Senator Woo: Thank you, Senator Plett. I have the same question for you that I asked Senator Bellemare, but whereas I asked Senator Bellemare a question out of genuine interest in the economic model she was proposing, I am befuddled by your explanation of how the economics work in the model you have put forward. Your starting point is that federal government spending is out of control and therefore unsustainable, and that it is this same spending that has added “fuel,” to use your words, to inflationary pressure essentially through what they call expansionary fiscal policy. Your solution, then, is to reduce the GST by a few percentage points, but that is expansionary fiscal policy.

While I haven’t done the detailed numbers, the back-of-the-envelope calculation in my head suggests to me that a reduction in GST of a few percentage points for everyone will be much larger than the cost of Bill C-30. Therefore, that policy would be an even more expansionary fiscal policy than what we are considering in this bill. It would also, by the way, exacerbate what you claim to be a problem of fiscal unsustainability.

Then there is the magical thinking that by reducing the GST — and increasing expansionary fiscal policy and adding to inflationary pressure — that reduction will allow the Bank of Canada to be less strict and harsh on increasing interest rates. That’s what we call fiscal dominance, where the fiscal policy of being irresponsible by cutting GST puts more pressure on the Bank of Canada to increase interest rates. Since you brought up the U.K. example, that is exactly what is happening in the U.K.

You are proposing, essentially, a policy of increasing expansionary policy, which will push up interest rates and inflation more than it does currently. You are creating pressures for the Bank of Canada, to the extent that this is an unsustainable fiscal policy, to increase interest rates more. I would add that reducing GST is a very difficult policy to unwind. You know that very well because it was under a previous Conservative government that reduced GST from 7% to 6% to 5%, which is where we are today.

My question to you, Senator Plett, is: What economics textbooks are you consulting?