October 18, 2010

“Hope for Families and Leadership for Canada’s Future: What the
Finance Minister Should Have Said”

A speech by Liberal Deputy Leader Ralph Goodale on Canada’s economy

The Economic Club of Canada (Ottawa)

(Podium Version Only – Check Against Delivery)

Good afternoon everyone.  Thank you for coming.  May I specifically express my appreciation to
Fraser-Milner-Casgrain for their sponsorship of this luncheon, and to the Economic Club of
Canada for hosting.

I’m grateful for this chance to talk with you today – in a serious, measured way – about how the
Liberal Party sees the economic prospects facing Canada … About the growing burden on this
country’s middle-class families … And about the appropriate role for government in responding
to a situation that’s becoming more, not less, concerning.

I want to offer a sober, unfiltered perspective on the international economic outlook.  And what
that means, from a Liberal point of view, for the priorities we need to pursue here at home … To
protect ourselves from international risk … To position ourselves to succeed in an economy that
has grown more perilous … And to prosper in the years ahead notwithstanding trying times right
now.

This examination will contrast sharply with that offered by the Harper Conservatives.  Our
approach is far more responsive to the real hardships taking hold of Canadian families as they
struggle with this challenging time.

Afin de souligner notre engagement envers une discussion sérieuse et raisonnable portant sur
l’économie, deux de mes collègues participent à cet effort aujourd`hui.

Au moment ou on se parle, notre porte-parole en matière des Finances, Scott Brison s`adresse
au Empire Club à Toronto.

Et à Montréal, Marc Garneau, porte-parole en matière d`Industrie rencontre les membres de la

Chambre de commerce.

De plus, M. Ignatieff abordera les mêmes thèmes à Guelph ou il tiendra une session à Micro
ouvert.
I hope our message is unmistakable: The Liberal Party regards the economy – and the
concerns of middle-class families – as our nation’s top priority. We will approach this important
matter with the rigour, respect and reason that we find so missing from the government.

But let me begin by breaking a cardinal rule of political communications. I am going to knowingly
repeat a charge laid by our opponents – understanding that I risk reinforcing the very mis-
impression they hope to leave about the Liberal Party.

As you know, some three or four weeks ago, Finance Minister Jim Flaherty unburdened himself
of a most unusual speech before the Canadian Club – not about the economy, but about
swashbucklers along the bounding main.  One particular allegation was so clever, so subtle, so
insidious that I believe it requires a direct rebuttal.

Allow me therefore to be categorical … To leave no question and no doubt: I am not a pirate!

I have no sword. No flintlock. No eye patch. This glass is filled with water, not rum. The only
squawking parrot I know is Pierre Poilievre.  And I would never let him sit on my shoulder.

I should also declare – before the Talking Points pour forth from the PMO – that neither am I an
alien transformer, a vampire or a werewolf.  

You laugh!  But I joke about this to make a serious point.

Under Mr. Harper’s Conservatives, Canadians are treated to absurd rhetoric of this sort almost
daily. At a time of severe financial distress, when thousands of employable Canadians are
unable to find work … With the United States struggling to avoid a return to recession and
currency wars casting a dark cloud over the international economy, this piracy stuff is the level
of discussion we get from our government. 

It’s more than a nuisance. It’s unacceptable.

I know it’s tempting to throw up your hands and say “that’s just politics”.  But those who peddle
only partisan pap win when the rest of us resign our search for a higher level of discourse.
When something as serious as the state of Canada’s ailing economy and the effect on our
families is being discussed, we should demand better.

Mr. Flaherty gave a second speech just last week. And while he managed to avoid flagrant
references to Captain Jack Sparrow, it was, in its own way, equally cavalier.

He presented the government’s Fiscal Update. With less than 24 hours’ notice.  On the day after
Thanksgiving.  Not before Parliament.  But at a political luncheon. The timing was suspect –
rushed, some say, to distract from Canada’s losing bid for a seat on the U.N. Security Council.

In other words, it was about politics. Not the public interest.

In substance, last week’s Update was excruciatingly superficial. A dismissive, sometimes

contradictory treatment of the nation’s books and our prospects going forward.
It asserted that Canada’s economy is performing better than predicted. Yet it revealed the
largest federal deficit ever recorded – $55.6 billion – nearly $2 billion higher than projected just
last spring.

