me attempt to summarize what I've heard over the last hour and three-quarters. All of you recognize that the deficit and debt are huge problems, but this is where people part company. I have been most impressed by those in this group and the previous group who talked about the importance of not taking budgetary measures that will hurt the most vulnerable or most in need.

I hope that is the consensus of everyone here. I'm not sure it is, however, because we then get into the issue of tax increases versus spending cuts. People are virtually split on some of these proposals, except that we have had two different proposals.

One proposal is put forward by COMER, which says that we can get rid of a lot of our $40 billion plus a year in interest expense if the federal government prints money and lends it to the provinces at 0% or a very low rate of interest. If it's that easy, then let's do it.

Mr. Healy has come up with a unique concept, that we convert our federal or public debt into equity on the analogy of a private corporation that issues equity and doesn't have to pay interest on it, but where the holders of that equity share in the future profits. It's a novel concept.

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We've heard some ideas about areas for further tax increases. We've also heard an interesting idea that labour-intensive industries are taxed more than those that resort to high technology and get the fast write-offs.

You've given us a lot to think about. You have made us more aware of the plight of those who are the least well off in our society. On behalf of all members, thank you.

We will adjourn for five minutes for lunch.

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The Chair: Again, I apologize for our delay in getting started. We will not abridge your time in any whatsoever.

This afternoon we have, from the Ontario Coalition for Better Childcare, Kerry McCuaig: from the Roncesvalles Business Improvement Area, Andrew Musial; an individual presentation by Mike Jensen; from Senior Link, David Kelly; from the Canadian Association of Retired Persons, Lillian Morgenthau; from the Metropolitan Toronto Association of Legal Clinics, Ms Channan; and from the Black Women's Coalition, Ms Keyi.

We look forward to your opening presentations and thank you very much for agreeing to meet with us over this noon-hour period.

Who would like to begin? Shall we begin with you, Mr. Musial?

Mr. Andrew Musial (Vice-Chairman, Roncesvalles Business Improvement Area): Good afternoon, committee members. With me is my colleague Jerry Taciuk.

Our organization is the Roncesvalles Business Improvement Area. The Roncesvalles village BIA is a self-funded association of businesses under the umbrella of the Ontario Municipal Act. The City of Toronto collects a tax levy for every business in the BIA and then transfers the funds to the BIA. The BIA is required to forward a budget to the City of Toronto, passed by its executive and duly voted on by the membership each year - something similar to the process followed by the federal government. It is the duty of the executive to manage the limited financial resources in a prudent and efficient manner and to make decisions on how the money is to be spent on a yearly basis, including long-term capital projects.

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To start my presentation I would like to read you a quote:

...all men are created equal, that they are endowed by their Creator with certain inalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. - That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, - That whenever any Form of Government becomes destructive to these ends, it is the Right of the People to alter or to abolish it, and to institute new Government...

The above words may have shocked you, but the public is in this very mood. The last election demonstrated that the public is mandating economic revitalization, fiscal restraint, universality of programs in health, and the issue of social development within the Canadian context. All these issues must be dealt with in a justifiable manner but should not be reflected in enormous fiscal deficits. This is the message we are delivering today.

Thank you for taking the opportunity to listen to the concerns of the individual groups. The opportunity to be before a finance committee represents the democratic principle for which Canada is known globally. It makes for peace, order and good government.

As you are aware, the ratio of total government debt, federal and provincial combined, has risen dramatically since the early 1970s. The debt ratio has risen virtually every year and is today at 100% of the GDP. Interest rates exceed the rate of economic growth, and the federal portion of debt to the GDP has risen from approximately 30% to 73% today. Given that the interest rates exceed growth by 3 to 4 percentage points, the revenue intake must not exceed program spending by 3.5% of the GDP, or close to $30 billion. That's our deficit.

There is no magic solution to bringing down the deficit and maintaining the level of services which are currently provided or funded via transfer payments by the federal government. Recently the referendum on the separation of Quebec has added more downward pressure to economic recovery. The fundamental processes that govern our economic status internally and globally must be reworked if Canadians expect to maintain their high standards of living.

First of all, the root causes of debt finances and root remedies must be applied to the economy. That is to say, we must make the federal government, the provincial governments, and the municipal governments ultra-prudent and efficient.

Budget mechanics must be rethought from the ground up. Departmental and ministerial input into budget processes must not reflect phantom requests in order to maintain budget submissions. Actual budgets must be taken as the base for starting spending cuts.

Departments can no longer be in competition with other departments and ministries with other ministries. There has to be a team approach to the physical management of the economy. As global economics emerge and mature, the team approach of many multinational companies has also expanded and has in fact been mandated by global economic growth and success.

The Chair: Excuse me, Mr. Musial. I just wanted to ask how much longer you thought your opening remarks would be.

Mr. Musial: Just a little longer.

The Chair: About half a minute?

Mr. Musial: Yes.

The Chair: Okay, thanks a lot. We're trying to keep opening presentations down to about three minutes. I'll give you lots of time afterwards.

Mr. Musial: Fine.

Each federal program must be examined in respect of spending and realistic financial budget targets established. Federal programs must be analysed with respect to priorities, necessity of programs, public or government utilization, cost analysis, level of service provision, form of delivery, and the overall integration of a central policy.

I'll skip over some of the other parts here. The main point is that we need a solution to address this interprovincial dispute, which really is central to our economic revival. Certain powers the federal government has now are sought out by the provinces. What we need to do is to prepare acts and mandates in the acts that will give the necessary powers to the provinces without destroying the central power of the federal government. That is the use of declaratory acts.

For instance, in employment the federal government can hand over some of the powers, but under a mandated act that gives the provinces a sphere to work in. The federal government also retains the overall control of these programs. So by using declaratory powers under the Constitution, we can satisfy the needs of the provinces, at the same time fostering economic growth.

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Thank you.

The Chair: I take it Mr. Taciuk is with you?

Mr. Musial: Yes.

The Chair: Okay, thank you very much.

Mr. Jensen, please.

Mr. Mike Jensen (Individual Presentation): Thank you, Mr. Chairman.

I'm here representing myself. I'm not an expert in economics, but I've done a little bit of simple number crunching and simple plotting in looking at the deficit and debt question to see what it means.

