Full Comment - Ian Lee reveals the alarming economic reality facing Canada

00:00:00.000 Canada's finances are a mess, right?

00:00:05.100 The economy has some very turbulent times ahead, no?

00:00:07.780 Not according to Prime Minister Justin Trudeau and his Liberal government.

00:00:11.480 In fact, Finance Minister Christy Freeland says this year's budget, released in April,

00:00:16.120 was about, quote, healing the economic wounds left by the COVID recession,

00:00:20.700 meeting the urgent needs of today, and about building for the long term.

00:00:24.780 She adds it's a plan that embraces this moment of global transformation

00:00:28.780 to a green, clean economy.

00:00:31.040 I'm sorry, but can we get a fact check on all of that?

00:00:33.680 Canada is seeing the largest deficits and debts ever, breaking the $1 trillion debt mark.

00:00:39.400 Will the wounds be healed that quickly?

00:00:41.180 Is all of this massive spending happening right now going to create a better, imminent future?

00:00:46.400 And will a government-mandated green economy fly? 0.78

00:00:49.400 Well, our guest today does not care about government spin.

00:00:51.380 He's interested in the cold, hard facts.

00:00:53.760 Professor Ian Lee dishes the unvarnished truth,

00:00:55.980 whether it's in front of his students at the Sprott School of Business at Carleton University,

00:00:59.360 or in front of politicians during his many appearances before the House of Commons Finance Committee.

00:01:04.560 Ian, thanks so much for joining us on the show.

00:01:06.160 Great to chat with you.

00:01:07.420 My great pleasure, Anthony.

00:01:08.980 Thank you.

00:01:09.460 So let me put it to you straight right now.

00:01:11.120 Are we on the right path in Canada?

00:01:14.120 No, I don't think we are.

00:01:15.880 I think that's a much more appropriate question than these, you know, debates over the solvency of the federal government.

00:01:22.400 I mean, federal governments have printing presses, and, you know, U.S. has the Federal Reserve, we have the Bank of Canada.

00:01:28.280 But I think, and this has been my criticism since March of a year ago,

00:01:33.240 the government has been making the argument that our social safety net has collapsed,

00:01:39.360 poverty is skyrocketing, inequality is skyrocketing, and I have studied the numbers.

00:01:44.240 I have created slide decks called Enduring Canadian Urban Legends.

00:01:49.280 Poverty is not skyrocketing.

00:01:51.640 It's at the lowest level ever in the history of Canada.

00:01:55.700 This is StatsCan data down to 8.7% from 15% in the mid-90s,

00:02:01.880 from 25% of Canadians, one in four in the 60s when I was a child.

00:02:07.420 So poverty has been going down, down, down, not up, up, up, as they claim.

00:02:11.660 Inequality, they claim, is skyrocketing.

00:02:14.080 It is actually, if one looks at the StatsCan data and the OECD data, we are below the OECD average,

00:02:22.340 which is the 34 high-income countries.

00:02:25.060 Most of them are European, very progressive countries.

00:02:27.560 We are below the inequality index.

00:02:30.760 And if the government looked at the monetary policy report of its own governor that they appointed,

00:02:35.080 last September, he had a wonderful graph in his report from StatsCan showing that the top 1% share of income peaked in 2006.

00:02:44.620 It's being claimed by the government that the wealthy are getting wealthier and richer at the expense of everybody else.

00:02:50.780 That's simply not evidence-based.

00:02:53.600 Okay, but Ian, let me ask you this, though, because a lot of people are going to interrupt,

00:02:57.760 and they're going to say, hold on, though.

00:02:59.480 We're in a pandemic right now, and we've just got to go rampant spending.

00:03:03.460 Yes, the deficit, the debt right now is $1.1 trillion.

00:03:07.460 The deficit is just a massive $354 billion projected for 2020, and we've got to do it.

00:03:14.780 Every cent of it.

00:03:15.680 That's what Justin Trudeau is saying, because of extraordinary times.

00:03:18.240 Are these figures themselves justified?

00:03:20.160 To answer that question, I argue that they misdiagnosed the problem in the first place.

00:03:27.880 The safety net did not collapse.

00:03:29.680 It never did collapse.

00:03:31.020 It has not collapsed.

00:03:32.520 And so it was not necessary to spend these gargantuan amounts of money.

00:03:38.020 Should we have responded to those people in the 90-10 economy as The Economist magazine has characterized it?

00:03:45.260 Yes.

00:03:46.120 However, the government did not do that.

00:03:48.720 What they said is, oh, my God, large numbers of Canadians, large numbers of the economy have fallen over the cliff, almost reduced eating cat food and dog food.

00:03:56.920 When you look at the data, and I'm talking at the worst days, March, April 2020, okay, the unemployment rate soared to 15%.

00:04:07.220 People say, oh, my God, 15%.

00:04:09.160 That meant 85% of Canadians continued to work and be paid.

00:04:14.680 Other than the unique situation of Laurentian, which had nothing to do, in my view, with COVID, and I'm aware of that situation, there was no university professor laid off in Canada.

00:04:23.800 There was no federal public servant laid off.

00:04:25.940 There was no big bank laid off, employee laid off.

00:04:28.500 There was no municipal public servant laid off at OC Transpo in Ottawa or the Toronto Transit Commission.

00:04:33.980 No provincial public servants were laid off.

00:04:35.980 In fact, 90% of the economy was doing just fine, and the stats show that crystal clear.

00:04:44.080 And they should have targeted like a laser beam on the 10% that was for sure annihilated. 0.96

00:04:50.840 Bars, restaurants, small business in the high-touch sector, you know, barbershops, hair salons, that sort of thing.

00:05:00.100 But it was never, as the prime minister repeatedly claimed and the finance minister, that large numbers of Canadian economy were wiped out, devastated, fallen over the cliff, safety net destroyed.

