Government underspending has left Canada with an infrastructure deficit

Posted on in Governance Debates

TheGlobeandMail.com – ROB/Commentary
Sep. 22, 2015.   Tony Fell

Tony Fell is a former senior financial services executive.

I support the Liberal Party’s plan to increase federal expenditures on national infrastructure, although it would be deficit-financed for a few years. I also support the notion of a balanced budget but, unfortunately, we have let our infrastructure deteriorate so far for so long that we will have to borrow for a few years to dig ourselves out. A deficit dedicated to productive infrastructure investment is justified, especially given the incredibly low interest rates. As for balancing a budget, that’s easy – just underspend on a few key areas such as infrastructure and defence.

One lesson we have learned in the past decade is, “No more tax cuts.” One of the worst public policy misjudgments was the Harper government’s reduction of the GST to 5 per cent from 7 per cent. There was no economic justification to do so; it was a classic case of good politics trumping good public policy and we are still paying a heavy price. The GST reduction cost the federal treasury about $14-billion annually and well more than $100-billion since the rollback began in 2006. Big things could have been accomplished with that $100-billion – including world-class infrastructure and increased spending on defence in an increasingly dangerous world.

The infrastructure deficit accumulated over the past 20 years is a terrible legacy of this and previous governments. This infrastructure crisis is having a significant adverse impact on the quality of life in our cities and on national productivity. Major urban areas, such as the Greater Toronto Area and Montreal, are choking on a lack of subways, traffic chaos, highways that are essentially parking lots, potholed city roads, derelict bridges and hundred-year-old sewage and water systems. It’s a national embarrassment.

It will take 10 to 20 years and tens of billions to dig our way out of this mess, but that’s what happens when you underinvest in your country for a prolonged period. Federally and provincially, good politics has trumped good public policy for far too long. Politicians will be remembered for the big things they did when they were in power – not for how long they were in power.

A national infrastructure renewal program should be organized and led by the federal government but should not be all about public money. I would hope the next prime minister would call a meeting of the premiers, big-city mayors and chief executive officers of the major pension funds to work out a co-ordinated national infrastructure renewal plan. Our world-class pension funds have extensive and proven experience in buying or building highways, bridges, airports, subways and energy infrastructure around the world. Given the opportunity, they can do far more of that here in Canada. We need more public-private partnerships, some highways should be sold, others should charge tolls, and we need many more privatizations such as Ontario’s Hydro One. Tens of billions of dollars of assets in public ownership across Canada would be far more efficiently run by the private sector. Provincial governments and city councils are reluctant to privatize highways or make them toll roads, because it might cost them votes. They should get over it, show some leadership and do the right thing instead of the political thing. We need a much greater sense of urgency and bold political leadership with a vision for a far more prosperous, growth-oriented and productive Canada.

Finally, who cares whether we are in a technical recession or not? The real issue is that Canada’s growth rate is substantially below that of the United States, our unemployment rate is substantially higher, the energy business is in a serious downturn and manufacturing is in trouble. The economy is in need of intelligent stimulation. The drop in the Canadian dollar dramatically increases the cost of vital machinery imports and impoverishes us all in global terms. The dollar’s decline reflects a lack of growth and investor confidence and a lack of vision about what this country could be.

There was a time when tax cuts and lower interest rates would spur the economy and create employment but the world has changed and, in the current environment of record-high consumer debt, the old formula won’t work. We don’t need more politically driven tax cuts from any political party. Anyone can cut taxes – always popular with voters – but it takes strong leadership and the ability to sell a vision to invest in crucial but less-popular initiatives such as infrastructure and defence. A major national infrastructure program that heavily involves public-private partnerships and privatizations will go a long way toward creating employment and getting Canada moving.

Let’s stop measuring ourselves against other members of the Group of Seven industrialized countries or the G20, many of which are basket cases. Let’s measure ourselves against what Canada could be. No one rises to low expectations. It’s time to raise the bar. We have to ask ourselves and our political leaders: What is your vision for Canada? If you don’t know where you’re going, it’s pretty hard to get there.

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