Nowadays we're in a big turmoil over a debt that is equal to 58% of our GDP as of 1994. That seems to us to be a very high level, but back in 1945 our debt was 145% of GDP, and somehow we survived that period. As a matter of fact, in the ten years right after that, we decreased our debt from 145% of GDP down to 55% of GDP, and we did it without the type of pain and sorrow we're seeing nowadays.

Since 1955 our debt as a proportion of GDP has looped down and gone back up again; it looped down to 21% back in 1977 and has come back up to 58% today. In looking at this question, we need to look at the economic conditions and what was happening tax-wise and expenditure-wise back in the time period from 1945 to 1955 to see what sorts of good things we were doing back then that improved our situation and put us in a good situation and see what we've done differently from 1955 until today that has made our debt and deficit condition worse.

The Chair: Thank you very much, Mr. Jensen.

Ms Keyi, please.

Ms Vuyiswa Keyi (Black Women's Coalition): I'm representing two organizations: the Black Women's Coalition and Women's Health in Women's Hands.

The Black Women's Coalition is a coalition of black women throughout Ontario and in other provinces. We've been looking at the situation of the health status and the position and the problems of black women, particularly in Canada.

Women's Health in Women's Hands is a community health centre funded by the provincial government through the community health branch. It looks at providing services for immigrant refugee women, older women, teenaged women and women with disabilities.

We are really concerned with the direction the federal government is taking in its financial decisions. For us, the major piece is this whole push for devolution, which we see as devolution without federal responsibility and accountability to ensure there will be no loss of human rights to people in the various provinces.

What we're seeing is the federal government cutting more and more the funding they give to provinces for social and health services. As a result, we're seeing provincial governments in turn deliberately cutting more and more from poor people and ensuring there are more violations of human rights in that context.

Poverty is a violation of human rights. If a government is facilitating the increase of people living in poverty and without housing, it is also a violation of human rights. Canada is known internationally for upholding all universal human rights and fighting very strongly to ensure that human rights are not lost.

We are concerned particularly about women's health status in this country. We are concerned about the fact that the Canadian government has agreed to and pushed for measuring and valuing women's unremunerated work and contribution to the economy, yet the kind of work that's being done now is going to make it difficult to even be able to start to measure the amount of work and contribution women are making to the economy of this country.

We are concerned about the impact of the CHST and what that does to the way in which services are provided to people in the various provinces. We are also concerned about the impact of the UIC legislation introduced by Minister Axworthy, which has in essence forced people to continue to work in work environments that violate their human rights for fear of losing their unemployment payment if they decide to quit their jobs if the conditions are not healthy for them.

We are also concerned about the kinds of questions we have been asked to prepare answers for, to deal with this in terms of deficit reduction, budget measures to create an environment for jobs and growth and also what the federal government should focus on.

Our main concern is the third question asks us to consider areas for further cuts when our first premise is there shouldn't be the cuts that are happening right now in social and health services. The cuts that need to be done by the federal government should actually focus more particularly on disarmament, cutting the contribution to military budgets and cutting back on support for the rich and the corporations not paying their taxes.

We would like to see the federal government take responsibility by reducing real interest rates, reducing the taxes on the poor and the middle class, making corporations and the rich pay their share of taxes, protecting Canada from foreign banking interests, supporting health and social services, and ensuring that human rights are not violated.

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In the last few years.... Right now 4.8 million people in Canada are living in poverty, and about 23% are children. Over 3 million people a year depend on social assistance to avoid destitution, and almost 40% of those are children. Of single-parent families, 60% are led by women and live in poverty, and 55% of single elderly women are poor. These are serious statistics, not just in terms of numbers but in terms of the reality of peoples' lives, and they need to be looked at.

Our major concern is that Canada has a particular face that it puts out internationally, and what's happening right here runs contrary to the position Canada has taken around ensuring that people have a livelihood, that people have universal health services. The CHST will make it very difficult for the federal government to ensure accountability by provinces to not reduce and cut health services and support for people in various provinces.

I'll stop there for now.

Ms Suchetna Channan (UI Inter-Clinic Working Group for Metro Toronto, Metropolitan Toronto Association of Legal Clinics): Mr. Chairman and committee members, I'm here representing the Metropolitan Toronto Association of Legal Clinics, and more specifically, the unemployment insurance working group within the larger group of legal clinics.

Briefly, our mandate at Legal Clinics is to serve the area of poverty law, and unemployment insurance comprises a significant proportion of this mandate. My primary purpose here is to address the latter two questions that were submitted to us for consideration. We have a number of positive recommendations, as well as suggestions for ideas that we cannot support because we find them counterproductive.

Under training and jobs, we feel that unemployment insurance must encourage claimants to seek retraining when suitable jobs are not available. It must target those who are at a disadvantage in the employment market, because of age or lack of basic skills. There must be public education programs to educate employers and others about the capabilities of older workers and other classes of workers that are discriminated against. Moreover, there must be a commitment on behalf of government to see that those employers who discriminate against classes of workers having the requisite skills and abilities are penalized for such discrimination.

We need to become competent in identifying needs and resources. Money must be devoted to developing expertise and training potential trainers and counsellors to meet this task. The difficulty in doing so should not lead us to abdicate this responsibility to the private sector. Both sectors must work together.

Finally, under training and jobs, we believe that training programs should not be funded out of the unemployment insurance fund. Other funding for training and educational programs must be found.

We agree with the concept of creating a special labour market investment fund. One of the proposals Human Resources Minister Lloyd Axworthy may be suggesting on Wednesday relates to the human resources investment funds that will reinvest $800 million of the savings into employment programs, including a wage subsidy to encourage people on unemployment insurance to take low-wage jobs. We're in favour of this human resources investment fund, but once again, the funds should not come out of UI premiums.

With respect to financing unemployment insurance, the UI fund must be allowed to build a surplus in times of high employment. A number of people today have commented on the surplus issue, and stated - and we strongly believe - that the surplus should continue during times of high employment. The cap on premiums should be raised. This would be in line with UI schemes in other industrialized nations. The premium rate should be frozen at the same time, thereby providing a net inflow of revenue into the system. There should be a form of experience rating similar to that in the workers' compensation system in Ontario. Finally, the government should impose an employer tax on overtime wages paid to employees already earning above the increased UI wage cap for premiums.

