Fraser Forum

Not your grandparents' growth-maximizing infrastructure spending

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While infrastructure spending was major theme in this week’s federal fiscal update, Canadians ought to know that despite the government’s rhetoric, the planned infrastructure spending is unlikely to deliver on fostering long-term economic growth.
For starters, it’s important to clarify the minimal role that infrastructure spending plays in the government’s five-year fiscal plan. While some Canadians may have the impression that infrastructure spending is largely why the government will be in deficit for the foreseeable future, it turns out new infrastructure spending is a surprisingly small share of the projected deficits over five years.

Of the $138.1 billion in total deficits over the government’s five year budget period, infrastructure spending amounts to just $28.6 billion—about 20 per cent of the cumulative deficits. Put differently, approximately 80 per cent of the expected federal deficits are not due to infrastructure spending.

More concerning, however, is the small portion of infrastructure spending that will go towards building more efficient transportation corridors to move people and goods across our country and to borders and ports. This is the type of infrastructure that will actually improve Canada’s long-term economic potential.

Only $2.4 billion is being spent on trade and transportation infrastructure over the next five years—less than 10 cents of every infrastructure dollar. The rest will be spent on things like “new federal investments in social infrastructure” (i.e. connectivity, indigenous, cultural and recreational facilities) and “green infrastructure” projects.
Since being elected last year, the government has talked a lot about fostering long-term economic for Canadians. The reality is that the government is digging deeper into debt while investing little in growth-enhancing infrastructure.


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