Infrastructure spending in Canada: pick a multibillion dollar number
The need for infrastructure spending in Canada is getting a lot of attention this election, with all the parties presenting platform planks on the amounts they would spend, which in turn is generating unprecedented anticipation among Canadian engineering and construction firms.
However, when it comes to infrastructure, the key feature of any evidence-based policy must be rigorous and consistent estimates of how much spending there should be. Sadly, this is not the case.
While there is a consensus that infrastructure investment in areas like transportation, water systems, energy and power and communications is needed, the question of how much should be spent yields a disturbing range of often dire and alarmist numbers with ominous implications for present and future taxpayers.
The Federation of Canadian Municipalities warns of the coming collapse of Canada’s municipal infrastructure and estimates that Canada has fallen behind in infrastructure spending on water systems, transportation, waste management and communities by $123 billion since the 1950s. It divides this estimate into sub-deficits: water and waste water systems ($31 billion), transportation ($21.7 billion) transit ($22.8 billion), waste management ($7.7 billion) and community, recreational, cultural and social infrastructure ($40.2 billion).
Moreover, left unattended, the federation claims this deficit could potentially rise to as much as $2 trillion by 2065.
Meanwhile, the McKinsey Global Institute has estimated that Canada must invest $66 billion by 2023 just into maintaining roads and bridges.
As part of its vision of creating the foundations of a competitive Canada, the Canadian Chamber of Commerce maintains there’s a need for strategic infrastructure investment. It asserts that, depending on the methodology, the infrastructure deficit is in the range of $50 billion to $570 billion. And that while the range is large, the consistent message is that Canada needs to significantly increase infrastructure spending.
Another study by the Canada West Foundation estimated the accumulated infrastructure debt at $123 billion for existing infrastructure, with an additional $110 billion for new infrastructure, bringing the total estimate to $233 billion.
Another report in 2013 by the Canadian Centre for Policy Alternatives on Canada’s infrastructure gap estimated that, depending on your target, annual spending could range up to as much as $60 to $75 billion annually—an amount substantially higher than that allocated during the peak years of the Great Recession stimulus program. Over the next 10 years, this amounts to $600 to $750 billion in spending.
Take your pick—Canada needs as little as $50 billion in infrastructure spending or as much as $750 billion. And, we are told, the price tag could eventually grow to $2 trillion. Needless to say, this range of estimates does not inspire confidence in the ability to plan for replacing either our existing infrastructure or anticipating new needs.
Infrastructure spending is an important policy problem for Canada, given that public infrastructure has deteriorated. At the same time, we may be embarking on a trip into undiscovered fiscal country in the absence of firm expenditure estimates. The mantra that spending is needed, and we can borrow a lot now because interest rates are low, is merely a recipe for putting the taxpayer on the hook for untold billions of dollars without a solid quantitative foundation.
Canadians deserve better.
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