If we're realistic on how fast infrastructure spending can flow, we're less likely to be disappointed.
‘It’s pre-budget time and the Canadian economy has hit another rough patch. As a result, it seems like everyone’s discussing the importance of ‘shovel-ready’ infrastructure. Many stakeholders are urging the government to get money out the door quickly to boost our ailing economy.
I’m sympathetic to this argument, but let’s have realistic expectations about how quickly funding can flow on these projects.
I worked at the PBO during the last fiscal stimulus effort, and I recall repeated delays relative to the government’s initial plans — particularly for cost-shared provincial, territorial and municipal infrastructure spending (which was structured as time-limited federal matching grants).
So I decided to get some numbers (and since opposition parties required the government to release quarterly updates on the roll-out of stimulus measures, we can track their evolution over time).
The figures below compare the initial spending profile in Budget 2009 with the final report from Budget 2012.
Note: Includes the infrastructure stimulus fund (ISF); recreational infrastructure canada (RinC); accelerated payments under the provincial /territorial base funding initiative; the community projects bonus; green infrastructure fund; national recreation trails; and loans to municipalities for housing-related infrastructure.
Originally, the plan was to spend half of this money in each of the next two fiscal years. But there wasn’t as much ‘action’ in the first construction season of the Action Plan as many expected, with only 17% of the funds spent. And after repeated delays, the two-year deadline was ultimately extended to allow for spending into year 3 (which incidentally featured almost as much spending as in year 1).
I should note that most of the funds allocated to these projects were eventually spent (88%). And emphasize that this wasn’t close to the whole stimulus package (it represents less than 12% of the total measures; it’s not even all of the infrastructure spending). But I think these results suggest a bit of caution. If the last time around is any guide, matching infrastructure spending announced in Budget 2016 will have a hard time getting out door for the 2016 construction season. It’s more likely to land in 2017. This isn’t necessarily a problem, as it looks like the economy will still be operating below its potential at that time.
I’m not against attempts to accelerate some of the infrastructure spending, or even the broader argument for more fiscal stimulus. I just think we need to be realistic on what can be done quickly in the area of infrastructure. In a recent interview, I thought the Minister of Infrastructure, Amarjeet Sohi, made an excellent point when he said that infrastructure spending should not only be ‘shovel-ready’ but also ‘shovel-worthy’.
By all means let’s make ‘shovel-worthiness’ the over-riding principle applied to these spending decisions. While there are plenty of routine maintenance jobs that need doing, and that can be started quickly, let’s not miss an opportunity to build new infrastructure too — ambitious, longer-horizon projects that will last and improve our longer-term economic potential.
On infrastructure, remember this: just because it takes a while to do, doesn’t mean it’s not worthwhile. It’d be a shame if we diverted too much attention towards the ‘shovel-ready’ filling of potholes and fixing of weathered arenas. Now’s the time to be bolder, think bigger, focus on ‘shovel-worthiness’ and help build our economic future.