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With respect to the workplace - I have only two more short items - while unemployment insurance should not discourage marketplace job sharing, neither should it encourage it.

With regard to benefits, there should be flexible periods of eligibility with longer periods in recessionary times, rather than a further reduction in the benefit period.

We support the rectification of regional disparities through the unemployment insurance system. Again, I understand Minister Axworthy will be proposing something that may be favourable to Quebec, northern Ontario and Atlantic Canada, because of the short-term jobs in those regions.

The deterrent effect on claimants of complete disqualification does not outweigh the potential for employer abuse, and this penalty must be eliminated.

I wish to conclude with the suggestions that we are opposed to. We do not support the notion of a longer qualifying period. We do not support time-limited earnings supplements. Ultimately, these contribute to long-term and repeat unemployment - they do not resolve the problem. A big focus of the proposals that Lloyd Axworthy will make on Wednesday is that people will lose benefits based on the number of times they file for unemployment insurance. We're strongly opposed to this suggestion.

Training subsidies to employers are harmful to the concept of creating meaningful jobs. With respect to special benefits, we do not support the notion that special benefits such as sickness, maternity and adoption benefits should be part of a separate benefit scheme. We are against the concept of looking at family incomes and attaching income criteria when paying unemployment benefits. In our view, this will have an adverse impact on women's financial independence.

We oppose the creation of a two-tier system of unemployment insurance. This two-tier system penalizes people for becoming unemployed when they have no control over that. Evidence does not show a correlation between individual repeat use and generosity of unemployment insurance.

The Chair: Thanks, Ms Channan.

Mr. David Kelly (Policy and Planning, Senior Link): I'd like to thank the committee for hearing from me today, and apologize for not having notes. Unfortunately, we didn't have enough time to get them to you. We'll be sending them later.

Senior Link serves about 1,800 people in the east end of Toronto. Most of those people are frail, vulnerable seniors who are house-bound, and about 85% do not have relatives in the metro Toronto area who can assist them. We see the direct effects of our economic crisis. I hear it on the phone every day. I get calls from 80-year-old women who have to wait to see a specialist in our health care system. I get it from people who desperately need food delivered to them because they haven't made it through the month on their pensions - because of rental costs and for many other reasons. I see it every day from 55-year-olds who have lost their jobs, have few opportunities for employment, but will not have access to pension funds for at least 10 years.

We see the effects of deficit reduction every day. It's hitting the streets and it's hitting the most vulnerable people in our society, the ones all of us are trying to protect.

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I'm not here to argue about whether we should be doing deficit reduction or not. I just want you to know the effect is really great, and it's going to get worse as all levels of government cut back.

The other thing I really want to talk about is responsibility. You hear many times it's not the government's responsibility to provide these services, and it's up to the individual. For children, the elderly, and many groups in our society, it's everybody's responsibility. That includes our governments, our businesses, and our corporations. It's the responsibility of all of us to work with those people. I think the best way any government can do that now is to go right to the communities where they're working, and by that I mean just spend your money smartly and invest in local neighbourhoods.

We have some ideas on pension planning, obviously. I'd like to thank you for other programs the federal government has operated in the past, which I think are very important, like the SIP or seniors independence program and New Horizons. Those kinds of things have great impacts on local communities. They are really some of the ways you can reap benefits by providing help directly at very little cost, that make a difference to people's health and how they use other services. We can get into that later.

Thank you very much.

The Chair: Thanks, Mr. Kelly.

Ms Rothman, I didn't introduce you.

Ms Minna (Beaches - Woodbine): By the way, Senior Link is a wonderful volunteer organization. It does a fantastic job with seniors.

The Chair: It has nothing to do with the quality of representation they receive in Ottawa, I'm sure.

Ms Rothman.

Ms Laurel Rothman (Chair, Ontario Coalition for Better Childcare): I'm here instead of Kerry McCuaig for the Ontario Coalition.

The Chair: You're with the Ontario Coalition for Better Childcare.

Ms Rothman: I actually didn't get a chance to look at the questions until about five minutes ago.

The Chair: Don't worry about the questions. We're here to hear your concerns.

Ms Rothman: We have a novel approach regarding budget measures that will create an environment for jobs and growth, and I might say for healthy well-being. On behalf of the Coalition for Better Childcare and the Childcare Advocacy Association of Canada, I am really here to issue a challenge to the Government of Canada.

I should say that as well as being a broad-based advocacy group in Ontario of parents, child care programs, women's groups, trade unions, religious groups, and interested citizens, we represent about 500 programs across the province and provide a network of specific services.

I'm here to issue a challenge, which is really in the national interest, to announce a national child care program containing principles and criteria that will guide public expenditures on high-quality child care in Canada, and an action plan of how you're going to implement it and phase it in over the short, medium and long terms.

The realization of this plan by next March would be most fitting, since that's the tenth anniversary of the report of the Task Force on Child Care, known as the Katie Cooke task force. Now, how many of you were in Parliament in 1986?

The Chair: The good people had thrown me out for that period of time.

Ms Rothman: I knew there was a hiatus.

The Chair: In their wisdom.

Ms Rothman: You may recall this was a task force established by the Trudeau government, that later reported to the Mulroney government. The report called for:

Federal leadership in developing complementary systems of child care and parental leave as comprehensive, accessible, and competent as the health care and education system....

In those days, we said it was the issue of the 1980s and there was a state of crisis. The report said it required federal intervention and leadership.

In the past decade limited, if any, progress in child care has been made. Approximately the same number of children are being served, while female participation in the labour force has increased considerably. About 68% of females with children under three are in the labour force, and the number of children living in poverty has gone up by approximately 34%. And I know you heard quite a bit about that earlier.

The impact of the Canada health and social transfer, with no guidelines and substantially lower transfer payments, will bury child care. You may recall that last Friday was a day of action in the province of Ontario, where in 23 communities parents and children did a number of things. Some closed down for five minutes. Some closed down for the day. Some walked to their MPPs and some walked to their MPs, because we're scared.

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Anyway, child care is not an established program, but a patchwork of services. In the past, we'd urge you to rescind the CHST. We'll repeat that, but we'll also say that we urge you to amalgamate the existing child care expenditures under the Canada assistance plan, the child care expense deduction, dependent care allowances, aboriginal head start, and the new funds you've committed in the red book into a designated child care fund that would be guided by the principles that would ensure high-quality services, while recognizing provincial, territorial and first nations jurisdictions.