00:05:12.160 That was never the case from the get-go, which therefore did not justify the monies they spent because we squandered large amounts of resources on people that did not need help.

00:05:24.860 So, Ian, let me ask you this, because we've got a lot of messages coming from the prime minister, from the Bank of Canada, deputy governor, talking about how, well, we also have an opportunity right now, Justin Trudeau said, for a reset.

00:05:38.760 And then if you say, well, he means the great reset, and oh, that's a conspiracy theory.

00:05:42.300 And then you look and you go, no, Paul Baudreau, who's deputy governor of the Bank of Canada, putting out a full proposal, a full PDF, talking about, yes, a great reset and so forth.

00:05:50.940 But this idea that, well, you know, now is our opportunity to re-imagineer the economy in the direction that we want to head.

00:05:58.280 Is that going on right now?

00:05:59.800 Is the liberal government structuring its spending in a way where they are trying to seize the moment and to, you know, never avoid an opportunity from a crisis?

00:06:10.500 Well, this is my point that I've been making.

00:06:13.540 They have claimed to justify their gargantuan levels of spending, that the economy, large numbers of Canadians had fallen over the cliff, and that the safety net was completely fractured, destroyed, broken, whatever word you want.

00:06:27.060 This was their claim.

00:06:28.420 And my point is, when you go through the stats, and I've got a deck I've created using StatsCan only data, PBO, in other words, government stats, not some lobbyist or critic such as myself.

00:06:43.660 These are government statistics showing in every area our social progress has been, we are becoming more and more equal.

00:06:52.680 The inequality is being reduced, poverty is collapsing, elder poverty is collapsing, homelessness, which we, people claim is a huge problem with large numbers homeless, is about one-tenth of one percent.

00:07:06.160 This is StatsCan data, by the way.

00:07:08.200 And so what I'm trying to say is their claims, which they asserted repeatedly, are not supported by the factual empirical income data in Canada.

00:07:20.260 And so the alleged need to rebuild the society, build back better was their phrase, was bogus.

00:07:28.680 It was bogus because the economy wasn't, it was a 90-10 economy.

00:07:33.600 Ten percent were annihilated, yes.

00:07:36.080 Ninety percent were not.

00:07:37.800 That's why house prices have been going through the roof for a year.

00:07:40.400 That's why even in March, April, I could hardly get a parking spot at Home Depot.

00:07:45.440 Large numbers of the economy in Canada were doing fine.

00:07:49.020 Let's talk about that 10 percent though, Ian, because I guess there's a lot of concerns that there are people being left behind.

00:07:55.660 Are we creating a new class, whether it's 10 percent of Canadians or whatever the number is, of forgotten men and women who have been totally screwed over and left behind during this era?

00:08:06.560 It depends on what we mean by left behind.

00:08:08.800 I completely disagree with Ms. Freeland who says we've got this serious unemployment crisis in Canada.

00:08:14.960 First off, it peaked at about 15 percent, it's down to eight, and that's in less than 12 months.

00:08:22.320 Secondly, in terms of medium and longer term, and I mean two, three, four years now, we do not have an unemployment crisis.

00:08:28.740 We have a labor shortage crisis.

00:08:31.600 The boomers are exiting in very large numbers, and we are facing already in this country restaurants that can't hire people, trades companies. 0.97

00:08:42.820 I deal with tradesmen all the time because of my own renovations where they can't get workers.

00:08:48.120 And so we already are experiencing labor shortages.

00:08:51.200 This is an urban legend of mass unemployment.

00:08:55.080 Well, hold on, but I've also heard stories that because of the generosity of certain government programs, there are some lower wage jobs that places can't fill because people go, well, I'd rather stay on CERB or what have you.

00:09:06.620 Talk to me about that phenomenon.

00:09:08.000 I mean, to what degree you hear anecdotes.

00:09:10.020 To what degree is that actually happening in any sort of noticeable broader way in the economy?

00:09:15.020 It's that stats, again, are showing this.

00:09:17.220 And that's my point.

00:09:19.000 If you create the mythology that the safety net is broken and there's massive unemployment, then that gives you the justification to do the social spending to drive up the payouts.

00:09:33.380 And what it's done, and we know it was overly generous because only two countries in the world, and this is OECD and StatsCanData, only two countries saw average income go up as GDP collapsed.

00:09:48.120 Germany, a very wealthy country, progressive country, GDP went down as did income for everybody in the economy.

00:09:56.820 Canada and the U.S. were the only two countries where the GDP collapsed and incomes went up.

00:10:01.060 And we did that through borrowing massive amounts of money and distributing it to people.

00:10:06.540 And by making it very generous with essentially no checks and balances, what it did, I mean, if somebody offers me free money, I'm going to take it too.

00:10:15.120 And so what we did was we created this problem that they claim affects large numbers, but it was exacerbated by government policy.

00:10:26.300 And now we're seeing the consequences where trades companies can't find workers, restaurants can't find workers, and that's in turn contributing to inflation, which is going to eventually cause the government to have to increase interest rates to make up for these earlier mistakes, these earlier fiscal mistakes.

00:10:46.300 Well, Ian, I think a lot of people are really confused by the disconnect because you see these reports that, you know, the Dow, Nasdaq, what have you, hit a record high and so forth.

00:10:55.060 Stocks are really surging ahead.

00:10:56.840 And then you go, oh, look, there's crazy bidding wars in my neighborhood in Toronto or in Vancouver or what have you.

00:11:01.780 But then we have restaurants that are pretty much shut in the GTA in Ontario.

00:11:06.420 They've been shut for many months on end.

00:11:08.920 Then you hear these people who are getting stimulus checks who maybe they don't even need them and so forth.

00:11:12.940 But then you go, well, hold on a second.

