April 30, 1918 (13th Parliament, 1st Session)

Mr. McMASTER:

If that be so then I have to say that this legislation is very loosely drafted, because the idea I took from it was that " automobile " is a term of wide application, covering pleasure oars, express delivery vans, and isuch automobiles as the large trucks used by the Militia Department on the streets of this city.
Now, my hon. friend made some remarks which he thought were more or less hopeful about our having a favourable balance of trade. He told us that we were selling more to Great Britain than we were buying from her, and that we were buying more from the United States than we were selling to the United States. In the case of Great Britain the balance was favourable to us; in the case of the United States the balance was not favourable to us. I think that before going further, I should remind the House of the very essential fallacy wrapped up in the phrase " favourable balance of trade." Suppose a vessel laden with commodities grown in Canada leaves the port of Montreal for Great Britain, the goods on board being worth $100,000, and that it returns with a cargo of commodities useful to the Canadian people worth $120,000. On the unfavourable balance of trade theory our exports would be represented as $100,000; our imports as $120,000; and our unfavourable balance of trade, $20,000. But, suppose my hypothetical ship is lost on the voyage from Liverpool to Montreal, then the exports from Canada are set down at $100,000, imports into Canada, nil; favourable balance of trade for Canada $100, 000. It is not a wise thing to base any public policy on absurdities of that sort.
What is the situation in regard to our trade? The situation is that we are maintaining an army across the seas, and helping to maintain other armies across the seas, and in consequence our imports have been enormously swollen and our exports still more enormously swollen. To illustrate my argument, I have merely to Tefer to a table dealing with war trade, prepared by the Department of Statistics, containing the exports of certain Canadian commodities having a direct bearing on the war for the last normal year, which ended on the 31st March, 1914, compared with the exports of the same commodities for the fiscal year ended March 31st, 1917. These are the latest figures I have been able to obtain along these lines. The war has swollen both our pxports and imports, first, by greatly enhanced prices, and, secondly, by greatly increased quantities of certain commodities imported and exported for the equipment and provisioning of our army and for the use of our allies. I do not ask the House to follow me in a long list of figures, but there are some rather striking examples of my contention which I think may be of interest to hon. members. In the fiscal year ended March 31, 1914, we exported from Canada $446,000 worth of clothing. I leave the odd hundreds out. For the fiscal year ended March 31, 1917, this item had increased to six and one-third millions of dollars. Eggs jumped from just over $37,000 to just over $1,800,000. Explosives leaped from over $241,000 to over $281,000,000. Gutta percha, which we exported in the year 1914 to the value of $686,000, jumped to over $2,500,000 in 1917. In the year 1914 we exported 15 gasoline launches, worth a little over $9,000; in 1917, we exported 463 launches, worth over $15,000,000. The export of bacon has caused a good deal of interest in this country, and I note that from $3,750,000 in 1914 our exports have jumped to $43,000,000 in 1917, which latter figure, of course, includes the piice of the brine which was pumped into the bacon according to a well known process which occasioned a certain amount of interest throughout the country some months ago.
Exports of beef jumped from over $1,000,000 in 1914 to $5,750,000 in 1917, and canned meats from $95,000 to $1,750,000. Pork, showing the family characteristic, almost kept pace with bacon by increasing in export from over $200,000 to over $2,500,000. Among the metals a vast increase of exports was shown. Exports of aluminium

Toronto to see what sum less than $10,000,000 the people of Canada shall pay to the owners or the pledgees of the stock of the Canadian Northern railway for taking that stock away from them. There was room for a commission, but the commission should have sat for this purpose-to see what sum the owners and the pledgees and other people interested in the Canadian Northern railway should give to the Canadian people for taking their obligations off their hands. I greatly fear that for many years to come we shall find ourselves face to face with grave capital commitments.
I am glad that the Acting Minister of Finance (Mr. A. K. Maclean) has brought forward to-day proposals for the application of allowances, in regard to a man's payments on income tax, in respect to the children which he has. That is only fair and right. It is following sound British precedent. I noticed in Mr. Bonar Law's Budget speech that the British Government bad carried to a higher figure than formerly the exemptions for children.
The next criticism which I have to offer to my hon. friend's speech is that it discloses no proper nor adequate measures of economy.
It has been my lot recently to read a certain number of budget speeches which have from year to year been delivered- in the House, and a certain number of financial criticisms, and with all respect in the world fo-r those members of this Hoarse- who have made speeches and those criticisms, there is a -certain sameness about them. When the Liberals were in p-o-wer their expenditure was denounced in words- eloquent and bitter by the present Minister of Trade and Commerce (Sir George Foster). To-day no longer does he denounce, at any rate in bitter tones, the Government's extravagance; the eloquence has remained, but the bitterness h-a-a gone. Here are his words, uttered when he was financial critic of the Opposition in 1908:
The rapid pace which has been set and the recklessness of the expenditures that have been undertaken have obliterated all the old rules, the old lines in reference to expenditure. Whither are we rushing?
The expenditure which was animadverted to in such eloquent tones amoamted in that year to $76,000,000. In 1911 the present Prime Minister, then the leader of the Opposition, issued a manifesto to the-Canadian people, who were -then called upon to de- -cide which of the two great parties in this country -should direct the country's des-
tinies for the next parliamentary term, and he wrote these m-ost severe words:
The increase in what is known as ordinary controllable expenditures of from $36,000,000 in 1896 to $79,000,000- in 1910 is proof of extravagance beyond any possible defence and establishes a prima facie case of corruption.
It is a sad commentary -upon the value of election promises and upon the frailty of mankind- to- -know that the Administration. of my right hon. friend the present P-rime Minister increased the consolidated fund expenditure- or what we may call the expenditure on current account from $98,000,000 for the year ended March- 31, 1912, to $112,000,000 the succeeding year; the next year it had increased to $127,000,000, the next year to $135,000,000, hack again to $130,000,000 the- next year, leaping up again to $148,000,000 the- next year, .and the expenditure stands at $173,000,000 for the year just closed, exclusive of all war expenditure except pensions and interest on the war debt.
To compare the first four years of -the Conservative Administration with the last four years of the Liberal Administration- of course, in regard to this part of my remarks the Acting Minister of Finance is no more responsible than a babe unborn-we find -that the expenditure of the Conservative Administration exceeded by about 45 per cent that of their predecessors, though the country was certainly prosperous in the last four years of Liberal Administration, and although part of the first four years of the Conservative Administration was passed in war time, when extravagance ceases to be -a fault and becomes -a crime. To those who find it difficult to believe anything disadvantageous concerning the -Conservative party and although the name Conservative has disappeared from political -history we cannot think that -all Conservatives have lost their Identity in the sea of Unionism- and to -those who may object that -my remarks deal only with consolidated revenue account, I need only say that the capital expenditure -accounts of certain spending departments of the Government show the same high, and in my view unjustifiable, increases. In all governments there are forces working for economy and 'forces working for extravagance, and -the history of this country shows in the most plain and unmistakable manner that the forces of economy have been relatively stronger under the administration of Liberal leaders than under the administration of my right hon. friend the present Prime Minister, or those who have preceded him in guiding the affairs of the Conservative party.