A comprehensive child care program would do a number of things. It would help Canada meet several international conventions and agreements, including: the Beijing Platform for Action; the Nairobi Forward-Looking Strategies, adopted in 1985; the convention to which I believe you were referring, which is for the elimination of all sorts of discrimination against women, which is in international law and which was in 1982; and, of course, the UN Convention on the Rights of the Child.

I had the opportunity of meeting a senior official from the UN last Friday when she was listening to hearings. She basically said that, given what she'd heard about Canada, it looks like a developing country suffering the perverse effects of adjustment policies.

At any rate, we'd be joining the countries in continental western Europe, not only the Nordic countries but Italy, Greece, Spain, France, Germany, as well as Denmark, Sweden and Finland, that have the provision of universal, accessible, full-day, publicly funded early childhood services. These are helping economies.

I think this is an area in which you can take leadership. We'll talk some more later.

The Chair: Thank you, Ms Rothman.

Mrs. Morgenthau.

Mrs. Lillian Morgenthau (President, Canadian Association of Retired Persons): Thank you very much for allowing CARP to come. However, before I begin my official presentation, I thank you very much for introducing the people who are going to be on the round table. However, my members would like very much to know who is sitting at your end of the table. Would you introduce them?

The Chair: They are a very nefarious bunch of people, I can assure you.

Mrs. Morgenthau: I really would like to know whom I'm addressing.

The Chair: You're addressing a member of the Reform Party, the Bloc Québécois, and seven Liberals.

Mrs. Morgenthau: The names?

The Chair: Mr. Walker, Mr. St. Denis, Mr. Shepherd, Mr. Discepola, Mr. Grubel, Mr. Brien, Mr. Crête, who will be here, and Mr. Peterson.

Mrs. Morgenthau: Thank you.

The other thing I would like to also say is that CARP is an association of over 225,000 members. It's a national association that takes absolutely no money from government. It has a paper that reaches over 500,000 Canadians. It is for anyone over 50.

We were not invited to come here. We didn't know anything about it.

The Chair: The only person at the table that applies to is Jesse Flis.

Voices: Oh, oh!

Mrs. Morgenthau: Well, Jesse, I'm telling you that I'm really annoyed we didn't hear about this committee. I certainly would definitely have come. It was only this morning and with a very great pushing of staff that we put together something for you, which is not really up to scratch.

The Chair: Don't worry about your written presentation. We know who you are.

Mrs. Morgenthau: Do you? Do you remember?

The Chair: Of course we do. Yes, of course we know who CARP is. We just look forward to your outlining to us your brief and your major concerns about the next budget.

Mrs. Morgenthau: All right. We see the attack on the incomes and assets of seniors as a Machiavellian attempt to divide and conquer by pitting one generation against another. It encourages younger people to look at the cost of providing benefits to the elderly without due regard for what they themselves have received in the past or will receive in the future in terms of education, health care, pension, etc.

Once more, seniors continue to pay income taxes, property taxes, GST and all kinds of other taxes. In other words, when we were young our needs were provided by others, who are those now classified as old. Like the needs of the young, the needs of the elderly have to be given special consideration.

The attack on the incomes of seniors and those planning for retirement is based on the incorrect view that seniors as a group are wealthy and add next to nothing to society in return for government handouts.

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In addition, costs of social programs for seniors are often exaggerated, and the need for these programs is underestimated. When we talk about Canadians aged 65 and over, we are talking about people who lived through a depression of the 1930s, several recessions since then, and World War II. They have prudently saved whenever possible, often by doing without in order to provide for their old age without being a drain on society.

Most seniors live on fixed incomes with little opportunity to increase it. As a country, we are proud that the longevity of our people has increased. Canadians are living longer.

The other side of the equation is that even their retirement savings are at a risk of not being enough for older years. Do you realize that there are almost 100,000 North Americans who are between the ages of 90 and 100? And we're getting older.

People now over 65 have done their best to provide for their old age. Many did not have the opportunity to invest in RRSPs in their productive years. Those now planning for retirement may have had that opportunity. In both cases, however, planning was based on universal programs that governments called sacred trusts.

CARP is a member of a coalition of seniors for social equity representing more than 500,000 seniors. The coalition paper entitled Seniors' Incomes: Myth and Reality was released on December 1, 1994. It showed that governments during the past ten years have been cutting seniors' tax exemptions, credits and old age securities credits.

The Minister of Finance was quoted as saying that every time seniors lose a dollar, they don't have the capacity to replace it. It is our contention that over the past decade, there has been a piecemeal - but steady - dismantling of the income security structure for the elderly.

The Chair: That's true.

Can I ask you to summarize very quickly, because I just want opening comments. We'll have time to finish off some of these things, Mrs. Morgenthau.

Mrs. Morgenthau: I have a page and a half left.

The Chair: I take it your bottom line is that you don't want any further cuts to seniors.

Mrs. Morgenthau: Our bottom line is that we don't want any further cuts to seniors. Also, we don't want a family income.

The Chair: Understood.

Mrs. Morgenthau: We are very, very cognizant of the fact that there is a deficit, but we feel we've done our share and we'd like to see some other innovation.

The Chair: Thanks very much Mrs. Morgenthau.

Mr. Leigh-Bell, please.

Mr. Peter Leigh-Bell (Peter Leigh-Bell and Associates): Thank you Mr. Chairman. I'm here not representing any interest group; I'm an analyst. You may remember me from my presentation last year. Unfortunately, I only had two hours' notice to attend, so I haven't come here with a written presentation.

What I presented to the committee last year has now been verified by no less a person than the auditor general and by the public accounting committee of the Canadian Institute of Chartered Accountants.

First of all, I'd like to congratulate you on your indulgence and patience in saying that you don't really care whether the people making presentations here answer the three questions that were asked others. I would suggest that the purpose of this committee is to assist the Minister of Finance in a tremendously difficult task. This year, as last year, I want to specifically address the three questions that were asked.

The first question asks what a deficit reduction target should be and how it can be best achieved. With all due respect to everyone, I would say that is the conclusion. Before we can answer that question, we have to ask ourselves what are we doing?