00:11:14.440 The price of commodities, of copper, of lumber is going up.

00:11:18.320 The price of groceries is going up.

00:11:20.120 How does this all come together?

00:11:21.460 What does this all mean for the regular person?

00:11:23.380 I mean, it's almost contradictory information.

00:11:26.240 Anthony, this is demonstrating what I've been arguing.

00:11:29.600 100% of the economy did not go over the cliff.

00:11:32.060 50% of the economy did not go over the cliff.

00:11:34.280 10% of the economy went over the cliff.

00:11:37.860 90% did not.

00:11:40.040 The contradiction is not a contradiction.

00:11:42.420 The 90% are doing very well.

00:11:44.140 They're filling up the parking lots and driving up the price of lumber doing renovations.

00:11:47.940 Their homes are going through the roof.

00:11:49.900 10% yes, the restaurants in the GTA and Ottawa and Vancouver and Calgary and elsewhere were annihilated.

00:11:58.140 I'm not denying.

00:11:59.200 Nobody will ever quote me, say, suggest that Ian Lee said that there was nobody hurt.

00:12:04.700 10% of the GDP was affected extraordinarily badly.

00:12:11.020 90% was not.

00:12:13.560 But what they did was they distributed largesse to far more than 10% of the economy.

00:12:20.160 They over, they expended too much.

00:12:24.900 And we, as I said, we drove incomes up as GDP was going down and we gave large amounts of money to businesses and to people who didn't need it.

00:12:34.680 And the evidence for that statement, because people can say that's your opinion, Ian, is that we are sitting in Canada.

00:12:39.600 Some argue it's only $150 billion in bank accounts.

00:12:45.080 Others say it's, no, it's $200 billion.

00:12:47.100 That's 10% of GDP.

00:12:49.140 In other words, this money was not needed to go buy groceries because if you did, you would have gone and spent it to buy groceries.

00:12:55.980 You wouldn't have put it in the bank account and driven up the savings rate through the roof.

00:12:59.960 It peaked at, I believe, 28%.

00:13:01.500 That's the evidence that they were far too generous in their paying out these monies.

00:13:08.840 And what it's done is it's reduced their degrees of freedom for future crises.

00:13:13.620 And what are the long-term ramifications of that?

00:13:16.640 $354 billion deficit for 2020 alone.

00:13:19.440 Like I said, we're at $1.1 trillion deficit.

00:13:22.100 I mean, someone has to pay for this down the line.

00:13:24.200 Do we not?

00:13:25.060 I know Justin Trudeau says the budget will balance itself.

00:13:27.480 It means the economy is going to just grow in such a way that outpaces things.

00:13:32.040 You know, the old saw that you buy your home for a small amount.

00:13:35.060 It looks like a lot the day you buy it.

00:13:36.520 But as the years go by, your salary increases.

00:13:38.660 He's saying that old thing.

00:13:39.780 But does that logic apply to this extraordinary sum?

00:13:43.380 No, I don't.

00:13:44.080 And it's all interconnected.

00:13:45.760 And let me explain this.

00:13:47.200 What I'm arguing is they misdiagnosed the problem.

00:13:51.020 They diagnosed the wrong problem that the safety net had collapsed.

00:13:53.840 It hadn't.

00:13:54.620 And the large numbers of Canadians had fallen over the cliff.

00:13:57.100 They hadn't.

00:13:57.740 It was about 10%.

00:13:59.040 Maybe 15% at the most of the economy had been devastated.

00:14:03.940 And they didn't diagnose the real problem, which is the aging of society and the concomitant

00:14:09.980 health care crisis.

00:14:11.540 So I was in the virtual budget lockup.

00:14:13.620 They threw money at just about everything in this country except health care.

00:14:17.600 And health care is the problem facing this country.

00:14:20.200 We are a rapidly aging country, as are all the other Western countries.

00:14:25.040 And the provinces are fiscally, I won't say insolvent, although Newfoundland and Labrador

00:14:30.700 is.

00:14:31.480 The Parliamentary Budget Office has said most of our provincial governments are financially

00:14:37.420 unsustainable in the medium term.

00:14:40.460 And the government of Canada did not address that, which is the second real problem facing

00:14:46.580 our country.

00:14:47.500 As GDP growth, the long-term growth declines because of the aging, which everyone agrees,

00:14:53.200 even Finance Canada.

00:14:54.240 So what we've got is a slowing economy for the next 5, 10, 15, 20, 30 years, which means

00:14:59.800 slower revenues going into the Treasury of federal...

00:15:03.460 Sorry, 20 years?

00:15:04.680 Slowing economy for as much as 20 years?

00:15:07.280 The forecast of the impact of aging is that from now through 2050, we are going to see a

00:15:14.600 reduced annual GDP growth rate.

00:15:17.300 Some people can shrug and say, who cares about GDP?

00:15:19.500 Remember, GDP is the totality of all the wages and all the salaries and all the incomes and

00:15:24.500 all the pensions of all the people in the country.

00:15:26.640 So it's our paychecks.

00:15:28.160 And we pay taxes as a function of what we're getting, what we're paid.

00:15:32.020 And so with GDP slowing, revenues are slowing to pay back the increasing indebtedness.

00:15:38.680 And the provincial governments do not have a printing press.

00:15:41.780 And Newfoundland and Labrador, as we speak, is insolvent.

00:15:45.160 And New Brunswick is right behind.

00:15:46.720 And the federal government, even though not legally the co-signer, is de facto the guarantor

00:15:53.760 of every provincial government in this country.

00:15:56.980 So that's our third real crisis.

00:15:59.540 And they ignore the aging crisis, the health care crisis, and the financial and sustainability

00:16:05.700 of our provincial governments.

00:16:07.800 Those are the three problems facing our country.

00:16:09.980 They're very large and they're very major.

