Committee members, we will continue on with what are hopefully our closing studies on the economic stimulus package.
We have before us, from the Department of Finance, Mr. Paul Rochon, the Senior Assistant Deputy Minister; Monsieur Benoit Robidoux, General Director; and from Infrastructure Canada, Madam Yaprak Baltacioglu and Mr. John Forster; welcome again.
I understand you have some presentations with you that you will be talking about. Then we will start our questions.
I would like to ask the committee if we could finish around 5:05, so that we can discuss for the final 10 minutes what we want to do on Thursday—we have three options given to us for Thursday—because at 5:15 the bells will start ringing and then we'll have to go.
So at 5:05, if everybody is mindful of the clock...
À 17 heures? C'est parfait, oui.
With that, who is doing the presentation?
It's Monsieur Rochon?
Go ahead, please.
Thank you very much. It is a pleasure to be here with Benoit Robidoux and my other colleagues.
I thought what I would do very briefly, just to open up the session and provide some context for our discussion, is give you a very quick overview of how the Department of Finance estimated the 220,000 jobs maintained or created by the action plan that we had published in the budget and in subsequent reports. We have a short presentation that we can go through fairly quickly.
At the outset, it's important to recognize that we say “maintained or created”, because in a recession what we're largely talking about is maintaining or protecting jobs as opposed to new job creation.
The first major point is that the approach we've taken is a model-based approach. While I think it's fair to say there's no consensus on how to go about estimating jobs and output impacts of these types of policy changes, by and large, when we look around the world, the consensus seems to be that a model-based approach is the way to go. That is for two primary reasons. First, models allow one to isolate the impact of the specific policy measures against everything else that's happening in the economy—for example, in the current context, changes to monetary policy, changes in the status of external demand in other countries. Second, the models allow us to capture the various channels of influence that fiscal policy has on the economy, which includes not only the direct influences—that is to say, for example, direct stimulus to housing, which feeds one for one into output—but also indirect impacts on other industries and the induced effects that these types of policies generate, particularly in recession periods, via their impact on incomes.
The various avenues of effect are summarized, on page 2 of the handout, in something that we refer to as output multipliers. You've probably seen these not only in our work but in work that the Congressional Budget Office and the Council of Economic Advisers in the U.S. have put out.
Essentially what we're trying to do here is provide you with an estimate of what a dollar spent on any one particular area translates into in terms of output, and then employment. For example, one dollar in infrastructure in the first year translates into about one dollar of output, and by year two, once the indirect and induced impacts build, that's about $1.05.
At the bottom of the table, you see personal income taxes. Generally speaking, one dollar in personal income tax cuts translates into about 40¢ of economic activity in the first year, building to 0.9 in the second year, and then that effect would build over subsequent years. Of course, the reason for the difference between, in this case, personal income taxes and infrastructure is that a portion of that tax reduction is initially saved and not spent. Over time, as the effects build through the economy, so does the overall impact.
Using these multipliers, then, we're able to estimate an overall impact on output, and then based on historical relationships between changes in output and employment, we have come to the conclusion that it's reasonably prudent to assume that for every 1% increase in output, you get a 0.6% increase in employment. The combination of that approach leads us to the conclusion that the plan will create or maintain roughly 220,000 jobs.
I'll just point out in passing that the 220,000 number doesn't really include much of the impact from the work-sharing program, which has seen a large take-up.
In broad terms, that is the approach we used.
There is another consideration. When we look at recent economic developments, we come to the conclusion that, in general, those recent developments more or less correspond to what we were expecting from the package. Essentially, we are looking at an increase of about 220,000 jobs.
Page 3 shows consumer and business confidence. One of the main objectives of the package was to boost this confidence at a time when the world economy and the Canadian economy were in significant decline. You can see that consumer and business confidence has been restored.
On page 4, we see that government investment in the last two quarters of 2009 has increased markedly, with increases of 16% and 25%.
On page 5, we see that residential investment, which was one of the targets of the plan, has been very high recently, especially in renovation activity.
Page 6 shows that, overall, the domestic economy, which was the main objective of the package, remains stronger in Canada than elsewhere.
Finally, page 7 shows that, since March, employment seems to have stabilized in Canada, especially as compared to the United States. The unemployment rate is actually about 1.6% lower than in the United States.