Last year, the thrust of my representation was that the accounting procedures in the operation of government are not sufficient to provide not only the Minister of Finance but the ministers responsible for individual departments with the information they need to make decisions. I will go further and say that if it were otherwise, a lot of the presentations I've heard today and that I heard last year would not have been made because the information would have been readily available to the public.

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The purpose of this meeting is to address the problems of deficit and debt. The first thing that comes to mind is that, with all due respect to everyone here, first of all very few people can define the difference, how they interrelate, and how it relates to their presentation. To a large extent, the presentations here are made without regard to solving this particular problem.

Only yesterday, in a discussion on the CBC, a very well-known personality - I can't remember who it was - literally did not know the difference between deficit and debt. Very few people understand that a deficit results in an ever-increasing debt.

So I feel there's not much point in asking the committee not to tax me but tax somebody else. Rather, we should look at specific areas where deficit reduction can be achieved.

The Chair: Could I ask you to wind up very quickly, please, Mr. Leigh-Bell?

Mr. Leigh-Bell: Yes.

The first item is, of course, accounting. The auditor general, throughout his report -

The Chair: What's the point?

Mr. Leigh-Bell: The point is that the auditor general, as I reported last year and as every auditor general in the past has said, is saying there should be accounting for value analysis. What do we get for our money? For instance, in this year's report there is a methodology of analysing the interprovincial transfers, all of which have apparently resulted in not a single permanent job. This is just one.

When we talk of cutting the deficit on the backs of the people who can least afford it, I suggest we look at other areas. We look, for example, at the multitude of committees and various organizations. Last year The Globe, I think, published 250 of them. The need for all these organizations has long disappeared, but they have not been cut off; they consume a very large amount of money.

If I can put in a little anecdote, at the beginning of World War II it was discovered in Britain that three people were still being paid to ring a bell in the event that the Napoleonic fleet was approaching.

The Chair: It obviously worked, didn't it?

Mr. Leigh-Bell: Well, there are similar situations in Canada, and I think that is one area where we should look to cut.

The other area is that there are a lot of wrong assumptions. Deficits were incurred and the debt was incurred on the assumption that there would be continuous growth at all sorts of fabulous rates. That was the wrong assumption. We should not work on the assumption that there will be no growth.

The Chair: Mr. Leigh-Bell, I'll have to cut you off there. We'll come back and give you some time to sum up some of your other specific points. I apologize.

Mr. Leigh-Bell: No, that's quite all right.

The Chair: I just want to be fair to the other participants here.

[Translation]

We are going to start with the questions. Mr. Brien, please.

Mr. Brien (Témiscamingue): I am interested by what Mr. Leigh-Bell is saying and I would like him to be able to continue. You state that the projections we make rest on the premise that there will be continued growth. So, I presume that what you were going to say is that it's also possible that the expected growth will not continue. If such is the case, how should we adjust the various options we have to choose from?

[English]

Mr. Leigh-Bell: Well, I suggest that we work on the assumption that growth is either going to be minimal or negative. The reason for that is that with the population growth, we are rapidly exhausting our resources all over the world, not just in Canada but everywhere else.

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Obviously, growth can't continue indefinitely. We'll run out of food, and we'll run out of fuel. So it would be much better to plan on the basis of a levelling out of the curve. Then once that assumption is made, you realize you can't borrow money on the strength that future growth is going to pay the interest and pay off the debt, because historically that has not been the case. It was true in the post-war years and for a certain period of time.

What I'm saying, of course, is a theory that cost a Russian economist his life in Stalin's day - a fellow called Kondratev, who plotted historically that ever since recorded history growth has been like this, and there's been erratic growth due to the industrial revolution. Now we're in the noetic society, and the very fact that we are in a noetic society means there's a limit to growth, particularly for the unskilled jobs.

[Translation]

Mr. Brien: I would have an other question for you, Ms Rothman. You talked about a child care program and you even mentioned the date it is supposed to come into effect. I would like to know what you expect of such a program and how the government should fund it.

[English]

Ms Rothman: I'm not sure what you mean by ``expecting'', but I think what we're looking for is an announcement of a commitment to comprehensive services across the country. Obviously, that means working closely with provinces and territories, respecting jurisdictional responsibilities and issues. What we want to see is a system of services from coast to coast that parents can rely on at various points in children's lives, whether they're infants, children with special needs, or single parents who are or are not yet in the workplace or in training.

High-quality child care is a multifaceted service. It's an anti-poverty measure. It's a child development measure. I'd like you to think of it as the first investment in human resources. We want to talk about modern economies. We want to look more long range.

If I leave you with anything, I leave you with the concept that investing early in children is a quality investment. In fact, the national organization, the Child Care Advocacy Association, is going to be doing a study - an econometric study - looking at the long-term economic impact.

You asked me about the cost. It's very interesting - and most members of Parliament may not be aware - that the combined expenditures on child care now are significant, but they're not often well used. They don't go to encourage consistency or high quality. One thing I'd very much like you to take a look at is actually the largest federal expenditure on child care, which I believe is through the child care expense deduction. That is actually forgone revenue. It's not really an expenditure on service. It's a tax measure. We have for a long time urged the government to look closely at that and move towards a system that will reduce that and turn that forgone revenue into actual investment into child care services.

I understand that many programs in the federal government are undergoing review. I'd certainly like to see you review the child care tax deduction and see how it stands up to the test. But maybe more specifically what I'd like to see you do in addition to announcing the broad framework and an action plan is, right now, amalgamate the existing expenditures that you now have into a fund so we can see where they are, monitor them, and make sure they're spent wisely.

The Chair: Merci, monsieur Brien.

Mr. Grubel.

Mr. Grubel: Thank you, Mr. Chairman. I'd like to react to Madame Morgenthau's articulate, wonderfully eloquent presentation of the position of seniors.

Mrs. Morgenthau: I didn't even finish!

Mr. Grubel: A couple of weeks ago I was at a conference where there were a number of actuaries whose occupation is to look at the implication of population changes for economic variables. What they told us is that their unborn generation and young, who are not yet as articulate as Madame Morgenthau and the people she represents - and somebody should speak for them.... Your generation - and I'm joining you in two years -

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Mrs. Morgenthau: [Inaudible - Editor] your application.

