BUYING TIME ON INFRASTRUCTURE SPENDING: IVISON
LIBERALS NEED TO BUY TIME ON INFRASTRUCTURE VOWS
Navdeep Bains spent most mornings during the federal election campaign at his local GO Transit station in Mississauga, Ont., handing out flyers that read: “Tired of your long commute?”
The message that his Liberals would spend billions on new transit systems resonated with stressed-out, frustrated voters.
Justin Trudeau is now prime minister, and Bains his economic development minister, in part because Canadians bought his pitch that strategic infrastructure investments would help the economy grow, create jobs and alleviate the life-draining tedium of the daily commute.
The Liberals pledged $60 billion over the course of the next decade to fight congestion and mitigate against the effects of climate change, for the most part using borrowed money and putting the economy into “moderate” deficit.
The party’s intellectual guiding light, Harvard University’s Larry Summers, calls such public investment a “free lunch” because he believes the boost to potential growth offsets the increase in debt.
The problem that Amarjeet Sohi, Trudeau’s new minister for infrastructure and communities, has discovered since taking office is that many of the shovel-ready projects are not shovel-worthy, while many of the shovel-worthy projects are not ready.
How to buy some time, while effectively investing the promised $5 billion a year in additional infrastructure spending?
The Liberals appear to have hit on a sensible (if hardly sexy) way to bridge the gap until the big transit projects are ready to break ground — fix up the nation’s stock of old buses, sewers and social housing.
When the Big City Mayors’ Caucus of the Federation of Canadian Municipalities met with the prime minister last week, he told them the infrastructure plan on which his government’s re-election may one day hang will roll out in two phases, with the initial two $5-billion tranches concentrating on the “deferred maintenance backlog.”
While the larger projects will require approval on a case-by-case basis — a necessarily slow process — Ottawa is preparing to offer the cities a degree of flexibility by allocating maintenance cash on a percapita basis, in a manner similar to the way gas tax money is distributed.
Since recapitalizing existing assets doesn’t require extensive assessment or planning, the impact could be almost immediate. At the same time, it would address a pressing need to upgrade municipal infrastructure identified in the FCM’s recent “report card.”
The mayors will not get confirmation of their allocation until the federal budget, but in the next few weeks they are likely to be given some preliminary numbers so they can get projects ready for the construction season.
It is an evolution in the government’s thinking since taking office and reflects a welcome degree of pragmatism. Some may quibble with the idea of going into deficit, but if it is to be done — and it seems it will be — better to spend money that would have to be spent anyway, than on some glossy make-work project with minimal job-creation and long-term economic benefits.
Having been elected in large measure on their promise of investment in the economy, the Liberals will also be judged on it.
Aware of how important it will be to get this right, Sohi and his team, led by chief of staff John Brodhead, have been spending long hours designing the program. Former parliamentary budget officer Kevin Page and his team at the University of Ottawa have been brought on board to help advise what worked in other jurisdictions. Experts from the U.K.’s National Audit Office, the International Monetary Fund and U.S. President Barack Obama’s former deputy secretary of transportation, John Porcari, were all drafted to offer their input.
Many experts endorsed the idea of spending the first two years recapitalizing existing assets. “Limit the scope of what you initially do, then, for the longer term stuff, plan. Do it right. Don’t do it quickly,” said Sahir Khan, a senior visiting fellow who works with Page at the University of Ottawa.
Tellingly, Porcari warned the government not to link success to specific job numbers — a mistake the Obama administration made.
The metrics of success for the Liberals are likely to be more long term, and more nebulous — for example, greenhouse gas emissions reduced, poverty alleviated and productivity gained.
This is a problem for a government committed to transparency. How do you persuade the public that the billions of dollars driving the government’s budget into deficit are sparking growth and creating jobs if you don’t link that spending to growth or job numbers?
Khan said the average age and condition of assets needs to be monitored and improved, if the program is to succeed. “Measurement matters on this stuff,” he said. “Money can’t be given with no strings attached.”
But if done well, the repair and upgrading of existing assets may prove a good investment of taxpayers’ money. “It addresses a public policy issue, doing stuff politicians don’t want to do normally,” said Khan. “There are no ribbon-cutting ceremonies extending the useful life of a sewer.”