That is the work and the follow-up that we have done since we examined the budget.
Thank you very much.
Thank you, Madam Chair.
A particular thank you to our repeat guests for their additional time.
Thank you for the presentation. I hope to get to this in subsequent questions--it depends on how much time I have--but I will just suggest that we have a continuing concern with relying on models as opposed to facts. These are uncommon times, and we have been focused on looking for actual numbers. We know that in some departments, we and other committees have been able to receive actual job numbers by project. That is something we still seem to be lacking. So I appreciate that the approach here is one of a model base, but I'm not so sure we're completely comfortable that this is the only one we're using.
I want to address a couple of issues we had from our last committee.
I want to thank you, Madam Baltacioglu, for having provided the agreement between the federal government and, in this case, Ontario.
We had been speaking about the need for information on job creation and progress reports. In the last committee meeting, there was a significant effort to suggest that somehow the federal government was not entitled to the information that the province, in this case Ontario, had requested from municipalities for the infrastructure stimulus program.
I just want to read a little bit from the Canada-Ontario agreement:
||Ontario warrants and commits to:
||a) monitor the progress of the Projects;
So there's a positive obligation to monitor progress on the part of the province.
Section 9 specifically refers to progress reports:
||Ontario shall provide Canada with quarterly Progress Reports, commencing on August 30, 2009, (in accordance with the 2009 Budget Implementation Act and subsequent requirements) detailing progress on Implementation of the Projects:
It actually talks about amounts allocated; it talks about amounts received from Canada; it talks about amounts expended on the projects that have been detailed; and it also requires information on projects started and substantially completed.
I note that we have also spent a significant amount of time asking for information on amounts actually expended.
As my first question, has a progress report been received by Ontario--on August 30, I would have thought--and if so, can we get a copy?
There is a requirement under all of our contribution agreements with each and every province and territory to file a quarterly update to the federal government on the status of the projects, the money expended, and the claims they're making to the fund--i.e., how much the federal government requires.
The committee has already received, as has the Parliamentary Budget Officer, all the claims reports submitted in the first round in August and September. That was provided to the committee at your request. It has also been provided to the Parliamentary Budget Officer.
The second round of information was due in November, and we are about 90% of the way through verifying, cleaning up, correcting errors and omissions, and identifying incomplete data. We haven't yet finished verifying the second round of claims information. You have the first round. You do not yet have the second round.
As for what Ontario collects from its municipalities, further to the meeting last week, the agreement between us and Ontario requires Ontario to provide a provincial report to us. It does not require Ontario to provide us with the data it collects from municipalities and other recipients. We have, as you requested at the last session, gone to our lawyers to ask for legal opinion about whether our contribution with Ontario obligates Ontario to provide that data to us.
Thank you, Madam Chair.
Good afternoon, gentlemen; good afternoon, Madam. First, I am going to talk to Mr. Rochon.
Mr. Rochon, I have always had great reservations about model-based approaches and forecasts. Although you consider some contingencies, this is still just a projection.
You say that, thanks to its Economic Action Plan, the government has created 220,000 jobs. I have a lot of difficulty grasping the truth of a statement like that. I am not doubting your work. But thousands of jobs have been lost in Quebec, especially in manufacturing and forestry. You are trying to sell me Canada's, or rather this government's, Economic Action Plan, which is supposed to have created 220,000 jobs, but I am having a really hard time swallowing it.
Then there is the matter of investments in housing. Just last week, some groups in Canada and Quebec said once more that they had not seen one red cent of the money that was supposed to have been invested, in social housing specifically. You understand why I might have my doubts about your opening statement.
You also mention the work-sharing program. It could be said that that program creates no jobs, it just moves the problem elsewhere. In a job with shared shifts, people share the work between themselves, and one group receives employment insurance one week and works the next week, and so on. People who were working now get employment insurance.
So it is difficult for me to accept your figures. Could you just take a few minutes to explain to me how I can accept the figures you have presented?
We keep going round and round to witnesses, and I'm not sure we're still getting what we're looking for. I've been sitting here trying to decide whether we're just not asking the right questions--partly because we're lay people, we're not economists--or whether we're asking questions to which there are no answers.
