ON INFRASTRUCTURE FILE, ALL TRUDEAU HAS BUILT ARE TOWERING EXPECTATIONS
If feds are serious about it, they will remove politics from equation as much as possible
Public administration is hard enough when all a government wants to do is tinker; a tax cut here, a few rule changes there, maybe a new trade agreement if the stars align.
It is extremely difficult when the objective is transformative change; think Jean Chrétien’s and Paul Martin’s overhaul of Canadian fiscal policy in the 1990s or the exertions of the Democratic majority in Washington to introduce universal health care in 2010.
This brings us to Prime Minister Justin Trudeau’s infrastructure program, the latest reminder that good ideas don’t implement themselves.
In 2015, Trudeau told us voters that he would abandon balanced budgets in order to build roads, bridges, metro lines and other infrastructure that would make Canada’s economy bigger and more competitive. Canadian voters endorsed a return to deficit financing in surprisingly strong numbers. Four years later, many of those people must be disenchanted, notwithstanding what they might think of the prime minister’s ditching of electoral reform, his star-crossed sojourn in India, and his decision to take the side of the white men running SNC-Lavalin over the Indigenous woman running his justice department.
Trudeau took about $90 billion left unspent by Stephen Harper’s government, budgeted about $100 billion in new spending, and unveiled to much fanfare a record-setting commitment to infrastructure. Yet only about $19 billion of that money has been spent, the National Post’s Jesse Snyder reported on March 13, citing Infrastructure Canada data. The Parliamentary Budget Office reported last year that program was responsible for a “modest” increase in gross domestic product, and said this week that provinces appear to have used the promise of money from the feds as an excuse to reduce their own infrastructure budgets. Meanwhile, the budget deficit, which Trudeau once promised to erase by 2019, is about $20 billion and the economy nearly stalled in the fourth quarter.
“Expectations were too high, they were unrealistic,” Mahmood Nanji, a former Ontario finance ministry official who now is director of the Lawrence Centre for Policy and Management at Ivey Business School, told me in a phone interview on March 14.
Trudeau shares the same political lineage as Chrétien and Martin, and he and then U.S. president Barack Obama reportedly became fast friends. Either those men are poor mentors, or Trudeau is an uninterested student, because he appears to have missed the most important lessons of the 1990’s budget cuts and the tortured history of Obamacare.
The previous Liberal government’s austerity program was successful because Martin managed expectations, which helped him demonstrate success. That kept the public behind him.
Obama and his highly educated advisers devised a program that survived Washington’s gauntlet of lobbyists, but they took the boring part — implementation — for granted. The website on which many Americans were to purchase their subsidized health plans crashed out of the gate, and it took months to get it working. The failure emboldened the Republican campaign to repeal the law. The Democratic Party lost control of the House of Representatives and the Senate, and Obama never really recovered politically.
Trudeau’s experience with infrastructure mirrors Obama’s star-crossed experiment with health policy. He had the right idea. Canada had been underfunding infrastructure for decades, and it showed in the country’s miserable productivity numbers. A significant body of research shows that spending that boosts competitiveness will pay for itself through stronger economic growth. Canada is better off now that the balanced-budget spell has been broken.
But some politicians continue to see red ink as the answer to everything. And now, the fiscal zealots have the upper hand in the debate because the infrastructure program hasn’t delivered what was promised. “They developed an infrastructure policy with zero evidence or research on the economic benefits,” Matt Jeneroux, the Conservative infrastructure critic, said after the release of the latest critical PBO report.
That matters. In January, Nanji and some co-authors at Ivey published a paper that aims to get policy-makers thinking differently about infrastructure. They describe six macro risks that they contend are responsible for delays, poor decisions, and blown project budgets. One of those is political risk.
Nanji reckons Canada needs to spend billions of dollars more a year than is currently budgeted to reach its economic potential. Yet it’s fair to wonder what would become of Trudeau’s existing infrastructure promises if he loses the election. Before the SNC-Lavalin scandal broke, the Opposition was spending most of its time making a fuss over the deficit. If the Conservatives win, and balancing the budget becomes a priority, the infrastructure program would be an obvious place to cut.
“In good economic times, a balanced budget should be in the forefront of politicians’ minds,” said Nanji. However, given the infrastructure deficit, he added that politicians should be asking a different question: “What is a reasonable deficit that you can manage?”
You reduce political risk by creating systems that shield strategic policy decisions from the election cycle.
The Trudeau government has tended to blame the provinces for failing to figure out how they wanted to spend the money, but the feds should have seen it coming. Australia has an independent agency that assess what the country needs to maximize its economic potential. Nanji’s report proposes that Canada’s various levels of government could agree on a list of priority projects that are worth of funding, regardless of who is in power at any given time.
Here’s the point: A country that is serious about infrastructure will remove politics from the equation to the greatest extent possible. Something for Trudeau to consider, if it isn’t already too late.