00:16:12.000 So they didn't address the real problems and they squandered money on problems that weren't

00:16:17.500 of the magnitude that they claim.

00:16:19.200 Ian Lee, speaking of provinces, I want to talk about Alberta in a second.

00:16:21.840 I want to talk about the resource sector in a moment.

00:16:24.180 Before we get to that, though, what you've just said about that 20 years of really not

00:16:28.220 having much growth.

00:16:29.280 I mean, what does that mean for the average person and their prospects?

00:16:32.240 I have small children.

00:16:33.180 I know you have grandkids.

00:16:34.180 I mean, we always talk about that.

00:16:35.640 My kids will have a better life than I did and so forth.

00:16:38.180 And now you've seen more and more headlines, surveys, opinion polls where people go, I'm

00:16:42.400 not so sure about that anymore.

00:16:43.800 What do you think about that question?

00:16:45.340 I do believe that, unfortunately, and I don't say this with any, believe me, it's depressing.

00:16:51.300 But for the next, for the life of my children and my grandchildren, which next 30, 40 years,

00:16:58.920 we're going to see very, almost no increase in the standard of living because the long-term

00:17:06.320 productivity has collapsed in this country.

00:17:08.240 David Dodge has talked about this extensively.

00:17:10.820 It's down to about one half of 1%.

00:17:12.560 And productivity is the only driver of a long-term increase in our standard of living.

00:17:19.220 GDP is going to be going down because of aging, as they've described.

00:17:22.360 The government squandered huge amounts of money.

00:17:24.380 And so we're going to be paying larger amounts in taxes down the road to service the debt.

00:17:27.760 And I believe, I'm one of those people that believe inflation is rising, which is going

00:17:33.180 to cause interest rates to increase, which will increase, take even more money out of

00:17:38.740 our pockets.

00:17:40.000 So I'm not predicting doom and gloom and the depression.

00:17:43.380 I'm just saying we are not going to be as well off going forward as we have been for the

00:17:48.480 last, since the 60s.

00:17:50.000 All right.

00:17:50.580 Let's talk about Alberta now.

00:17:52.040 And then after that, let's talk about the green economy and Justin Trudeau saying he can

00:17:54.920 just snap his fingers and make it magically happen.

00:17:57.240 I take your point when you said, you know, the numbers show 90% actually are still doing

00:18:01.400 all right, 10% being decimated, restaurant industry, hospitality, and so forth.

00:18:05.880 But I know a lot of my friends in Alberta, they're going to raise their hand and say,

00:18:08.440 well, hold on, what about me?

00:18:09.460 Because, okay, maybe the paycheck's coming in right now to some degree or what have you.

00:18:12.840 But we have an entire budget that, you know, you open the file, you press control F,

00:18:16.060 you're not really going to see many mentions of Alberta oil sands, all that kind of stuff.

00:18:20.440 Justin Trudeau wants to, you know, as the famous phrase says, phase out the oil sands.

00:18:24.040 But I guarantee if you press control F and search for green and all those phrases,

00:18:27.820 I mean, it's just going to be that, that word's going to be in there with wild abandon

00:18:31.260 in the budget.

00:18:32.580 I know, you know, I've started saying that Justin Trudeau isn't a prime minister who

00:18:37.600 happens to be a green activist.

00:18:40.060 He's a green activist who happens to have become prime minister.

00:18:42.640 I mean, when you hear him talk about the future and he says that, you know, fair and equitable

00:18:46.100 and this and that, green is actually the first word Trudeau almost always says every time

00:18:51.980 he's talking about his priorities for Alberta.

00:18:55.480 What does this mean?

00:18:56.900 Where they are, you know, the other year you saw they were taken to the streets.

00:19:00.000 They were, they were going to Parliament Hill to say, pay attention to us.

00:19:03.760 And Trudeau seems like he doesn't really want to.

00:19:06.220 What's happening with Alberta right now?

00:19:07.640 If we continue down this path that we're on, this radical elimination of fossil fuels,

00:19:17.080 and I certainly do not deny global warming.

00:19:20.360 I believe that there's lots of things that we can do in an economy at the federal level

00:19:24.880 and the provincial level to incrementally in a reasonably and prudent manner respond to

00:19:32.700 the greening of the economy and produce a greener economy, but without the elimination of oil

00:19:42.260 and gas.

00:19:43.460 I, if we continue down that path, which has been set up by this government, it's going

00:19:48.600 to turn Alberta, I think, into a have not province.

00:19:52.360 I've been to Alberta.

00:19:53.520 I have family in Alberta and Saskatchewan because of my mother came from Western Canada and I've

00:19:58.500 driven through Saskatchewan and Alberta and the idea that there's huge amounts of alternative

00:20:03.760 resources in Alberta to, to diversify to is nonsensical.

00:20:10.480 And, and so that to answer your question, I think that Alberta is facing very, very tough

00:20:16.020 times in terms of their, their, their, the plan.

00:20:19.980 I think when you look at the actual stats and I'm talking natural resources, Canada statistics,

00:20:24.980 and you look at the fact that we are about 75%, 70% of the totality of energy in Canada

00:20:32.820 is produced by oil and gas.

00:20:35.260 A quick fact, there's 15 million homes in Canada, 80%, 80% of the 15 million, over 12 million

00:20:43.320 are heated with oil or natural gas or propane.

00:20:46.660 And, and so to say, we're going to throw those out and, and tell everybody they've got to rip

00:20:51.140 out their oil furnace or gas furnace and replace it with the new electric furnace.

00:20:55.120 It's $5,000 a house and rewire the house because you need a heavier electrical supply and rewire

00:21:02.740 the grid across Canada, the second largest country in the world.

00:21:05.780 First off, we're looking at a gargantuan amount of money.

