Debt financing a flawed policy

Re: “When borrowing makes sense; ‘Smart debt’ could eliminate Alberta’s infrastructure deficit,” by Melissa Blake, Ideas, Dec. 3. Melissa Blake, mayor of Wood Buffalo, supports provincial government borrowing. Certainly, ensuring adequate infrastructure is essential.

But Blake confuses the rationale for government borrowing and the logic of some of the criticism directed at the province.

Borrowing by a rapidly growing city like Fort McMurray to finance infrastructure can be smart. Borrowing by the province (with only one-sixth the growth rate of Fort McMurray) to finance schools, hospitals and roads might not be.

Young families and rapidly growing municipalities typically have no option but to borrow. The province, however, has a choice.

Because of interest payments, borrowing is the high-cost alternative to pay-as-we-go. The province needs to get its budget organized so it can finance ongoing infrastructure needs without resorting to the more expensive option.

Understandably, Mayor Blake does not want to see roadblocks to improving Highway 63, a project to be financed by the new borrowing initiative.

Albertans already own a huge amount of infrastructure and, thanks to the pay-as-we-go approach, owe essentially no debt. Perhaps the government is shifting to debt financing to overcome an inconvenient and what it hopes will be temporary fiscal and political problem.

If so, say so. But if it is intended to be a long-term way to finance infrastructure, as it is being pitched to the public, it is bad policy. Melville McMillan, professor of economics, University of Alberta