Mr. Grubel: - will have received, for every dollar paid in pension, $5 or $6. Do you know what your grandchildren will get for every dollar they pay in pension? Let me tell you: 20¢.

Mrs. Morgenthau: Oh, I love this.

Mr. Grubel: On top of that, may I suggest that we're probably also leaving them with well over $1,000 billion in debt or 40¢ for every dollar they pay in taxes. They have no choice. We overspent, and they will have to service the debt we have incurred to the tune of spending 40¢ for every tax dollar.

So, madam, I wonder whether, in your wonderful presentation in favour of not touching seniors, you might ever just give a bit of consideration to the next generation that is coming up and doesn't have any spokespeople yet. Thank you.

Mrs. Morgenthau: In rebuttal, if I may, first and foremost, we give great consideration to the next generation and to the fact that they're going to be our grandchildren. Since I have 12 grandchildren, I assure you that I give great consideration to it.

The other thing, if I may, is that the pensions that were promised to the people who have been putting money into it for years - 40 years, to be exact - was supposed to be invested at an interest rate no less than the Canada savings plan. That money was put out at 3%, when interest rates were sky-high, to provinces and to other areas, and very little of it has been paid back. Even if you put $2,000 in a bank at compound interest, you will have $1 million in 40 years. What happened to the money that was put into those areas? It's not the fault of the seniors that this money has not been turned over properly. It is the fault of the government, which didn't invest it properly. This is on the backs of the seniors.

We're willing to concede something. We have a clawback, which is a maximum age grouping for seniors but doesn't touch any other person who is making that kind of money. We have given up at least five different types of things. We're not going to say we won't help you, but we're saying we should go on and look at other areas first.

There's one thing I wanted to say to Mrs. Rothman, if I may continue on this child interest. We don't overlook the kids. There have been a number of teachers who have said that if they would take a coalition of, say, six, eight, or ten single mothers who are on welfare and make them look after a group of children rather than just their own to allow the other mothers to go out and get jobs, perhaps we would be able to offset some of this. That was a thought that came up from teachers.

Ms Rothman: That's not high-quality health care. We could get into a debate about that.

Mrs. Morgenthau: We won't debate this. This was just a thought.

But as far as pensions are concerned, the seniors didn't take other pensions, because the government said to them, don't take any deals; we will give you this pension.

The Chair: Thank you. Just one brief comment, Herb. You get the last word on this.

Mr. Grubel: The program we now have is pay as you go. The reason some money was accumulated is that we had a phase-in period. We have now, on deposit with the provinces, $40 billion, and the deficit is $20 billion a year. We're running out in two years. It was pay-as-you-go. In spite of all the things that you have said.... I'm just reporting this; I don't have any answers. I'm not the government; and as the Reform Party, we have committed ourselves to paying and maintaining the living standards of the retired people.

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But I just warn you that when you are.... There are people who understand what the issues are, and in that group there were ten actuaries. Three of them said their teenaged children have told them that when they control the government, because they will vote, they will not accept the obligation that we so dishonourably are putting on them, and you had better put that into your bag.

The Chair: Thank you, Herb.

To our guests we've kept waiting, we've had an unexpectedly big demand so we just abolished our lunch hour and we've put this group together. We should be ready to go with our afternoon session not at 2 p.m. but in about 10 minutes, at the longest. I apologize to you.

Mr. Discepola.

Mr. Discepola (Vaudreuil): I have two questions, and one is for Mr. Kelly. I would like to know if you could give this committee any form of suggestions as to how we could apply whatever litmus test you would deem reasonable so that when we do actually take decisions we take into account some of the concerns you expressed so eloquently in terms of the impact it might have on the less fortunate in society, whether it's women's issues or other issues. Do you have any recommendations to this committee?

Mr. Kelly: I wouldn't want to recommend a financial level on that. First, we have to stop any intergenerational warfare that's going on, and I think too many times we're all concerned about the issues and the areas that we're protecting or people who we're trying to help. The reality is that if we are in this deficit crisis - and it is a crisis - then we all have to sit down and work at it and come up with solutions that are going to be good, especially for those people in society who are vulnerable, the elderly and the children. I think we'll have to balance out all of that.

As a society, I think we're going to have to look at who is going to be needing services, stop looking at it from different levels of government and start doing our planning and amalgamation of services so that we understand how when we change something in the health care system it affects the person on the street.

We see now different levels of government playing with different aspects of our social service net, and there's no longer any consideration of how all these cuts are impacting the individual. So instead of planning in our plastic bubble, we have to really start coordinating what our choices are going to be. As the federal government looks at the Canada Health Act and may make changes to that act or strengthen it, we must ask how is that going to affect and hinge with the cuts that the Ontario government may be considering for its health act.

Mr. Discepola: Let me ask more direct questions.

Since you're dealing with seniors, for example, in your day-to-day work, you see it and live it. I would like you to debate Mrs. Morgenthau, because I think one unanimous thing we hear throughout these hearings is that we do have a deficit problem. I concur with you, we shouldn't try to blame particular generations that benefited the most in the past, although I happen to think that possibly the seniors' generation had more opportunities. My parents certainly had a lot more opportunity than I'll be able to provide my children.

I would like to know, specifically from your viewpoint, whether for example the clawback that Mrs. Morgenthau claims to be so drastic...what is so magical about reaching age 65 and having an extra exemption, for example? When you consider that seniors are only clawed back at individual revenues now, so if you're talking about a couple living together, it's $53,215.00 times two, should they be entitled to receive the same benefit? I've resigned myself to the fact that I won't have a pension when I get to be 65, God willing.

So can you rationalize the two, or do you agree with Mrs. Morgenthau?

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Mr. Kelly: I don't think we would agree on everything, but what I will tell you is that if the senior has available to them - or any person, because now we've had to branch out into other areas of society because so many people are in need right now because of the last five years.... If somebody has access to support services - and by that I don't mean being able to get to the hospital, I mean community neighbourhood organizations that are there providing through volunteers, through people like me who are just there to provide help - a senior can live off a CPP pension and the OSA, which is about $950 a month. And that includes getting access to fair housing; that means if they need help getting groceries there is a volunteer group -

Mr. Discepola: Are you in favour of clawing back seniors who have in excess of $53,000 a year?

