Infrastructure spending is like time-release medicine.
It brings relief eventually, but in the short term it’s ineffective. It also can be tempting, and harmful, to increase the dosage when results are unapparent.
Which was why the signs were hardly gratifying from Ottawa last week in its gloomy economic statement.
Our region craves cash for transit and housing – compensation for years of poor planning and co-ordination among governments – and Finance Minister Bill Morneau was hardly reassuring about the path ahead.
True, the time-release medicine appears to be a sustained attack on what’s ailing us.
Morneau stacked more commitments on top of what was already a hefty injection: $22.6 billion in 2025-26, a trade and transportation initiative of $10.1 billion starting next year and $2 billion for northern communities starting the year after next.
But another truism is that the proverbial shovels in the ground haven’t even been manufactured yet. Heck, the wood for the shafts hasn’t likely made it out of the forest.
Infrastructure spending, then, is also like a placebo. It is packaged like an immediate benefit, but nothing is truly happening except what’s in our minds.
This is a government that is becoming all too known for sweeping and symbolic gestures. When you’re in a honeymoon, you can say sweet nothings and romance remains in the air.
So large is the priority pile that the next year or two is bound to see some first-term obligations and commitments soften to second-term intentions and aspirations.
The clear and present danger Morneau was fair to note was that we’re not creating many jobs as our economy mirrors the world’s slowdown. The Economist may love Canada as an “example to the world,” but that doesn’t pay the rent.
The inextricable truth is that the extra infrastructure commitment will not gain traction until at least the end of the decade. At the very least, engineers and architects will get in the way – they want, of all the nerve, safely built roads and bridges and transit lines and houses.
What it means, at best, is that the biggest of Justin Trudeau’s initiatives to expand our economy is going to take time.
With time comes unpredictability. And that is where the worst can come in. It is worth observing that nowhere in the federal economic projections is there a whiff of an ugly baby on the horizon. Sunny ways, my friends. The skies do not need to fall for the picture to darken, and much of Ottawa’s conjecture removes as an option a serious economic downturn.
Which is not to say that large deficits would derail the spending, only that it is possible Canada would fall ill without the equivalent of the EpiPen at hand. The cheques would be written but the projects would not yet be cashing them.
This has historically been the risk with the delayed reaction of infrastructure commitments. They don’t hit the system when we might need them. By signalling a longer-term strategy, though, Morneau is essentially saying that infrastructural improvement is going to be a larger way of life for the federal government.
But how it will intersect with cities and provinces is thrown into question by Morneau’s other announcement last week of the redirection of $15 billion of previously announced spending into a newly announced infrastructure bank as a giant project manager.
More worrisome are the marching orders of the new bank: to emphasize revenue-generating projects that attract private-sector capital. That could either erode what might be available or charge the taxpayer additionally because this investment will expect a healthy return.
We need more details before drawing a conclusion, but at first blush the announcement of the bank represents a departure from the genuine early tone of the Liberal government’s commitment to public projects. It ought to worry other levels of government, too, because their terms of access are bound to be strained.
In the end, the cure may hurt the patient. •
Kirk LaPointe is Business in Vancouver’s vice-president of audience and business development.
