CORCORAN: REAL INFRASTRUCTURE GAPS.

The great Canadian infrastructure salvation movement is shifting into high gear. All Canada needs to fix its economic problems, apparently, is a massive government-backed spending binge to fill the “infrastructure gap” — even if it means big deficits.

Whether the infrastructure reboot idea will survive through to Bill Morneau’s first budget remains to be seen. An offhand comment by Morneau prior to Monday’s Liberal retreat in New Brunswick seemed to hint at caution: “If we find projects that are responsible, that can help us with long-term productivity that are also ready now, we’d like to move forward.”

That sounds sensible, which is more than can be said for the infrastructure boosters preaching around the nation. Ontario Premier Kathleen Wynne says she wants to see “money on the table” from Ottawa, as do other premiers and city mayors. One bank economist said Ottawa should use “the fiscal weapon” on the economy by running up $30-billion in annual deficits via spending on infrastructure.

As with previous alarmism over infrastructure gaps, it is far from clear what the causes of the crisis are, or even if there is a crisis.

According to a new Canadian Infrastructure Report Card, released Monday by an association of construction industry and municipal lobbyists, municipal buildings are crumbling, roads are un-driveable, water systems and sports facilities are deteriorating and public transit networks are in poor condition across the country.

The impression is that infrastructure has been grossly neglected across all Canadian governments, producing a national crisis that must be addressed. “Nearly 35% of assets are in need of attention,” said the industry lobby report. To which the average Canadian might ask: How did that hap-

MASSIVE NEW SPENDING WILL NOT ADDRESS THE REAL CAUSES OF INFRASTRUCTURE DECLINE.

pen? Governments collect taxes to fund public spending on things like infrastructure, but now we learn that politicians and governments have not been doing their jobs, infrastructure has been neglected, and now they need more money, quite possibly to continue to not do what they are supposed to be doing.

If there is an infrastructure gap, it is unlikely to be filled with blasts of deficit spending and high-profile cash distributions to local governments. The evidence is strong that existing government institutions are ill-equipped to handle infrastructure management efficiently and effectively.

One problem is inter-government management regimes and political approval processes. The recently announced $400-million cost overrun on one leg of Toronto’s subway expansions is just one recent illustration of the problem.

In all the current infrastructure hype, nothing has been said of the municipal tax regime. Municipal dependence on property taxes for revenue means that they lack funds for the projects they initiate. Maybe they should privatize and price for services. Compounding the cash squeeze on taxpayers is the fact that most infrastructure work must be carried out by big corporations at union wage rates. Last week on this page Catherine Swift asked why Canada’s infrastructure has been neglected. “It is certainly not because our governments have been short of money.”

Spending by all levels of government on fixed capital formation has recently been climbing as a percentage of GDP. As shown in the nearby graphic ( from the Canadian infrastructure lobby) such spending recently rose to 4 per cent of GDP, a level not seen since the 1960s. Total government spending in Canada as a per cent of GDP is about the same as it was in the 1960s and 1970s, when capital formation averaged closer to 5 per cent of GDP.

Could it be that the sharp fall- off in infrastructure spending in the 1980s and 1990s was related to high levels of government debt, especially at the federal level? During the federal debt crisis of the 1990s, Ottawa downloaded spending to lower levels of government to pay for previous deficits. The debt reduction succeeded in repairing the federal government’s fiscal situation.

If Canada has an infrastructure problem with various causes that are not being addressed, it would be foolish to begin a massive push for deficit spending on infrastructure that could, in the end, recreate the crisis of the 1990s.