Mr. Kelly: I would say that at this point in time, if we as a society have to make decisions, and some of those decisions are going to be tough, and if we have to claw back from people with high income levels in order to ensure that people have access to services, then I think, yes, we have to do that.

The Chair: Thank you very much, Mr. Discepola.

Now I would ask for a brief summary from each of you, and you can address your concerns relating to the last question in that one. Do you think we could keep it down to about 30 seconds? Thank you.

Mr. Taciuk.

Mr. Jerry Taciuk (Roncesvalles Business Improvement Area): Yes, I will do the summary for us.

I think my situation is a primary example, and the following summary will tie in with what we are trying to get across for reducing the expenditure of the government. I am on Canada Pension and I have a RRIF right now that I collect. Because of $250,000 in RRSP, I collect on my RRIF $2,500 a month. I can live a long time with my Canada disability pension from my stroke. I can collect my RRIF for 25 years. My position in regard to this government is that I think, because the seniors from previous years have never enjoyed the benefits.... There are people who have accumulated $500,000 in RRSPs. The purpose of that RRSP was to provide for later years in life.

Nobody needs $500,000, because at $400,000 you would generate an income of about $3,500 a month for 25 years. If you take it out at 65, you're going to be 90 years old, you can't even walk with that money. I would suggest that the government put a cap on tax-free RRSPs at $400,000, and get the other money into circulation, and collect tax on that money to reduce the deficit.

The Chair: Thank you, Mr. Taciuk.

Mr. Jensen, please.

Mr. Jensen: Thank you. I would like to take exception with the point that we have a deficit problem. I think we have a little bit of a deficit problem, but I think it's not so much an economics problem as it is a political problem.

Back in 1945, we had a debt as a portion of GDP that was more than double what we have now, and in the next ten years we paid of two-thirds of that. And what did we do in that time that was so different? Back then persons, individuals and corporations, each paid 25% into the federal coffers, paid 25% of the federal coffers that came in every year. Since that time, corporations have decreased their contribution from 25% down to 8%, while individuals have increased their contribution from 25% up to 42%.

That is a huge amount of money, and it takes a lot of money out of the economy, out of the spending ability of individuals and routes this money through corporations into inter-investment funds.

So I think we don't have so much a deficit problem as we have a revenue problem, in that we are not pulling in the revenues from the right places, and that even though we are pulling in good amounts of revenue, they are being sucked out of the spending economy whereby it doesn't show up as government revenues.

On the expenditure side, only two major expenses have been increasing over the past few years, and those are transfer payments to individuals and interest payments on the debt. The transfer payments to individuals, if you look at the pattern of them, is roughly the same pattern as the unemployment rate, and that is something about which not too many people can do anything about themselves, so it leaves the interest on the debt as being the major increase in expenditures over the last little while.

Again, the real interest rates are what have taken an unbelievable jump back since 1981. The real interest rates are taking more in interest now on just 58% of debt as a portion of GDP than it ever did way back when, when we had debt of between two and three times as much as we have now. We are paying a disproportionate amount of interest now for that amount of debt.

The Chair: Thanks, Mr. Jensen.

Ms Keyi.

Ms Keyi: There are a number of things from me. I am really concerned that when we keep talking about how we have a deficit, we focus on individuals within the community, especially poor people, as being the cause of that and therefore try to find ways to cut back from what they are getting, because obviously if we give them some social service money they are causing the deficit. That is not where the deficit is coming from.

If there is a deficit, it is coming - and I am going to come back to it again - from the whole notion of military expenditures for defence against some bogey war or something that is going to come I don't know when. That's what a lot of the money is being spent on, and now we're caught in a situation where we are looking at what seniors should or should not be getting and what children need and don't need.

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I just want to share this with you. In my culture, when we talk about age, for example, we don't ask a person how old you are, which is an implication that you are useless and to be put out to pasture, but we ask a person how many years you have acquired. This translates from my language into how much more wisdom you have gained, how much more valuable you are to society. So when we're paying money to older people in terms of payment back, it's not only what they've contributed in there, but it is also a way of saying thank you for what you've already done for this society. So we're not doing this to people who are just draining the system. They have already contributed.

So I think we ought to take this into account, and I think we have to come back to recognizing that all previous governments have consistently overspent on military expenditures and defence things that were totally unnecessary and left communities with nothing and no place to go for services that they needed. Then we come back and we take it out of the communities. We're not doing anything with the military. We're not doing anything about the corporations, as Mr. Jensen said. The corporations have cut back on what they've been paying towards taxes to support the social system.

So I'm asking this finance committee to look at a number of things, because I'm not really clear what your role is. So I'm fitting it in with your hope that it's going to go somewhere.

I'm asking you as this finance committee to begin to look at what the government actually also says, that the financial expenditures have social implications that are long-lasting, that are literally a a major violation of people's human rights. We have to go back to this and take responsibility for some of those things and make sure we don't do this any more.

The Chair: Thank you, Ms Keyi.

Ms Channan.

Ms Channan: While we're trying to attain equity and efficiency in government operations in order to gain economic strength, let's not target those who are compelled to make claims to the unemployment insurance fund.

We strongly encourage and we strongly believe that there is a need for educational and retraining programs both for employers and employees.

Regarding the next budget, we are very concerned first about the idea of people losing benefits based on the number of times they make a claim to unemployment insurance within a period of five years. Secondly, and often this has been reiterated time and time again, we are simply opposed to increasing the qualifying period to obtain unemployment insurance.

The Chair: Thank you, Ms Channan.

Mr. Kelly, please.

Mr. Kelly: I have just one suggestion on pensions and how pension funds have been invested in the past, and we just touched on that really lightly. I think it's time that CPP investments start getting a little more reasonable return for the amount of money that's put in. It's been notoriously low since it was started. In reality, whatever investments we're putting out we have to get a return that's available in the private community and that's going to save a lot of problems down the road when we're looking at the baby-boom generation retiring.

Our real point on this is to ask you to make sure that when you're doing your planning you look at all levels. I think we're at a real risk right now of hurting a lot of people in our society who need our support, and that is a commitment and it should be a goal of our society. Often we're talking now of governments withdrawing and pulling back, and I say to you that it is everyone's responsibility - governments and corporations, businesses and members - to look out for certain groups in our society, those being the children and the elderly. As I said, we're at a point where we're pointing fingers over whose fault it is, and different generations are fighting over who's going to be paying the bill.

