May 7, 1974 (29th Parliament, 2nd Session)


James McPhail Gillies

Progressive Conservative

Mr. Gillies:

I do not subcribe to the theory that inflation has been caused because, suddenly, all over the world there is a shortage of supply and suddenly the world is not producing as many goods and services as it produced in the past. If one examines the historical perspectives of inflation-the Minister of Finance mentioned this in the early part of his speech last night-one will see that inflation has come about from the great increase in world liquidity. The fact of the matter is that ever since the 1930s, and certainly since the 1940s, all governments have been willing to spend much more than they are taking in from tax revenues and other sources. They have been financing programs by printing paper money. It is as simple as that. We have seen this rate of increase in inflation and the decline in the value of currency all over the world as a result of such policies. The only way, generally speaking, to curb inflation all over the world is to bring some discipline back to government spending.
I find it incredible that in Canada, in the year in which we have inflation rates at 10 per cent, the government has increased spending by the dimensions we have witnessed. According to the budget this year, the government is to increase the tax take by 25 per cent. Yet, while taking that amount out of the economy, we are to operate with a modest deficit. One would think that if there were ever a time when expenditures might be kept down and revenues might be in surplus, that time might be the present.
The Liberal government has been operating its economic policy in the last 25 years under the modern Keynesian theory under which there is a budget deficit with slower economic activity and a surplus with higher economic activity. The fact is that the government has made no attempt at all to slow down the rate of government expenditure. Actually, never before in peacetime has Canadian government spending been growing so fast. It seems incredible to me that the government has not made a major effort to attempt to control government spending. How long can you continue to take as much out of the economy as is being taken by this government and applied to the sorts of activities which are being carried on at present, without diminishing the true productive capacity of the economy?
Surely, if there was ever a time to practice discipline in government spending, considering the rate of inflation that time is now. Governments do not exist for the purpose of collecting taxes and spending money. Governments exist to provide services for the people in an efficient and effective way. The fact is we face a very critical economic situation. There has never been as much peace-

time inflation as we are seeing at present. The government is still trying to attack it with budgetary policies which are singularly unimaginative, and is afraid to tackle the problem in any direct way. It has done nothing in terms of income policy, nothing in terms of a two-price system and nothing about controlling expenditure. Unless we do this, we will see much more inflation during the coming year than we saw during the past.

Subtopic:   THE BUDGET
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