That's what I've been trying to come up with--a line of questioning that might be useful. But I honestly don't know if I can.
If we're not asking the right questions, we need guidance. We need help to ask them. It's like Rumpelstiltskin or something: you have to say exactly the right word to make the magic begin. But maybe--it could be--there just are no answers to the questions we're asking, or not yet.
Is it simply too early to tell us how many jobs this stimulus money will actually create? Should we ask you to come back in six months or a year and look at it in retrospect, and then you could tell us the job creation?
Clearly, in retrospect we would have a better idea. I think there are certain things that we can say now about job creation. Monitoring the rollout of the plan is the first step.
As we indicated in the third report, in the auto sector in particular there are 52,000 jobs at stake there. So we know that. We have estimates, and they'll always only be estimates with regard to a number of elements of the plan, such as taxation and EI. We'll be able to tell you how many EI beneficiaries we had at a certain point in time. It's always difficult to say how many we would have had if we hadn't made the increases to the programs that we have made, but we can at least tell you what the enrolment was.
What's difficult is the infrastructure area where funds are flowing in the economy. We have yet to receive bills for that, but we know the activity is going on. So based on a series of assumptions at this point, we can tell you where we think we are, and more or less we think we're tracking.
But to go to your question of things like the home renovation tax credit, we'll know after tax-filing time at some point what the take-up was on that. We think it's large, but we can't tell you how large.
I want to pick up where Mr. Martin left off, actually—not the wrap-up bit, but trying to get a handle on job creation.
I've been reading the evidence from the Standing Committee on Industry, Science and Technology of witnesses who appeared before that committee on November 30. You had witnesses from Western Economic Diversification, from the Atlantic Canada Opportunities Agency, and from the Economic Development Agency of Canada for the Regions of Quebec. They were very specific about jobs created.
I will just give you one example. This was under the recreational funding. It says here:
||The City of Mount Pearl, in Newfoundland and Labrador, received $600,000 in RInC funding for a $1.8 million upgrade to its main soccer facility, a project that created 33 short-term jobs.
When we talk about the stimulus funding and about the rationale for it being to create 220,000 jobs and to deal with the ailing infrastructure throughout the country, I have to ask, Madam Baltacioglu, when you say you haven't asked for job numbers, and part of the rationale for having the stimulus funding is to create 220,000 jobs, and it would appear that at least in some cases there are numbers available to you, why haven't you asked for those numbers?
How can you explain that, yes, you're going to create 220,000 jobs, but you're not asking for the numbers, so you really don't know how many jobs have been created?
There are a number of issues, I think.
First, our regional development agency colleagues, I believe, are appearing in front of this committee or... You might want to ask them what they really collect.
From what I understand, they collect job information, because they work directly with the proponents, unlike us. We went into agreements mainly with the provinces. They work with a specific municipality, a specific proponent, and so on.
They asked for the job numbers, and apparently, because they're in the economic development business, they have been asking for this kind of data for a while.
I do not want to talk about who--
When it comes to infrastructure stimulus funds, the government has decided to ask for project progress data. How much money has been spent? What is the starting date? What is the end date? Have tenders been done? We covered that before.
The reason we did not ask for specific job information was that at the time, the reliability of the data was in question. I wasn't there, but these folks all were there, and they can explain it to you in further detail. When you collect information over many, many thousands of projects, through the proponents... It's the same problem the U.S. is having right now--i.e., that $980 worth of boots are creating nine jobs and so on. The reporting becomes inaccurate. The proponents sometimes give, I guess, exaggerated numbers or incomplete numbers. Comparisons between part-time, short-term, and long-term data become a problem. If a carpenter works, for example, on one bridge project and goes and works on something else, how do you account for those two things?
So there was a decision made that we wouldn't collect that kind of data, because of the reliability.
Thank you very much, Madam Chair.
Good day, Madam, gentlemen.
I'd like to come back to page 2, “Output Multipliers”. As we well know, in the business world, project promoters always sing the praises of a project's economic spinoffs. We often see that happen in connection with major events. We're told that if we invest in a particular project, we will reap the economic benefits. So then, there is always a certain degree of economic recovery.