00:21:08.440 I'm doing a study on this right now, by the way, for a, for a think tank here in Ottawa,

00:21:11.860 trying to come up and get a handle on these costs, but it's going to impose enormous costs

00:21:17.360 on us for very marginal benefits because we are 1.5% of the world.

00:21:24.140 The real problem is in China, as, as everyone knows, it's the number one emitter. 1.00

00:21:27.260 That's not to say, let's not do anything.

00:21:29.660 I'm just saying that destroying Alberta or ruining the financial future of Alberta and

00:21:35.300 imposing enormous costs on Canadians because they heat their, because of the crime of heating

00:21:41.240 their home in January at minus 25 is something that I, I think we're going to have to confront.

00:21:47.520 Is any other country in the world doing this, this aggressively, Ian?

00:21:51.340 I mean, I know the United States says, oh, we're going to kill Keystone XL because I don't

00:21:55.260 know, we care about the environment or what have you.

00:21:56.760 But at the same time, we know Barack Obama said, hey, I built enough pipeline to circle

00:22:00.580 the globe, you know, twice or what have you.

00:22:02.540 This was domestic pipeline.

00:22:03.940 I mean, yes, he talked about his green energy stuff, but he still didn't spite an entire

00:22:07.480 industry in his own country.

00:22:09.200 Uh, we got a number of other countries that I think are, are striking a balance.

00:22:12.900 I know in Europe, they're, they're trying to deal with various different, uh, renewable

00:22:15.540 energy things, but I don't think they're screwing over, uh, you know, domestic markets.

00:22:20.020 I mean, I know they don't have, uh, oil, so it's hard to make that, uh, direct comparison

00:22:23.860 there, but I, I just don't see the situation that's happening in Canada where everything is

00:22:28.640 getting shut down and the government seems to revel in it.

00:22:31.860 I don't see that happening anywhere else in the world.

00:22:34.220 It's, uh, probably I'll, uh, gently and respectfully disagree.

00:22:39.280 I think the Europeans are starting to go down a very radical direction as well.

00:22:43.960 Uh, let, at least we acknowledge it's radical.

00:22:46.960 It is, it is because the, um, the reason I'm saying that is, uh, I mean, some listeners

00:22:53.060 can say, oh, you're just shrugging off global warming.

00:22:55.320 Look, there are many solutions out there.

00:22:57.420 We know that, you know, there's things that we can do there.

00:23:00.280 We can develop hydrogen much more aggressively using the existing pipeline infrastructure

00:23:05.000 to distribute hydrogen, which is a very clean fuel.

00:23:08.480 And, uh, and again, it's the timeline.

00:23:12.360 They're trying to do it very, very rapidly and put technology that isn't there yet.

00:23:17.720 And at a cost that's going to be a horrendous and it's going to harm many ordinary people.

00:23:23.860 And, and so I'm not saying we shouldn't be transforming.

00:23:26.760 Of course we should on an incremental, prudent, uh, moderate level that doesn't, uh, cause

00:23:32.080 great fiscal damage.

00:23:33.900 And doesn't industry know that that reasonable timeline better than government is?

00:23:38.680 I mean, I, I know all these major companies, they're putting R and D into all these new

00:23:41.940 initiatives because obviously, you know, you innovate or you atrophy.

00:23:45.360 So, and I would surely imagine that the first company that can bring the electric vehicle

00:23:50.140 or what have you to market at an equal or lesser price point than the, you know, internal

00:23:54.540 combustion engine, they're going to do it.

00:23:56.680 They're not going to suppress it because they know that means riches galore.

00:23:59.520 Am I not mistaken in all of this?

00:24:00.940 I mean, I know Trudeau thinks it has to be by government fiat, but I feel like the industry

00:24:04.660 is actually just kind of doing the same thing, but doing it in a way that makes sense for

00:24:10.040 the economy and the workers and what the consumer wants.

00:24:12.360 Let me add to that.

00:24:13.460 Uh, I was very intrigued by Seamus O'Regan, the liberal cabinet minister of natural resources

00:24:19.260 Canada, who in December, just, just several months ago, four months to five months ago,

00:24:23.320 um, said that, uh, point blank, no caveats that we cannot get to 20, uh, net zero carbon

00:24:31.220 2050 without nuclear.

00:24:33.180 And he was promoting modular nuclear, these small nuclear, uh, uh, production facilities.

00:24:37.800 And the reaction of the environmental movement and of other people in the liberal party was

00:24:43.620 just astonishing to me.

00:24:44.840 He said something that's well-known to energy economists and energy experts that study this,

00:24:49.720 that we are not physically, it's a technological limitation.

00:24:52.960 It's a financial limitation.

00:24:54.840 It's a lack of resources to rewire the whole grid.

00:24:57.020 It's going to require hundreds of thousands of people going on those trucks that go up in

00:25:00.500 the air to string new wires because the grid to get rid of all the oil and gas requires

00:25:04.940 a five fold increase in the wiring of every street where there's wires, which is every

00:25:11.560 street in Canada.

00:25:13.100 And, and so he was saying the obvious, we're not going to get there without doing some other

00:25:17.720 things.

00:25:18.660 And he was attacked mercilessly for simply speaking truth to power.

00:25:24.480 And so my point is, is that we're going to do all of this fiddling and, and, and putting

00:25:29.240 on these and, and, and, and expending a large amounts of money for, to try to achieve this

00:25:35.580 reality that in my view, and I think in the view of quite a few people is not achievable

00:25:41.020 by 2050.

00:25:42.340 It can be achieved one day.

00:25:44.140 You know, it's that old joke about a boat.

00:25:45.740 You can solve any problem with a boat.

