Official Hansard
Mr. Speaker, this week the Liberals dropped two big pieces of news. One was a budget that, from what I can see, would not deliver any actual, tangible results for Canadians, with a massive deficit. This, of course, impacts Canadians who are presently struggling to pay their bills. At the same time, the Prime Minister announced $25 billion of debt for a new “fund”. To be fair to the Prime Minister, the political spin that his team has put on this expenditure is really something. By billing this debt fund as the Canada Strong fund, which is kind of patriotism-coded; a sovereign wealth fund, which is kind of freedom-coded; and a national savings and investment account, which is sort of stability-coded, the Prime Minister’s launch announcement had a level of overhype that would have made any starving founder pitching to a VC blush. At this point, I cannot really blame the Prime Minister for this level of shamelessness. He is staring down the barrel of a Liberal-induced faltering national economy, he has a debt-ridden government, and the man is counting on the Canadian establishment’s current enamourment with him to give in to the feels of the moment and not look too closely under the hood of this new debt fund. However, no good investment manager would do that, and Canadians should not either. Canadians should have a full picture of the risk the Prime Minister is asking them to undertake not only with their tax dollars but also, as he implored them in his announcement, with additional post-tax contributions. He is actually asking Canadians to invest in this debt fund not just with a very high amount of tax dollars but also with personal post-tax contributions. If the devil is in the details of the Prime Minister’s pitch, there sure is not a lot for Canadians to go on. For starters, the Prime Minister’s fund model is, as colleagues have mentioned, built on debt. Therefore, it is misleading for him or anyone else to pitch it to investors as a true sovereign wealth fund in the same vein as Norway’s, which is built on the actual wealth and surplus created by resource revenues. By contrast, the Prime Minister’s $25-billion expenditure would be entirely debt financed at a time of widening structural Liberal deficits, which is sort of the same as an individual investor who is already in serious debt borrowing more money to go out and buy stocks. Further, outside of the announcement that a Crown corporation would manage it, every other detail remains vague, including who would run it. I am assuming it would be Liberal appointees. The criteria that would be used to fund it are similarly opaque. The lack of announced guardrails to stop the $25 billion from being funnelled into politically directed projects should also raise red flags for Canadians. Allocation decisions made by the debt fund, according to the Prime Minister’s remarks, would follow government priorities rather than pure market returns. The Liberals have a dismal track record of picking winners: for example, the billions of dollars they funnelled into EV battery plants that left the country with no return; the superclusters, for which there is a word we use now, but it is not parliamentary; the green slush fund; and the arrive scam app. The government’s track record is literally funnelling taxpayers’ money. Now they are saying to add additional post-tax dollar contributions into a fund, and they do not really have a track record of delivering. On top of that, the government’s inherent ability to place such a bet successfully in any circumstance should make Canadians take the claims of big-time benefits that the Prime Minister has been touting with a grain of salt. There are other problems to consider related to the viability and benefit of the Prime Minister’s debt fund, too, especially in the context of Canada’s stalled economy. First, the Prime Minister’s debt fund could create something called a crowding-out effect. By pumping $25 billion of subsidized capital into Ottawa’s preferred projects, the debt fund could massively distort private markets. That matters because of pension funds, for anybody who has invested in a pension fund or is drawing on a pension fund right now. Banks and institutional investors already deploy billions of dollars into Canadian infrastructure and resources. They would now have to compete against a government player that is armed with massive taxpayer backing and a direct link to politics. That is a huge market distortion that could affect the stability of somebody’s retirement savings, for example. The result could be higher costs for genuine private projects or capital simply fleeing for greener or more level pastures. In that same vein, far from a guaranteed hedge against economic risk, what the Prime Minister is proposing with this debt fund has the potential to exert further inflationary pressure on Canada’s economy. Second, the Prime Minister’s early signals of international investing with the debt fund should raise eyebrows big time on its supposed Canada strong angle. Even more Canadian tax dollars could flow abroad while pressing domestic needs wait unfulfilled. Conversely, if the debt fund’s expenditures stay strictly domestic, it could become a captive buyer for Liberal-favoured ventures. Either way, this has the makings of a giant boondoggle and a mess. I want to say that we have seen this movie before with the Prime Minister. It was something called GFANZ, this big fund he tried to put together. What ended up happening was that members balked at the requirements to phase out financing without clear backstops or substitute goods. At the end of the day, what ended up happening was that the thing fell apart. Members may colour me a little skeptical, but I am not sure which investment manager would capitalize $25 billion right now under this lack of detail. I sure would not, and I will not be voting to support it, because that would be a bad decision on behalf of my constituents. This conundrum further underscores why this expenditure should not be referred to as a sovereign wealth fund, because decisions made with government debt have different opportunity costs to evaluate than those made with true wealth funds. The debt fund also has massive potential for mission creep. If the debt fund’s scope stays vague, as it is right now, it will likely expand quietly once initial public scrutiny fades. For that reason, scrutiny should be paid to the fact that this expenditure will also likely duplicate existing bureaucracy, and it will duplicate and increase overhead and, conveniently, Liberal board appointees. It would be duplicating things like the Canada Growth Fund and the Infrastructure Bank. There are other flags that Canadians should be concerned about too. The Prime Minister mentioned that the debt fund would grow through mechanisms like “asset recycling”, which in Ottawa is often code for selling public assets on the cheap to insiders. The debt fund also has the potential to impinge on provincial jurisdiction, particularly if the debt fund capitalizes from resource export taxes or remittances of any kind. Resources are definitively the jurisdiction of provinces, and a move to reset constitutional order would not only be a major concern but create great instability at a time when the Prime Minister should be trying to do more to create national unity across the federation. Right now, though, it is like a little poke in the eye there. Is he going to say to companies, “Oh, hey, you have to pay a tax to get a Bill C-5 exemption or to get around Bill C-69,” instead of just doing away with the regulatory tape that is making it difficult and risky for investors to capitalize big projects in Canada? Aside from all these issues, there is another big problem with Canadians writing the Prime Minister a blank cheque for this project, and it is opportunity costs. With $25 billion, we could cut taxes, pay down debt or deliver direct affordability relief for struggling Canadians. Interest on the federal debt already consumes tens of billions of dollars and is more than health transfers to the provinces. Canadians will be faced with even more of the same to pay for this new expenditure at a time when inflation is already straining affordability in every aspect of Canadian life. If building a bigger pool of capital for major projects is what the Prime Minister is trying to solve for, arguably the structural problem Canada faces is not the lack of a debt fund but the lack of investment certainty in its regulatory and tax environment. The government should be scrapping bills like Bill C-69 to attract the capital into the country naturally and more sustainably to see big infrastructure projects built out. Without reform in those areas, the Prime Minister’s new debt fund is throwing money at a problem that money cannot solve. He also has not begun to answer why families should lend their potential retirement savings to this fund instead of traditional instruments like RRSPs or, frankly, proven pension fund managers. Nor has he explained whether, if the debt fund loses money, taxpayers will backstop it at the expense of more pressing needs. Investing in a scheme that has the potential to pay earlier investors using money from new investors rather than having any actual profit has a name, and the Prime Minister would be well served to remember that. At the end of the day, I do not think the Prime Minister, a supposed investment guru back in the day, would actually invest in this fund, which was put forward by him, the Prime Minister, and Canadians should not either.