Regarding output multipliers, you have broken down the data in dollar increments to demonstrate the impact of a permanent one dollar increase. You also referred to the 220,000 jobs created as well as to $27 billion in investments associated with the action plan.
Have all of the $27 billion really been invested? Has the money been paid out? Are all of the projects that received funding now under way?
Thank you, Madam Chair.
Thank you for coming in this afternoon. We appreciate this testimony.
I agree with Mr. Martin insofar as he was contemplating the fact that we may, as a committee, be trying to pass judgment a little early on something that is still moving forward. So we understand we're probably working prematurely on some of this. But what we're looking for, as a committee, is kind of where we're at, and if we're doing the right things, and if there's something this committee can recommend be done differently.
We're getting a sense from all indications, from the media and from people on the ground, that things are moving well and that there are communities benefiting across the country.
Madam Baltacioglu, I wonder if you would help this committee understand exactly the value of the projects that have been announced, the value of the projects that have been given the green light in the country today in terms of the federal component, but then also the value when matched funding is included in that. I wonder if you could tell us, just from transport's side, what the value would be of the projects that have been announced and given the green light through the stimulus funds and through the different funds coming out of the most recent budget.
This is what's helpful for us as a committee. What we're trying to do, in the absence of the jobs being done...and what we're trying to get a sense of is what has been freed up in terms of the economy today. How many people could possibly be working as a result of the green lights being given? The numbers you have stated this afternoon give us a good indication. We can start to make some analysis out of that.
In the fullness of time we'll find out, but my sense, coming from a constituency where the infrastructure dollars are valued highly by the municipalities, is that there is no municipality that's not going to move forward on their project, because they see this as an opportunity. So I think we can reasonably expect that 90% of these dollars that have been allocated to different levels of government will be spent in the fullness of time, and these jobs will be created. So I appreciate that.
In terms of additional benefits... Well, let me switch gears and get a sense from Finance on what Mr. Martin was asking about, with regard to certain types of investments and how they translate into the economy. We see infrastructure investments, we see housing investment measures, and we see measures for low-income households. I would suspect that these are on the upper threshold of—
I mentioned at the beginning that I had some concerns about the modelling. I understand the value of modelling, and I understand the value of the Conference Board of Canada, for example, participating.
Two things, though. First, economists have been somewhat surprised at what appears to be and is often referred to as a jobless recovery. So I think earlier models based on infrastructure spending plans or stimulus spending plans elicited certain projections, but economist are now seeing this so-called jobless recovery. I'm not asking you to comment on that. I'm just pointing that out, that it might be a problem with earlier models having been used.
The other challenge I have with modelling is that it assumes that everything is done properly. In this government, we have seen in the past some real challenges with a particular large spending program where a small number of criminals took significant advantage of big spending in a relatively short period of time without accountability. I was one who applauded the effort toward greater accountability, because we don't want that sort of thing to happen.
My concern here is that with only relying on modelling, without actually asking for facts, without asking the regional programs for specific numbers attached to specific projects, the opportunity here...particularly because it's so much money and it's going out relatively quickly, and especially in different levels of jurisdiction it can be even harder to track. I don't disagree with that.
But I remain very concerned, and I put it out to you, have we not learned? I am very concerned that there is an opportunity here for people to take advantage without the accountability for hard jobs. So I put that there, but I actually have a question based on the agreement between the federal government and the provinces.
This is section 12, and it has to do with communications:
||The Parties hereby agree to follow the terms of the communications protocol set out in the Canada-Ontario Infrastructure Framework Agreement signed July 24, 2008.
I'm assuming that's a publicly available document. If not, I would just throw out here that we would like to have a copy of that.
The section goes on to say that
||Canada will provide Ontario with guidelines, graphics and branding requirements to be used in all communications regarding the Canada-Ontario Infrastructure Stimulus Fund Agreement.
Can I ask our representatives if the documentation for those guidelines, graphics, and branding could be tabled for us?
Yes. We go through by program, as we've indicated and documented in each of the reports. You've got a fairly detailed listing by program of amounts committed.
We work as close to the deadline as possible. We published the report on December 2, I believe. Depending on the program, mid to late November we would have finalized it.