00:25:47.100 If you throw enough money at it or an old house, I would add as an owner of an old house,

00:25:51.080 but it's going to take, I mean, look at the grid, the Canadian electrical association,

00:25:55.240 which is the provincial utilities owned by governments, for goodness sake, including

00:25:59.860 Quebec have said, there is just no way that we can distribute enough electricity over the

00:26:05.940 existing wires across Canada to eliminate all the oil and gas.

00:26:11.000 The, my line to explain this to people is there's no such thing as a wireless electrical

00:26:17.180 grid.

00:26:17.840 You can't beam the electricity up from Pickering power plant in Southern Ontario to Ottawa or

00:26:25.160 North Bay or Sudbury or other cities.

00:26:28.020 You have to string those high voltage wires.

00:26:31.660 And because electricity is only 17% of total energy supplied in Canada, oil and gas is over

00:26:39.060 70%.

00:26:40.140 It's a huge amount.

00:26:41.880 And so to displace it is going to require massive rebuilding of the grid in the second largest

00:26:48.680 country in the world.

00:26:50.060 It's almost 9,000 kilometers long.

00:26:52.060 And we've got to restring every electrical wire on every street, every village, every

00:26:58.280 hamlet, every true GTA across this country.

00:27:01.840 And it's going to acquire massive amounts of money.

00:27:04.680 It can be done.

00:27:05.540 But the idea that we're going to do this and just flip a switch and presto abracadabra, it's

00:27:10.400 not going to happen in that timeframe, but they're going to spend gargantuan amounts of

00:27:14.400 money discovering what they are refusing to accept.

00:27:18.460 Ian Lee, I want to circle back on something you were saying earlier, talking about that

00:27:22.800 notion, 90% of people actually do an okay, relatively stable, 10% really hurting.

00:27:27.760 And when you broke down those categories, it became clear that of that 10%, none of them

00:27:32.280 were really public servants.

00:27:33.820 And of the 90%, you know, there's an increasing proportion of people who are in the public sector.

00:27:40.460 The phrase has been used, takers versus makers, a lot of reports with that lingo in there.

00:27:45.020 I try not to use that anymore.

00:27:46.120 I know many public servants, I know many teachers, you know, to pit up the takers makers thing. 0.74

00:27:50.280 But, you know, there's still something to be said about that increasing, you know, off

00:27:56.460 ratio there, the percentage of persons who are in the public sector versus not.

00:28:00.780 And we see this in the latest budget.

00:28:02.060 We see it in latest reports.

00:28:03.780 What does that mean?

00:28:04.980 I mean, it seems that it's not abating that that number is only increasing.

00:28:09.080 Is it sustainable?

00:28:10.480 Right.

00:28:11.400 I do talk about it.

00:28:12.700 I don't use those words.

00:28:13.680 I use a different phrase because I think it's a very accurate phrase. 0.91

00:28:16.960 We in the and I'm in the broader public sector.

00:28:19.520 I don't hide that fact.

00:28:20.520 I'm a professor.

00:28:21.960 And we are incredibly privileged in the broader public sector.

00:28:27.560 Why?

00:28:28.060 We never get laid off.

00:28:29.520 We have unbelievable pensions.

00:28:31.220 I'm being truthful.

00:28:32.720 The government of Canada, the pensions are just unbelievable.

00:28:35.300 Same in the city of Ottawa.

00:28:36.300 Same with the city of Toronto.

00:28:37.260 All the universities, all the colleges, all the schools.

00:28:40.980 And so the broader public sector, which is about 4 million, by the way, out of 20 million

00:28:45.240 Canadians employed.

00:28:46.540 There are 20 million Canadians working per stat scan.

00:28:48.920 About 4 million are in the broader public sector.

00:28:51.460 So that's federal, provincial, municipal, plus crown corporations, education, hospitals,

00:28:55.100 and so forth.

00:28:56.020 And we're very well paid.

00:28:58.060 And this has been studied to death.

00:28:59.520 There's a premium for public sector.

00:29:02.340 They get paid a higher average wage than the private sector.

00:29:06.000 And we don't have any risk of being laid off.

00:29:08.540 That never used to be the case.

00:29:09.800 Didn't we call it some sort of, you know, a certain contract where you realized you had

00:29:12.840 job security for life, but it meant you'd get paid, you know, 10% less than the private

00:29:17.100 sector for a comparable job.

00:29:18.380 But now reports have flipped it around, and now you make about 10% more, and you have job

00:29:22.380 security.

00:29:23.280 But where I'm going with this, I'm just stating factual, you know, self-evident truths.

00:29:28.200 Where I'm going with this is I think that we should be in the pub, as you can tell, I'm

00:29:33.540 probably, I'm very much a minority view in the public sector.

00:29:36.980 I think that we should be much more humble and drop the arrogance that you hear.

00:29:45.700 Politicians are in the public sector.

00:29:46.960 They're not paid by private firms.

00:29:48.460 They're paid by the taxpayer.

00:29:49.580 They're in the public sector.

00:29:51.000 And we should be much more sensitive to the demands and the policies that we are imposing

00:29:58.280 on ordinary people who don't live in the Ottawa bubble, that are not part of the Laurentian

00:30:04.820 elites, to use that phrase, the elites of Toronto, Montreal, and Ottawa, who live with, you know,

00:30:10.360 modest incomes across Canada.

00:30:11.760 And yet, here we are doing this, I think, radical social engineering that's going to fall

00:30:18.520 disproportionately on people whose incomes are much smaller.

00:30:25.220 They don't lead these privileged lives in the sheltered larger public service that I do.

00:30:31.820 And we have to be, I think, a lot more cognizant of that, because if we aren't, then we're going

00:30:37.740 to facilitate or encourage or create the conditions for a populist demagogue to emerge.

00:30:45.420 And this doesn't make me popular, I can tell you, in the broader public sector.

00:30:49.160 But what are the things that that populist demagogue would say?

00:30:52.220 What are the issues that would be seized upon, that would be exploited?