What’s more, according to the Update, by 2015, the red ink just disappears – poof, as though by
miracle. There’s no explanation as to how this radical shift will occur. The Minister simply insists:
“We’re on track.” 

That’s a strange thing to suggest when you consider the “track” he’s on has taken us from a $13
billion surplus to an all-time record deficit.  And that deficit began BEFORE, I repeat BEFORE,
not “because of” the recession.

Mr. Flaherty’s “track” is one of missed projections, worsening results, lost jobs, and indifference
to the burdens on Canadian families.

To get to the basics:  The Finance Minister says his GDP growth projections are based on 15
forecasts provided by the private sector.  He further says he adjusted their “average projected
growth” downward, as a safeguard against the risk of an overly optimistic outlook.

The simple averaging of projections is, in current circumstances, an insufficiently prudent effort.
Rarely have projections from the private sector varied so widely. 

There is a huge discrepancy among those 15 private sector forecasts, from the most optimistic
to the most pessimistic – a gap of nearly a $60 billion.  Adopting an “average” across such a
vast chasm is unrealistic, especially if your most reliable forecasters are all on the pessimistic
side of the equation, and the effect of averaging is simply to dilute their caution.

Secondly, the Minister’s downward risk-adjustment is small. His discount – his safeguard
against adversity – amounts to a revenue cushion, at best, of just 0.61 percent.  That’s less than
a rounding error in the books of the Government of Canada.  Even worse, his cushion grows
thinner, not thicker, as the years unfold.  This is completely backwards.

Even in the best projections, beyond two years forward, the risk of error increases
exponentially.  The outer years are where the greatest cushion against risk is required, but
that’s exactly where Mr. Flaherty sets aside the least protection. Coincidentally, that’s also when
he lays his claim to a sudden return to surplus.  

That fact alone renders suspect his claim of a balanced budget.

Beyond the bare numbers, the analysis in the Update – which used to be a rich survey of the
best that public and private economists had to offer – is equally lacking.

There’s no assessment of the factors at play in the global economy through which Canada must
find its way.  For the most part, the analysis consists of selective statistics to show other
countries performing worse than we are.  But to be the “least bad” is hardly an assertion of
strength.  And to Canadians struggling to find work, it is small comfort to know there are many
more like you in some other country.

A responsible Update would offer a frank assessment of the fragility in the United States and
some sense of how their continued lack of growth will affect our exports. It would tell us how
long American unemployment will remain close to 10% … Whether deficits will continue to
gobble up 10% of their annual GDP … Whether a new round of stimulus or “quantitative easing”
will come from Washington and what, if anything, that might mean for our own policy choices. 

Certains économistes pensent que les États-Unis s`enlignent pour cinq, sept ou même dix ans
de dérive économique, semblable à la situation japonaise. Ils s’inquiètent du fait que les
consommateurs sont à bout de souffle, que les saisies d`hypothèque continuent et que l’activité
économique soit au ralentie.

In our view, that is likely too pessimistic a perspective. But why don’t we know Jim Flaherty’s
view?  Why don’t we have a detailed assessment from this government?

The same must be said for the situation in Europe, where the Greek debt crisis signaled the
need for substantial rebalancing in the EU. But how long will that take and how thorough will it
be?

The unstated hope of much of the world is that emerging markets – especially China, India and
Brazil – will fill the demand-gap left by a flagging United States. Here again, we need to know
whether the purchasing power of a growing middle class in these countries is adequate.  Will
new BRIC domestic demand substitute for fewer exports to the US or the EU?  

These are hard global realities NOT explored in an Update apparently designed to be digested
quickly before dessert.

Finally, we’re seeing what some call a “currency war” among the world’s economic powers, as
they rely increasingly on monetary policy to compensate for economic deficiencies.  We need
look no further than the jump in our own dollar to recognize that Canadian families have a direct
stake in this discussion.  The Update provides little insight as to how we’ll navigate these
suddenly treacherous waters.

It’s not that we suspect only the worst will come to pass. Certainly, we all hope fervently for
growth at home and abroad to surge ahead of current projections.

But we know the balance of risks is growing. The Governor of the Bank of Canada tells us this is
so. The Minister himself grudgingly acknowledges this fact.