I think any deficit reduction targets have to be balanced so it's paid by everyone and all groups in society. So if you're talking about RRSP reductions or increasing the retirement ages, equal measures have to be taken for other generations. That's one of our big concerns.

The Chair: Thank you very much, Mr. Kelly.

Ms Rothman.

Ms Rothman: Obviously parents are the primary caregivers of children. I think when we're looking at a national policy we have to look at a number of other options.

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We really think a national child care program is an illustration of how the federal government can assume leadership in an area of national interest. Let me read you what Katie Cooke said:

We are convinced that the government that initiates and perfects these child care systems will be rewarded, in the short run, by the accolades of the people, and in the long run, by the judgement of history.

I feel that in many ways the discussion around everything from child care to pensions is related. We need to start early to have a consistent, available - I hate to say it - pool of human resources to start at the beginning, in early childhood, to help develop well-being and a healthy workforce for this country.

The Chair: Thanks, Ms Rothman.

Mrs. Morgenthau.

Mrs. Morgenthau: We should understand we're not here with boxing gloves. We're really here to understand, to negotiate and to keep things going.

Instead of principally relying on seniors cuts, we should follow the prescription offered by the current Minister of Finance. Referring on network television on September 12, 1995, to his plans to continue a program of deficit reduction, Mr. Martin said:

Let me tell you; we are going to do it in a balanced way, in a fair way. We're not going to do it by singling out one segment of society for the benefit of another. We're going to make sure that the burden is fairly disbursed.

CARP would like to thank you for this opportunity of speaking to you.

The Chair: We've been delighted to have you. You have an invitation for next year, as does everybody else at this table.

Mrs. Morgenthau: If you would be good enough to let CARP know ahead of time, I'll have a much better brief for you.

The Chair: We're giving you one year's notice.

Some hon. members: Oh, oh!

Mrs. Morgenthau: Do it in writing.

The Chair: Same time, same place, next year.

Mr. Leigh-Bell, please.

Mr. Leigh-Bell: I will continue to break with the trend here and attempt to answer questions two and three, as you have requested.

My brief last year called for innovation in the taxation system. The auditor general's report is silent on that subject, presumably because it's outside its mandate. Innovation is to distinguish between taxes on production and taxes on consumption. We heard a lot about taxing the rich. The only way to tax the rich is by taxing consumption, because when you have more, you spend more.

I want to go back to erroneous assumptions. Corporate taxation is considered a good thing. In a study done in the United States by Peter Drucker, corporate taxation was found to be a tax on jobs. Time doesn't permit me to elaborate on it, but corporations are owned by the pension funds.

There is an incredible amount of money looking for investments. There is more money than there are investments. The recent oversubscription of the CN offering is a case in point.

Why tax corporations when it only brings in 80% and the subsidies that are being indiscriminately distributed to other companies amount to considerably more? Again, the auditor general has a great deal to say on interprovincial transfers. The value for money was virtually nothing.

There is one other point I want to make in closing. Someone suggested earlier this morning that the Governor of the Bank of Canada should lower the bank rate. One of the popular misconceptions is that the Governor of the Bank of Canada has the power to do that. Neither the Bank of Canada nor the Prime Minister nor anyone in this room has the power to do it. The marketplace decides where money is best invested.

If anyone here is willing to buy Canada savings bonds at 2%, I'm sure the Governor of the Bank of Canada would love to hear from him. But every one of us likes to get the best return for our money. The lady next to me complained about 3% investments in pension funds. The Governor of the Bank of Canada has no control over interest rates. The market sets the interest rates.

The Chair: Thank you.

Mr. Flis (Parkdale - High Park): On a point of order, Mr. Chairman, on the sheet of witnesses given out, there's a gross misspelling error for Roncesvalles. Many of you sitting here may want to drop in on your way home to the best shopping area in the city, and you won't find such a street. It's Roncesvalles, not Runcivalles.

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I thank my constituent for coming and making the presentation.

The Chair: I must confess I misspelled it on purpose because I wanted everybody to go to Willowdale on their way home, Jesse.

Some hon. members: Oh, oh!

Ms Keyi: Excuse me. While we are on names, could you please show my name spelled properly too? It's Vuyiswa.

The Chair: I misspelled that purposely so that nobody else could find your name in the phone book.

Some hon. members: Oh, oh!

Mr. Leigh-Bell: How many members of the committee have the auditor general's report on their desk and how many have the public accounting procedures published by the public accounting committee of the Institute of Chartered Accountants?

The Chair: I don't think any of us have the latter, but we all have the former, so we're halfway to wisdom.

Mr. Leigh-Bell: I urge you all to look at it.

The Chair: Again, we have had people at this table who in their daily lives work with those who are among the most disfavoured in our society. Again, we have heard eloquent pleas to not take further deficit or fiscal measures on the backs of these people.

We have heard, for the first time, an eloquent plea for a national child care program, not like the one in 1988, when David Walker was around. I remember at that time we promised a $5 billion national child care program, the Tories were at about $4.5 billion, and the NDP were at about $7 billion or $8 billion.

But you have indicated today that this could be done not through increased expenditures but through coordinating expenditures and with the federal government serving as a go-between with the provinces so that all the programs delivered for the benefit of children are coordinated and more effective. That sounds like a wonderful challenge for us.

Again, we've heard seniors and very eloquent pleas on behalf of them. We understand the problem. Seniors cannot go back into the workplace to supplement their income, and that's the one great unfairness about changing programs to which they thought they were entitled.

We've heard pleas for more corporate taxes, taxing the rich, dropping the taxes on the poor and the middle class and taxing the corporations. We've also heard some counter-arguments fromMr. Leigh-Bell.

I want to thank you all, on behalf of us, for very important presentations. I'm glad you came forward at the last minute. I'm glad we were able to work you in. You have certainly made us realize that maybe there are limits to what seniors need in terms of their pension income.

We raised that issue last year, Mr. Taciuk, and I wish we'd had you at the table, because I was almost decapitated for suggesting something around a million bucks as a cap.

These are all important issues for us to come to grips with, and on behalf of members, may I thank each one of you.

We adjourn.