00:30:56.980 The ordinary people are being exploited by the most privileged people in Canadian society.

00:31:01.060 But you don't disagree with that?

00:31:02.660 No, I actually, I don't.

00:31:03.800 I don't want to turn it into an us-them war.

00:31:07.740 But I do believe that the most privileged people living in the wealthiest postal codes,

00:31:12.480 they have all kinds of benefits.

00:31:13.960 I mean, I'll just give you a trivial example.

00:31:15.840 Mr. Trudeau overturned the decision to end door-to-door delivery to the 25% of Canadians

00:31:23.840 that still have it.

00:31:25.140 And that was about four years ago.

00:31:26.280 Well, who are the people that have door-to-door delivery?

00:31:28.940 Well, they're the people in the wealthiest neighborhoods, Rockliffe in Ottawa, Glebe in

00:31:33.740 Ottawa, Beaches in Toronto, Shaughnessy in Vancouver.

00:31:37.920 And that was just outrageous.

00:31:39.540 I mean, they support universal pharmacare.

00:31:42.100 Well, universal means paying free drugs to everybody, including doctors that make a half

00:31:46.560 a million or a million dollars a year.

00:31:48.280 This is privileged people lining their own pocket.

00:31:51.160 Or universal daycare saying we're going to give free or massively subsidized daycare not

00:31:56.940 just to low-income people that need help.

00:31:59.000 We're going to give it to the rich folks.

00:32:00.460 We're going to live it to the people that live in the beaches or live in the fanciest

00:32:04.580 neighborhoods in Toronto or in Montreal, the town of Mount Royal.

00:32:08.620 What should they do instead?

00:32:09.840 Because the liberals, that's the thing they are cheerleading the most in the latest budget,

00:32:13.760 this national daycare.

00:32:14.740 They've been talking about doing it for many years.

00:32:16.360 Who knows if they'll ever actually get around to doing what they're promising now.

00:32:19.620 I mean, people feel pretty, you know, once, bit, and twice shy about it all.

00:32:22.340 But there's still general enthusiasm for it.

00:32:24.040 And that's the thing that gets the applause.

00:32:26.100 Because I think people get the idea that this is just being, this daycare is just being given

00:32:31.720 to the people who are most in need of it.

00:32:33.840 That people are basically being oppressed by not already having access to it.

00:32:37.200 But you're saying there's a lot of wealthy people who are going to be benefiting from

00:32:40.320 this.

00:32:40.420 At the very beginning of our conversation today, I talked about squandering scarce public resources.

00:32:45.840 I believe that there should, all programs should be targeted.

00:32:49.700 I do not deserve as a professor, a very well-paid professor.

00:32:53.380 I do not deserve and need or want free drugs.

00:32:57.120 And I should not be getting them.

00:32:58.440 Public servants.

00:32:59.300 It's offensive to suggest that a doctor making a half a million a year should get free drugs

00:33:04.280 or free daycare or subsidized daycare.

00:33:06.300 The Canada Child Benefit, Ian, I've told you this before.

00:33:08.600 You know how much we get deposited in our account close to, I think it's now $600 a month

00:33:14.880 from the government, which isn't that far less than an Ontario Works welfare payment or disability

00:33:21.100 payment.

00:33:21.700 I'm getting that.

00:33:22.520 I'm working.

00:33:24.020 I'm paying the bills.

00:33:25.200 And yet the government is giving me $600 a month in my account.

00:33:28.880 I feel like my vote is being bought here.

00:33:30.620 It didn't work, but I feel like that's the attempt.

00:33:32.960 But this is my larger criticism of this budget and this government.

00:33:37.640 You know, if they said, if they really walked their own talk, which I don't believe they

00:33:41.080 are, they say, we're here for the, you know, the working class and the downtrodden and

00:33:45.920 the lower middle class in the middle.

00:33:47.620 That's not true.

00:33:48.700 That's not true.

00:33:49.340 OK, they're giving benefits to high income people.

00:33:52.560 They're giving benefits to people that live in the wealthiest postal codes in Canada in

00:33:58.560 the highest income categories.

00:34:00.740 And my point is, is that we have to target surgically.

00:34:05.580 Surgical targeting to help those who need help, not the people in the most privileged neighborhoods,

00:34:14.040 in the most privileged positions in the broader public service.

00:34:17.380 So this is not a let's bash government argument by me, and it's not a let's ignore everybody.

00:34:23.380 It is that we should be targeting ruthlessly on the people that truly need help, as opposed

00:34:29.880 to universal programs that benefit high income people in the wealthiest postal codes and who

00:34:36.080 have the most privileged positions in Canadian society.

00:34:39.020 Hey, and don't get me wrong, I'm happy to get that $600 a month or whatever it is back.

00:34:43.240 But it's like, OK, if you're going to do it, can you just like get rid of this complicated

00:34:46.740 tax code?

00:34:47.500 Don't turn it into a tax handout.

00:34:49.080 Just lower the general rates for everyone.

00:34:51.200 I would much prefer that.

00:34:53.200 But speaking of situations that I would prefer directions, I would prefer us head in.

00:34:58.660 What is the solution to all of this?

00:35:00.300 We began talking about how Canada's finances looking pretty rocky.

00:35:04.200 To what degree are we actually screwed here?

00:35:06.960 Massive deficits that, yes, they're projecting they're going to decrease them kind of a little

00:35:11.800 bit over the next few years, but they are still huge.

00:35:14.020 They're still bigger than what they were during 2008, 2009, during the economic crisis there

00:35:19.220 when Canada went into what was then a historic level of deficit.

00:35:23.800 Where do we go next?

00:35:25.940 Here's my fear.

00:35:27.340 And Don Drummond had a very wonderful quote.

00:35:29.320 He said, you look at their forecast for the next 30 years and everything's rosy.

