Canadian government can help in many ways

Keith Norbury
May 16, 2016
By Keith Norbury

Nobody needs to be reminded that Canada’s economy is facing serious challenges. Nowhere are these challenges felt more severely at present than in Alberta.

That’s a bit of a switch, considering that Alberta experienced a long run of prosperity. But this latest bust in the oil patch is hardly unprecedented. Albertans still remember the 1980s crash, which has been blamed on rapid expansion in the wake of the 1973 oil crisis, worldwide recession, and Prime Minister Pierre Trudeau’s much-maligned National Energy Program.

So Albertans, many of them at least, can be excused for wondering if they aren’t experiencing déjà-vu all over again — what with another Trudeau occupying the prime minister’s office just as the oil market stumbles again.

So far at least, Justin Trudeau looks to be more sympathetic than his father was to Alberta’s plight. On a visit to Calgary in late March, for example, Trudeau said his government would monitor the tweaks it is making to the employment insurance system “to make sure we’re doing everything we can for the places that need it,” the Calgary Herald reported.

That was in response to criticism that recent changes to EI, which have targeted hard-hit communities like Calgary, left out other parts of the oil patch such as Edmonton and southwest Saskatchewan, which have also felt the crunch.

Politically, it should be quite easy for the Liberals to expand the EI safety net under the circumstances. Transfer payments from Alberta have long benefited other regions of the country. It’s only fair that Albertans receive a helping hand during hard times.

But as the prime minister himself pointed out, the government should also work to make the economy more resilient and diversified. Those lofty goals are much more difficult, especially for an economy that has been so reliant on one major sector.

Still, the federal Liberals did campaign on a promise to ramp up investments in Canada’s infrastructure, even if it means posting large deficits. Those deficits are nearly three times greater than the $10 billion a year initially promised. However, polling indicates that while a majority of Canadians are concerned about the deficits, most are also prepared to accept them as long as the money is invested wisely.

About 90 per cent of respondents to a recent poll support the $120 billion in infrastructure spending the government has pledged over the next decade, the CBC reported in late March. That support suggests the government could commit to spending even more on fixing and expanding the country’s transportation networks, water treatment facilities, and sewage systems.

The federal Conservatives, now leading the Opposition, disagree. Edmonton-Wetaskiwin MP Mike Lake, for example, warned that future generations would be stuck with paying the bill and that the Liberals have no plan to return to a balanced budget, the Leduc Rep newspaper reported.

Such concerns are valid, which is why it’s important to analyze the costs and benefits of each project thoroughly. Overall, though, improvements in infrastructure should benefit the general economy by making the flow of goods and services more efficient and enhancing Canadians’ overall quality of life. That doesn’t necessarily mean building bigger for the sake of building — although the crane industries are really good at large projects. Installing systems for synchronizing traffic signals can also speed up commerce.

Groups such as the Federation of Canadian Municipalities, Engineers Canada, and the Conference Board of Canada have all proposed increases in infrastructure spending. The conference board, for instance, estimated in 2013 that each $1 billion spent on infrastructure boosts GDP by $1.14 billion and creates 16,700 person years of employment. “The timing for infrastructure investments couldn’t be better, given record-low financing costs and the weakness in private sector capital investment,” noted a conference board analysis of the most recent federal budget.

There’s not much, if anything, a Canadian government can do about slumping oil prices — or even the slumping loonie that tends to track oil slumps. But the government has considerable wherewithal to underwrite investments to build what needs to be built and fix what needs fixing. That way, Canadians and their employers can be better prepared for whatever roads lie ahead in an increasingly uncertain future.

Borrowing to buy the groceries is seldom a sensible strategy — unless the alternative is starvation, which case government assistance is proper and justified. A mortgage on a home is usually another good plan; you have to live somewhere, so it makes sense to invest in the means to own that asset eventually.

Mortgaging the country’s future can also make sense, so long as the mortgage pays for assets that enhance the common wealth of the nation.

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