Can I just make a comment on something? You mentioned accountability at the outset. We appreciate that, and agree that accountability is extremely important. With respect to this program, of course, the Auditor General is taking the exceptional step of auditing the program as it goes along to deal with some of those, to ensure we've got proper accountability. As well, the government has put out four reports, which is quite exceptional.
Finally, with respect to the jobs numbers--
Thank you, Madam Chair.
I'd like to thank our guests for attending today.
Madam Baltacioglu and Mr. Forster, you're starting to feel like old friends. You've certainly been here a number of times. Perhaps we can hang around your place for coffee sometime.
Voices: Oh, oh!
A voice: Oh, boy; this is getting better.
Mr. Ed Holder: I do want to say thank you, because you've been very professional, and your testimony has been very helpful.
I'll presume, Mr. Rochon and Mr. Robidoux, that your testimony is equally helpful. Actually, it has been.
I say this quite sincerely, because I think a comment was made by the ombudsman a couple of meetings back that sometimes it doesn't feel as if we as members of Parliament appreciate the hard work of our officials. I just know I speak for all of us here at this table when I say well done.
Mr. Rochon, you mentioned at the outset in your comments about the 220,000 jobs created or maintained as a result of Canada's economic action plan. Then I heard you make a reference to the Conference Board and U of T in subsequent testimony. Also you went to them to backstop your numbers, as it were. You determined, as a result of that, that the numbers you've indicated are actually conservative estimates--good word.
Here's my more practical question. You said they used higher multiples. Based on your estimates that 220,000 jobs were created, could I get a sense, using those other two centres of reference, what they might have estimated the jobs to be created?
First, we got their output multipliers and their multipliers from output to jobs. I think we'll have to check with them first that they...they gave us their multipliers through the budget process. They never see the final result and the stimulus.
I think we would like to get back to them and ask if they still agree with their multipliers, which I think they will.
In terms of the numbers we get by applying the multipliers, I guess we could run it. The only thing I could tell you is that with the Conference Board, the number will be slightly higher than 220,000. With the University of Toronto model, the number will be significantly higher.
I would say that the Conference Board of Canada, in the low range of the two for most of the multipliers...but were fairly high. As Paul was saying, in terms of translating output impact into job impact, their multipliers were fairly large. For example, for...and infrastructure, the one I looked at before coming here, in both cases, their multipliers between output and job were higher than what we assumed in both cases.
But we'll have to look at the numbers. In one case, I would say it would be significantly higher. For the Conference Board, it would be slightly higher.
Mr. Robidoux, I'm not one to go back and ask you for a make-work project, but I would be grateful to receive those numbers. Let me share with you why that is.
It seems to me this government has been beaten up, fairly or otherwise, and I would suggest to you not so fairly, in terms of jobs created. While it may not be an exact science, when credible sources like your own and the other two forecasting groups you've mentioned have a range, it might be rather interesting to say at least under 220,000 jobs and “depending on”. This isn't polling. This is using some reference points to try to come up with credible numbers.
I would like to know that range. I think it would be useful for this committee to know that range. For the record, at the lowest end we're talking 220,000 jobs and potentially higher.
But I'll come back to make another point.
I know. He is compelling.
Let me come back here. You talked about money actually spent, jobs actually created, but I think there's a missing piece there, and that is the legacy of needed facilities as well. Whether it's in my city of London, where city hall renovations...
Again, there are three partners in this, lest we all forget. We have provincial and municipal colleagues.
At any rate, we have those kinds of upgrades. We even have a soccer pitch. I'd suggest to you that some projects clearly are more job-intensive than others, and some much less, but on average--
Thank you, Madam Chair.
My question is directed to either Mr. Forster or Ms. Baltacioglu. As you know, elections were held in Quebec and that resulted in about a three-month delay in the submission of infrastructure projects and in the flow of stimulus funds. We know that the deadline for funding these projects is January 29, 2010.
Recently, the Fédération des municipalités du Québec and the Union des municipalités du Québec called upon the government and senior officials, including yourself, to show some flexibility.
Have you discussed the situation amongst yourselves? Can we expect an announcement to be made eventually, one that would give Quebec permission to submit projects after the deadline, given that many Quebec municipalities lost three months?
With the committee's consent, can I take Mr. Martin's time?