00:35:33.060 So long as you assume there's no pandemics for the next 30 years, no recessions, no crises

00:35:37.960 defined, and everything is normal.

00:35:40.020 Well, that's nonsense. 0.62

00:35:41.460 That's nonsense.

00:35:42.740 There's going to be another recession.

00:35:44.460 And interest rates are going to go up.

00:35:46.680 And inflation is going to go up.

00:35:48.520 And GDP growth is going to go down.

00:35:50.960 And the worst problem of all is Newfoundland and Labrador is today insolvent.

00:35:57.720 And New Brunswick is right behind.

00:36:00.300 And right behind New Brunswick is Manitoba.

00:36:02.680 And then we've got the elephant, or should I say the herd of elephants in the room, called

00:36:07.980 the government of Ontario.

00:36:09.780 And I am one of those pessimists who believe that Ontario is going to hit the wall in the

00:36:15.640 next three or four or five years, and hit the wall in plain English means the bond markets

00:36:20.480 are going to wake up and say, you know what, Ontario, you're just too high risk for us.

00:36:26.660 You look too much like Greece or Argentina, and we are not going to buy your bonds anymore.

00:36:32.420 You seriously think we're that close to that, just a few years away from being Greece?

00:36:35.400 Because, and then the premier will go, and here's the problem, we're back to the federal

00:36:40.680 government.

00:36:41.280 The premier will have a press conference and say, fellow Canadians, we can't pay our doctors.

00:36:47.780 We can't pay our nurses. 1.00

00:36:49.240 We can't pay our teachers.

00:36:50.800 And there is no premier, no politician of any political party who's going to say, oh, well,

00:36:56.920 too bad, so sad.

00:36:57.820 The government of Canada will be forced to step in and bail them out.

00:37:02.480 That's why the quote of 50% roughly debt to equity of the federal government is very deceptive

00:37:08.880 and misleading.

00:37:10.660 The OECD always quotes, as is the IMF, total government debt at all levels of government

00:37:16.460 as a percentage of GDP.

00:37:18.220 When you look at the Canadian metric, we are not at 50%.

00:37:22.360 We're more like 110%.

00:37:24.200 In other words, we're much more heavily indebted than Ms. Freeland tells us we are.

00:37:30.840 And because she gets away with this fiction that, oh, well, the provinces, that's their

00:37:34.460 debt.

00:37:35.160 But that's, we know that they will bail out the provinces.

00:37:38.200 How do we know?

00:37:38.800 Because this spring, or last year, the bond markets refused to buy the bonds of Newfoundland

00:37:44.840 and Labrador.

00:37:45.720 Who bought their bonds?

00:37:47.700 The Bank of Canada.

00:37:50.020 That's called a bailout.

00:37:51.440 Now, I know the Bank of Canada said, no, no, no, we're buying other provinces too.

00:37:55.100 Okay, you know, you can slice and dice it any way you want.

00:37:58.340 The reality is the private bond market won't buy their debt.

00:38:02.680 And the government of Canada stepped in, whether innocently or contrived, I really don't care.

00:38:08.600 They stepped in and bought the bonds, which prevented the Newfoundland and Labrador from

00:38:14.280 collapsing.

00:38:14.860 And what I'm suggesting, and the PBO is saying that most of the provinces are financially

00:38:20.180 unsustainable.

00:38:21.860 So in the, I don't mean 50 or 100 years from now.

00:38:25.020 Right.

00:38:25.160 And as we go forward in this decade, there's going to be further financial crises at the

00:38:30.120 provincial level, which are going to boomerang back on the federal government at a time when

00:38:34.900 interest rates are climbing and the economy is slowing because of aging and healthcare costs

00:38:39.800 are exploding because older people like me consume a lot more healthcare per person per

00:38:44.440 year, according to KIHI, the health institute, and then young people like you.

00:38:49.460 So we've got lots of problems ahead.

00:38:52.120 And unfortunately, the budget didn't even talk about the real problems facing our country.

00:38:57.000 They talked about fictitious problems of a collapsing social safety net and huge numbers of Canadians 1.00

00:39:03.200 that had fallen over the cliff when it was a 90-10, okay, some say it was 85-15 economy.

00:39:09.140 85% were okay.

00:39:10.480 15% were devastated.

00:39:11.840 I'm not going to quibble over that.

00:39:13.280 I'll go along with that.

00:39:14.540 Right.

00:39:14.680 Maybe 15% were devastated.

00:39:16.460 The point is, the vast majority of Canadians came through this with no problem because they

00:39:21.320 didn't lose their jobs.

00:39:22.780 What a wake-up call.

00:39:24.440 The stuff about Ontario, the stuff about the provinces.

00:39:26.940 And Professor Ian Lee, I thank you so much for giving us this wake-up call here on the show.

00:39:30.820 I hope you give it to the politicians next time you testify in front of the House of

00:39:34.200 Commons Finance Committee.

00:39:35.420 Ian, thanks so much for your time.

00:39:36.680 Great chatting with you.

00:39:37.780 Have a great day.

00:39:38.180 My pleasure, Anthony.

00:39:38.940 Thank you very much.

00:39:40.800 Full Comment is a post-media podcast.

00:39:42.920 I'm Anthony Fury.

00:39:43.840 This episode was produced by Andre Pru with theme music by Bryce Hall.

00:39:47.760 Kevin Libin is the executive producer.

00:39:49.760 You can subscribe to Full Comment on Apple Podcasts, Google, Spotify, or wherever you get

00:39:53.660 your podcasts.

00:39:54.540 You can help us by giving us a rating or a review and by telling your friends about us.

00:39:58.120 Thanks for listening.

00:40:00.820 Thanks for listening.

Full Comment - May 17, 2021

Ian Lee reveals the alarming economic reality facing Canada

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