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Infrastructure spending vital to economy

By: Dan Lett

Posted: 02/8/2013 1:00 AM | Comments: 0

A water-main break floods Route 90 on Thursday in Winnipeg. Investments in infrastructure generate economic activity, which in turn boosts tax revenues. (BORIS MINKEVICH / WINNIPEG FREE PRESS ) Photo Store

Will somebody please think of the sewers?

This was the desperate plea to Ottawa issued this week by the Canada West Foundation, which is concerned that infrastructure spending in general, and sewers in particular, may get short shrift when the federal budget is tabled sometime in late March.

A growing number of groups, including the Canadian Chamber of Commerce, is urging Ottawa to develop a long-term plan to fund infrastructure, even the mundane, sub-grade types like sewer pipes. "Infrastructure has no constituency," said Warren Everson of the Canadian Chamber of Commerce. "Health care, pensions, police services -- they all have very active lobbies. Nobody loves a sewer pipe."

Perhaps. But few would dispute the strategic importance of infrastructure. Functional roads, bridges, sewers and public transit systems are critical building blocks of a modern economy. Public safety is at stake. Infrastructure deserves to be mentioned as a core service of government, along with health care, education, justice and social services.

And yet, the concern is that even though we're finding ways of diverting more and more money into infrastructure, we're still falling behind in what needs to be replaced, rebuilt or patched up. The growing infrastructure deficit in this country -- estimated to be as large as $150 billion -- should not be ignored. Ottawa's next budget will be a primary indicator of just how much progress, or lack of it, we're going to see in the next decade.

Stimulus infrastructure spending programs, introduced in 2008 as a way of combating the world recession, are winding down. Provinces and municipalities are desperate for a new initiative that will eat into the infrastructure deficit while also easing pressure on provincial and municipal taxpayers. Unfortunately, Ottawa has its own fiscal mess to worry about.

Finance Minister Jim Flaherty has been giving mixed signals about his long-term strategy on infrastructure spending. Reports from Ottawa earlier this week suggested infrastructure would be one of the few areas of increased expenditure in the next budget. Then, in a speech to Ottawa business leaders on Wednesday, Flaherty issued warnings about a hard line on spending to get the budget deficit under control. Flaherty said more budget cuts would be needed in addition to the estimated $5 billion activated by the last budget. He said he doesn't see the need to "slash and burn" spending, but that doesn't mean any one line item should expect to see an increase.

As for infrastructure programs, Flaherty was less than forthcoming. Ottawa is already providing municipalities with more than $3 billion in gas tax and GST rebates. "What has not been decided is where we go in addition to (the rebates)," Flaherty said, "if we go in addition to that, mindful of our fiscal situation."

The fiscal situation Flaherty references is a common narrative at all levels of government. Having already stepped back from earlier targets for deficit elimination, Ottawa is firmly fixed on a return to surplus in 2015. Even so, macro-economic forces will make that target a hard one to hit.

The finance minister spent much of his speech talking about the impact that oil prices, and the corresponding taxes collected by Ottawa, have had on his budgeting targets. In particular, the fact Alberta crude oil is running $30 to $40 less a barrel than West Texas Intermediate crude. In Ottawa, lower crude prices mean less in corporate tax collected from oil companies, which hurts Flaherty's bottom line.

Ottawa is already attempting to introduce measures that will slow the growth in equalization and other transfer payments, a trend that affects Manitoba. If Ottawa constructs a program less generous than the one now winding down, you can bet provinces and municipalities will follow suit with less infrastructure spending.

If there is any hope for the infrastructure file, it is the knowledge that investments in roads, bridges and sewers are among the most effective ways of generating economic activity, which in turn boosts tax revenues.

If Ottawa focuses solely on its own bottom line, and not the collateral damage budget cuts will have on economic growth in general, then it's unlikely anyone will have the luxury to think of, let alone love, the homely sewer pipe.

dan.lett@freepress.mb.ca

Republished from the Winnipeg Free Press print edition February 8, 2013 A4

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