What worked, and what didn’t

TheStar.com – Opinion/Editorials
Published On Mon Dec 13 2010.

The first assessments of Canada’s $40 billion economic stimulus package are in; they raise troubling questions.

In Ottawa, Parliamentary Budget Officer Kevin Page released his evaluation of the government’s municipal infrastructure spending in early December. He found it didn’t create nearly as many jobs as hoped.

At Queen’s Park, Auditor General Jim McCarter released his analysis of Ontario’s share of infrastructure funding last week. He found public money was allocated haphazardly, job creation wasn’t even one of the criteria, and cabinet ministers overrode the recommendations of federal and provincial officials.

It is important to keep in mind that these are preliminary appraisals. Furthermore, they don’t apply to the $8 billion spent on jobless benefits, the $20 billion handed out in tax relief, or the $8 billion invested in housing. Nonetheless, the two reports suggest policy-makers have a lot to learn about prodding a moribund economy back to life.

The first lesson is that pouring billions of dollars into municipal works projects, even when they’re said to be “shovel-ready,” is a slow and expensive way to get people working and spending and supporting their communities.

Almost half (43 per cent) of municipalities that received infrastructure grants reported no effect on unemployment. A further 21 per cent said the impact of the stimulus money had been negative. (Torn-up streets hurt local businesses and construction drove tourists away.)

In Ontario, only 16 per cent of the money had gone out the door by the end of the first year of the program. That recession was over by the time the remaining 84 per cent could be spent.

The second lesson is that no matter how many safeguards are put in place, politicians will find a way to use stimulus money to advance their own interests.

Conservative MPs fanned out across the land announcing infrastructure grants as if they deserved credit for bestowing taxpayer-funded largesse on hard-hit communities. Provincial cabinet ministers replaced hundreds of projects recommended by public officials with proposals that didn’t meet the program’s objectives or couldn’t be completed within its timelines.

The third lesson is that the kind of infrastructure Canada needs — a reliable power grid, unclogged highways, effective urban transit — isn’t what it got. The infrastructure we got — primarily road, sewer and water repairs — won’t make a lasting difference. Municipalities merely accelerated already-planned capital projects.

The final lesson is that there appear to be better ways of creating jobs during a recession than small construction projects.

Training seems to work. Programs such as Ontario’s Second Career succeeded in getting laid-off workers back into the job market.

Enhanced employment insurance seems to work. The extension of jobless benefits and working agreements helped keep many families afloat.

Targeted tax measures seem to work. Jim Flaherty’s modest improvements in the national child benefit supplement and the working income tax benefit put spending money in the hands of struggling families. His home renovation tax credit kept contractors working during a lean period.

The stimulus package wasn’t a failure. But taxpayers’ money could have been spent more effectively.

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