Is this just the customary correction in the business cycle after 15 years of unbroken
expansion?  Or is something more fundamental going on?  Some economists see a decade or
more ahead of decline and drift.  Many families sense it.  Let’s hope they’re wrong.  But let’s
also insist on getting the data and the analysis to be fully informed and fully prepared.

These are extraordinary times.  Times which beg more detailed accounting, thinking and
planning.  Yet just when we need more, this government provides less.   

And here’s why that’s so wrong: 

Because unless we get a full and honest analysis from our government, Canadians cannot
intelligently or responsibly assess what it means for working people and what choices
government should make.

Policy decisions should not be taken in a vacuum. They should not be based on ideology or
bias. They should be rooted in a transparent and open assessment of facts. This government
obscures the facts. It evades that analysis, and therefore it robs Canadians of a discussion that
we desperately need to have.  Which, I suppose is their whole objective.

The Liberal approach is one that’s familiar to you. It is a record of genuine economic
achievement – achievements that largely sustained this country through the rough times since
2008:

 A previous decade of balanced budgets;

 Explicit contingency reserves and extra prudence factors embedded in the budget-
making process;
 The balanced use of surpluses to pay down debt, make tax rates competitive, and invest
in vital economic and social priorities like the child tax benefit, public infrastructure, innovation,
student assistance and healthcare;
 The slashing in half of Canada’s debt ratio;
 Low and stable interest rates;
 Well-controlled inflation;
 A rational Canadian housing market;
 A secure public pension system;
 Sound banks and responsible financial system regulation.
These are the strengths that got us through.  But Mr. Harper has weakened some of them and
the way forward is now far from certain.

Of course, there are two ways to measure our prospects – by what economists see and say.
And by what families feel.

We’ve discussed the former as best we can. Let’s turn now to the latter – to the practical
challenges, the day-to-day realities that grip Canadian families, and about which the
government had even less to say in last week’s Update.

The defining fact of economic life for many Canadians is anxiety.

People are worried about their jobs and their ability to pay down a level of household debt that
has soared. Middle-class families in Canada are being squeezed like never before – more
severely, in fact, than anywhere else in the western world.

The average Canadian family is about $96,000 in debt.  We owe almost $1.50 for every single
dollar of disposable income. And our cost of living keeps rising. 

Credit card balances are high. Mortgages have been borrowed against. And lines of credit are
full.

We can debate how we got to this point … About the need to encourage a greater culture of
savings and prudence.  But we also have to recognize that many families are simply doing what
they have to do to get by – to manage a household budget that is stretched with costs that are
growing.

A budget made even more difficult by the high cost of child care, or sending kids to university,
college or cegep, or taking care of an aging parent.  Or all these things together.
The source of household debt in Canada isn’t twice-yearly trips to fancy resorts, speedy new
sports cars or other luxuries. It’s about making it through day-by-day.

And it’s not a task made any easier when the value of the family home is uncertain and your
RRSPs have yet to recover.

These same middle-class families look to Ottawa and see a government that never fails to
congratulate itself for its so-called “sound economic management”. But they wonder where they
fit in.

This Conservative government has a “do you get it” problem.

Do you get what families are actually feeling? Do you get that risks are growing not shrinking?
Do you get that demographics are set to make this challenge even greater, as the baby
Boomers become the biggest generation of senior citizens in history?

Do you get that there’s a role for government in helping Canada and Canadians overcome this
new era of economic risk?

The Liberal Party “gets it”. We have always recognized that a growing middle class is the
cornerstone of economic prosperity. And we’ve always recognized that government has a
legitimate part to play in helping the middle class to grow, prosper and keep the country strong.

So Liberals would take a different approach than we’ve seen from this government. And we
would begin from a different premise.

One that recognizes the outlook for our economy is more fragile. That the balance of risks
internationally is tilted toward the downside. And that our middle class is hurting and needs
support.

Where does that take us in terms of priorities?

Fiscal responsibility – certainly.  That’s part of our Liberal brand and, unlike Mr. Harper, we have
a track record to prove it. 

Our initial target will be getting his deficit down to 1-percent of GDP within two fiscal years. 
We’ll re-establish properly structured “fiscal shock absorbers” to protect against nasty
surprises.  And our platform commitments will be costed, showing how they’ll be financed
without adding to the Harper deficit.