But now, face to face with the sternest situation that has ever confronted the Canadian people, let us admit frankly that whatever virtues of thrift and economy our people possess as individuals, these qualities have not been adequately reflected) in the management of the nation's business. Having signalized! the fault, let us see what conditions have led to it.
'In a democracy the people get the Government they deserve, and I ask the question: Why have the Canadian people had extravagant governments? The first cause has been a lack in the Canadian people of a feeling of responsibility for the good' government of their country. Many there have been who have frankly stated that they took no interest in politics; that they were too busy to do so; and what is still more astonishing, some such seemed to take a considerable degree of pride in this shameless sort of selfishness. Perhaps, a feeling of colonialism felt by certain classes in our country, especially in years gone by, has beep responsible in part for this condition. The second cause has been the fact that we were collecting our federal taxes almost altogether through a customs tariff and, excise, and no one knew what he was paying to the State.
These two causes, in some measure, will be removed' by the war. The people of this country are now feeling as they have not felt for years how nearly and closely politics-the science and art of Government- touches' every individual member of the State, and many persons are now learning, as direct taxpayers to the federal authorities, that they have a direct interest in the economical administration of the country's affairs.
But there is a third cause, and I believe a most potent one, consisting in a widespread misapprehension about the surpluses which the governments of this country have declared on current account, or consolidated fund account, for a number of years past.
For the fiscal year 1899-1900, we had a surplus on account of consolidated fund of just a little over $8,000,000; the next year, the surplus was a little over $5,500,-00O; the next year, a little over $7,250,000: the next year that of 1902-3, the surplus had increased to over $14,250,000; the next year it went to $15,000,000; the next year it was almost $8,000,000; the next almost $13,000,000; for nine months of the next year it was almost $16,500,000; the next year it amounted
to almost $19,500,000; but in the year 1908-9, which followed the commercial crisis of the fall of 1907, the surplus was reduced to a little more than $1,000,000; the next year, however, 1909-10, it increased to over $22,000,000; thd next to almost exactly $30,000,000; the next year, 1911-12, to almost $38,000,000; the next year to $56,500,000; the next year, 1913-14, it was almost $36,000,000; the next fiscal year saw the outbreak of the war, and for that year, 1914-15, instead of the usual surplus a deficit of almost $2,500,000 occurred. This was changed, however, the succeeding year, to a surplus of almost $42,000,000, and in the year 1916-17, the surplus amounted to $84,000,000, while for the year just closed it amounted to $85,000,000.
On the face of things, these surpluses demonstrate a truly marvellous condition of national prosperity, but I ask the question : Can we regard these surpluses as an indication of the excess of money furnished for taxation by the people of Canada out of their earnings over and above the necessities of the Government? In other words, during these years is it a fact that after having earned large sums of money the Canadian people have contributed, indirectly it is true, either through Customs duties or excise, such large sums by way of taxes to the Government that the Government has had these surpluses? My answer is: Far from it, because the revenue in these years in which these wonderful surpluses have occurred-in the history of the country the surplus never reached 10 millions until the year 1902,-largely represents taxation on our own borrowings. Perhaps I could better explain what I mean by an illustration-. Let us suppose a man in business has for many years been conducting his affairs at a profit, and in order to provide for his declining years he has been placing in a fund a part of his profits, which he calls his surplus fund. And let us suppose further that experience has taught him that the easiest way of doing so is to put aside each month, in a special account, 5 per cent of his gross receipts. Let us further suppose that it becomes necessary for him to enlarge bis establishment. For that purpose he borrows $10,000. Will he, if he be a prudent business man, regard this sum as a gross receipt and put $500 of it in his special account? Assuredly not, because he knows that no part of it can be treated as revenue. It is capital which he has borrowed, and to put it, ot any part of it, in his surplus fund would