Spending beats tax cut

TheStar.com – Opinion/editorial – Spending beats tax cut
November 08, 2008

When a country is slipping into a recession, as Canada is now, prudent governments stimulate the economy and create jobs. But what’s the best way of doing that? A convincing new study has the answer: infrastructure spending.

The study, done for the Federation of Canadian Municipalities by the economic forecasting firm Informetrica Ltd., has found that government spending of $1 billion on roads, bridges and water mains provides twice as much economic stimulus as a tax cut.

Specifically, the study’s authors estimate that $1 billion spent on infrastructure projects would create 11,500 jobs in the first full year. The same amount dispensed in the form of a personal tax cut would net just 5,700 jobs. Why? Given a tax break, many Canadians would simply save the money to weather hard times. Others might spend it on imported goods, creating jobs elsewhere.

By contrast, spending tax dollars on upgrading this country’s crumbling infrastructure would provide direct employment to tens of thousands, especially in the construction sector. And the badly needed new roads, transit systems and other public facilities would boost our long-term economic productivity.

No wonder Jean Perrault, president of the municipal federation, calls infrastructure spending “a kind of recession immunization.” And cities across Canada are ready to administer that inoculation.

Municipalities, large and small, have done a great deal of planning. Hundreds of urban infrastructure projects are ready to be launched. All they need is funding. And there is no good reason for them to be denied, especially since Ottawa has already promised to spend $8.8 billion on infrastructure.

Once that money is fully delivered, more Canadians will be at work – bettering their lives and the economy as a whole.

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