But our policy commitments – the choices we make – will demonstrate clearly how we differ
from the Harper Conservatives.

First priority: Learning. Invest in the creation of affordable early learning and childcare spaces.
Close the gap in Aboriginal education. Help families save for post-secondary education. Skills
training for workers. Language training for immigrants. Literacy training for those who need it.

We will invest in our people to build the best-educated, most highly-skilled workforce in the
world—because this is the most important thing the federal government can do to help middle-
class Canadians succeed. It is also the best way we can help prepare our economy to compete
and win in the years and decades to come.  Productivity and competitiveness depend on the
quality of our brainpower.

Second priority: Care.  Two weeks ago, Michael Ignatieff announced our Liberal Family Care
Plan, to help hundreds of thousands of families care for loved ones at home. These are costs
that families cannot ignore. They don’t want to ignore them.  And government should be there to
help.

Let me add an emphasis on health care. In particular, the federal-provincial agreements that will
come up for negotiation in a couple of years.  The jockeying has already begun and, already,
we’ve seen this government attempting to downplay its obligations. 
A Liberal government will defend our public, universal healthcare system. We must preserve
and protect this anchor of middle-class success. This defining aspect of what makes us
Canadian.

Third priority: Pensions. We’ve proposed new measures to help Canadians save for retirement,
and to protect pensions when companies go bankrupt. This is fundamental to a sense of
security as we enter an era defined by an aging population and more retirees than ever before.

And we must tackle the CPP/QPP. We’ve proposed consideration of a supplementary CPP – as
have many experts. This government’s answer is silence and absence.

They had to be dragged kicking and screaming to the federal-provincial-territorial table to talk
pensions. Since then their efforts have been a litany of missed deadlines, failed efforts and half-
hearted talk. Liberals led a national consensus over a decade ago when our pension system
required overhaul. We are prepared to do so again.

Permettez moi d`ajouter une dernière priorité qui souligne le caractère international des
économies de demain et d`aujourd`hui : Nous devons être des chefs de file sur la scène
internationale.

Pendant quatre ans, M. Harper insultait la Chine et ignorait l`Inde. Nos parts de marché dans
ces pays ne représentent pas la taille de leurs économies.

Nous devons faire mieux.

Can there be any question that our standing in the world community has been diminished after
the embarrassing failure last week at the United Nations? Is there any doubt that such
shortcomings are also a threat to our economy – at a time when so much of the weakness that
puts our jobs and growth at risk comes from overseas?

These are our priorities. Job for today. Jobs for tomorrow. A learning society where every
Canadian can reach their potential. Help for middle-class families. Support for seniors. And a
new era of global leadership, worthy of our history.

Conservative priorities are different.  A more costly, less reliable census.  Untendered stealth
fighters.  Bigger jails.  A billion-dollars of extravagance for one weekend in Toronto.  But the
needs of middle-class families don’t figure. 
Mr. Harper dismissed support for family caregiving as “reckless” – let caregivers use up their
vacation-leave, Conservatives say, or use up their savings.  Yes, “let them eat cake”, Marie-
Antoinette!

Instead, the Harper government is planning another tax cut for large corporations – 20-percent
more, on top of the tax cuts of 35-percent which these companies have already enjoyed.  They
already have the second-lowest rate in the G-7.  They already have a 10-point (or 25-percent)
advantage over the United States.  Mr. Harper would add $6 billion more every year.

Now don’t get me wrong.  As a former Finance Minister, I like cutting taxes.  But if you’re a
responsible Minister, your tax cuts will be affordable, sustainable and consistent with your other
obligations to Canadian citizens.  And be especially careful when you’re already $55.6 billion in
the hole.

So we will cancel these extra Conservative corporate tax cuts until the budget is balanced. We’ll
utilize the $6 billion per year to reduce the deficit, and to invest in the priorities of ordinary
Canadians: learning, care, and leadership in the world.

There is a clear choice here.

A choice of priorities. A choice of values. A choice between Mr. Harper’s Canada and the
Liberal alternative.  A choice that Canadians will have to make when the time comes.

Liberals have made our choice. We choose the priorities of middle-class families. We choose
forward-looking policies to lead to a more prosperous future. We choose to pull our country
together, and face together our challenges as one great people.

With these choices, we can build the future our children deserve.

Thank you.

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