Some hon. members: Agreed.
The Chair: Thank you.
I have a couple of questions and they relate to what Mr. Cardin asked you. We were talking about economic models, simulation, etc., and Mr. Cardin as an accountant asked you a question about an increase in 1% of GDP, which is equal well into $16 billion, resulting in an increase of 0.6% in employment. That 0.6% translates into 96,000 jobs—accountants calculate pretty fast—so $4 billion would create 28 million jobs.
I am just a little confused as to whether the 220,000 is not really job creation but it is trying to keep the jobs from disappearing as well as creating new ones. If that's the case, then we probably get our answers and then we know where we're going with this.
There was a question posed that, as Finance, you project issues, and that's your job; you have to project the future. When you do the budget, you have to project how much investment we need, how to get out of a recession, what the urgency is, and how much deficit will be created. However, as a committee and because we are the government operations committee, we need to ensure that we are the sober thought. That's why we have been repeating the question: if you made these assumptions, are your assumptions correct?
Give us a backup to your assumptions and help us understand whether you are really creating jobs and will therefore get us out of the $56 billion deficit, because Canadians look at it and say, “Okay, I am willing to take on the deficit if I can see a way out of it.” In your projections, can you see a way out of the deficit through this job creation?
Finally, between your third report and your fourth, infrastructure funding has gone down by $1 billion. How will that affect your simulation model?
The chair was so impressed by my line of questioning that I have an opportunity to ask a couple more questions.
Before I do, I'd like to read into the record something the committee might find very compelling. It's from Mr. Michael Atkinson, the president of the Canadian Construction Association, who said, “While building permit numbers often shift sharply from month to month, there is no doubt...the growth reflects stimulus spending by governments that's finally leading to projects and construction activity, particularly in the education sector.” He went on to say that in some parts of the country, where private sector work is at a standstill, “if it wasn't for [government money], there'd be no construction going on at all”.
I think those remarks give credence to the comments you're all making.
I think it's rather timely that we are discussing jobs and impact here today, because Statistics Canada reported that almost 80,000 jobs were created in November.
By the way, I still don't believe we're out of this. I think we've all said that we have to be careful. This is a fragile recovery and a global recession, but the unemployment rate has gone down another point, from 8.6% to 8.5%, and even in my own city of London, Ontario, where the region has had the second-highest unemployment rate in Canada, in this past month we went down one full percentage point. That hopefully bodes well, and I certainly hope it's an indication of things for the future.
Mr. Rochon, I don't think you had the opportunity, and this would be my question with--
They say create or maintain, so we do not want to split hairs on this.
I'd like to suspend the committee for 30 seconds. Bells will ring at 5:15 p.m.
Thank you very much for being here. We hope to see you again. We've become such good friends, we'd like to see you.
Committee members, don't get up, I need to finish this up. I have a question for you.
For the Thursday meeting I have three options that have been proposed. Number one is that we discuss future business and utilize the committee for future business. Number two is that, as Madam Baltacioglu mentioned, there are regional development agencies that collect job data. If we want to call them back, we call them. The third, and I'm sure you'll take the third, is that there is enough fatigue on the economic stimulus package, and the analyst needs to finalize the report. We just need the November figures, and the fifth report that we were talking about, so that we give the committee members a break.
Some hon. members: Hear, hear!
The Chair: We go away and you promise to e-mail to us what you would like to study for future business.
Which option do you wish?
Yes, Mr. Warkentin.
Committee members, could I request, please, that you send in your suggestions? You will have had a break. You will have been away from here. Your heads will have been cleared. You'll be able to think clearly as to what we need to study.
An hon. member: I want to talk to Santa and see what he says.
The Chair: Okay.
Do we need a vote on this number three? We don't need to vote on this.
Number three: done. No meeting, therefore, on Thursday.
Before you leave, the two speakers, the Speaker of the Senate and the Speaker of the House, have invited us for the Quilt of Hope exhibition at 199 Sussex Drive. I was told to advise you that the green buses will be leaving Parliament Hill at 6 p.m. and will go every 20 minutes. If you do not know this, 199 Sussex Drive is the building that the Prime Minister opened. It's the Delegation of the Ismaili Imamat, next to the Saudi Embassy.