Hey there, time traveller!
This article was published 4/11/2012 (1356 days ago), so information in it may no longer be current.
CALGARY -- When Prime Minister Stephen Harper balked over the summer at an International Monetary Fund (IMF) invitation to participate in a $430-billion rescue package for Europe, many taxpayers cheered. They could be forgiven for thinking the PM had at last kicked the nasty bailout habit he picked up in 2008.
The celebration, however, may be premature.
That's because Harper appears to be as big a believer in the benefits of bailouts now as he was in the wake of the financial crisis when he bailed out the auto industry and tapped the Canadian Mortgage Housing Corporation (CMHC) to relieve the banks of billions in mortgages. So great is his belief in Keynesian-style stimulus schemes that he's now executing a bailout in another country even as he rightfully says "no" to Europe.
Word of this latest stimulus scheme came in June with the announcement Canada and Michigan had struck a deal to build the New International Trade Crossing (NITC), a bridge that would compete with the privately owned Ambassador Bridge for the declining traffic crossing the Detroit River.
According to the plan, Canada will float Michigan $550 million to cover the state's entire share of the project. On top of committing an additional $1.5 billion for supporting roadwork in Ontario, the federal government will also be on the hook for all land-acquisition costs in Michigan. In total, Canadians taxpayers could be on the hook for $4 billion, assuming no cost overruns.
The Detroit Free Press's editorial board put this deal in the correct perspective: "It's as if the PM is buying our state a first-class ticket and throwing in the frequent-flyer points."
"Canada believes in Michigan's future more than most Michiganders do. Why else would the Canadian government agree to front all of the money, and incur all of the risk, to pay for road improvements that will be made wholly in our state?"
Albertans seem to be asking the same questions.
A recent poll commissioned by Enquirica Research and conducted by Dr. Faron Ellis of the Citizens Society Research Lab reveals Albertans -- from whose oilpatch much of the largesse for the prime minister's spending spree in Michigan is coming -- don't like the NITC plan. Albertans surveyed support private-sector participation in infrastructure and oppose the federal government's plan to fully fund the new bridge.
Fewer than one in five (17.0 per cent) Albertans believe the federal government should fund infrastructure projects that directly compete with private sector projects. Slightly more than one-third (36.3 per cent) believe the federal government should only fund projects if no private-sector option exists. A further one-third (34.5 per cent) prefer private-public partnerships while the remaining 12.2 per cent would prefer no federal funding for infrastructure, leaving all projects to be funded through the private sector.
The Citizen Society Research Lab study also revealed that when considered within the context of other possible federal-government funding options, such as much-needed improvements to Alberta's Highway 63, a new Detroit-Windsor bridge has very little support, only 3.9 per cent. When considered independently from other possible federal-government funding options, a clear majority of Albertans (56.2 per cent) still remains opposed to the proposal.
With little support from Albertans, why would the Harper government take the historically unprecedented step of bailing out a state in a wealthy developed nation?
The answer from the federal government is that a new bridge will increase trade and create jobs. But will it? In Economics in One Lesson, a classic primer on economics published in 1946, Henry Hazlitt wrote "If the bridge cost $10 million the taxpayers will lose $10 million. They will have that much taken away from them which they would have otherwise spent on the things they needed most. Therefore, for every job created by the bridge project, a private job has been destroyed somewhere else."
With respect to enhancing north-south trade, industry sources say traffic is already down on the existing, privately owned Ambassador Bridge, part of a drop that began well before 9/11 and tracks the secular decline of the auto industry.
While the NITC bridge and infrastructure proposal look like a bad deal for Canada, for Michigan, Harper's generosity is a bonanza. Canadian taxpayers' $550 million will leverage another $2 billion from the U.S. federal government for road construction. It will liberate the state's road budget for yet more road projects, help pay off its own $80-billion debt, and bail out bankrupt Detroit with $80 million.
Harper may wisely have declined to bail out Europe this summer. But the PM would be also be wise to heed the opinion of people in his home province and forget about a bailout for Detroit.
Matthew Johnston is the president and CEO of Enquirica Research.