Stimulus spending

The Trudeau government is soliciting communities for projects to spend another $120 billion dollars of stimulus. We should be concerned more concern of the greater opportunity cost, rather than the economic debt.

Google 2008 economic stimulus and the first result will be the Globe and Mail article – Stimulus Gamble: How Ottawa Saved the Economy – and Wasted Billions.

Recall that $64- Billion dollars was shovelled out over two years. Infrastructure accounted for the majority of the stimulus spending – primarily asphalt, updated hockey rinks, new community buildings, and of course excessive Economic Action Plan Ads. The requirement for “shovel ready” projects meant that projects that could have produced greater long-term benefits were overlooked. One prominent economist was quoted as saying:

“I think the best you can say is, if this exercise of massive stimulus had a positive payoff it was that it stabilized the economy. End of sentence.  It has not achieved any long-run goal.”

In hindsight we know that many of that many of the many high priority infrastructure projects remain unfunded in our cities with both their infrastructure deficit growing, continued poor housing and infrastructure on Reserves, and significant deficiencies in transit funding everywhere. Additionally, while the Harper government was continuing to scape goat climate action on the previous Liberals, Canada ranked third last of G20 Countries in percentage of Green stimulus a meagre 9% compared with top performers  South Korea close to 78%, EU 64%, and equally popular inaction scape goat China 34%. The outcome of course, Canada isn’t even close to meeting its climate change commitments and we’re a country more dependent on oil and gas as ever.

The tragedy is less the debt, but the lack of long term value the stimulus actually delivered to transition to a low carbon economy and invest in infrastructure to meaningfully reduce our individual dependence on fossil fuels.  The stimulus could have created new types of jobs to solve the carbon crisis, clean the ticking time bomb of contaminated sites, and provided options to get us out of our cars saving families $10,000 a year per avoided car which would have been inevitably reinvesting to strengthen local economies rather than pockets of multinational oil companies.

Instead, the stimulus disappeared in asphalt that will inevitably need to be repaved again, inevitably will create more congestion, and inefficient buildings that leave a legacy of high energy costs. It’s easy to think that nothing tangible was achieved.

Fast forward 2016. The Trudeau government is soliciting communities for projects to spend another $125 billion dollars.  In this do over we are expecting shelved major transit projects to be funded in major cities, water treatment systems, First Nations Housing and renewable energy in off-grid communities, funding affordable housing and likely a good chunk of asphalt. These are good things, however, we should be concerned that these projects will again be built without a long term vision in mind. With infrastructure, the more you build, the more you have to maintain. It can be as much an asset as it is a liability. 

The irony isn’t lost in this comment by Naheed Nenshi, Mayor of the fast sprawling city of Calgary about what to do with the stimulus funding: “The easiest thing to do for shovel-ready is life-cycle maintenance. I can fix roads and fix roofs at arenas – and that stuff can happen literally the day the cheque arrives.” I wonder how many of these projects might have also been funded in 2008.

This is the elephant in the room:

• We have no vision of how our cities should grow - We continue to grow our cities to consume great amounts of energy and infrastructure that are unsustainable to support over long term without continued expansion.  There is no carrot or stick for predicable infrastructure funding to reward sustainable planning to end this Ponzi scheme.
• We have no vision for how Canadians should travel. Major transit projects have been funded in major Canadian cities, but their scale is still well below what is required particularly in medium sized cities to transform welfare levels of service to viable alternatives. When we do spend on things like transit and active transportation, we fail to maximize the potential impact of the investment by failing to promote usage.  Generally, we automatically fund roads first and alternatives as an after-thought, even requiring them to make a business case. Never solving congestion or affordability both that has real costs in the billions.  Consequently, we have locked citizen in auto dependent lifestyles with no viable alternatives and wonder why the public always support road expansion first. 
• We have no vision of what our cities should reduce energy costs - We keep funding the same feasibility studies for renewable energy or conservation studies then expect communities to compete for underfunded uncoordinated implementation funds that likely cost more to administer and apply for than benefits they provide. Rather, we need government leadership that determines what initiatives present the best opportunities in each province and provide predictable funding for them. If we are going to build any new buildings, we need to build them as efficiently as possible. Stop messing around with capital cost excuses and start thinking lifecycle of your 100 year asset. Voters should understand.
• We have no vision of how to end the Indigenous Housing and Energy Crisis - We are planning on spending over $400 million on Indigenous housing without any stipulations they will resolve root causes of the housing crisis including providing: housing that is durable (will not mold and can be easily repaired), uses as little energy as possible, is adaptable for changing needs, and will instill pride.  Ultimately, doing so would not only improve the health and social well-being of residents, it will reduce the astronomical costs associated with these issues and energy costs. Instead expect that in less than a decade time expect $400 million of more decrepit housing stock to replace again.  We should be concerned because the renewable energy project funding that has been announced for indigenous communities to reduce energy poverty, did not come with any mention of minimizing energy demand first.

The issue is we are spending money without an aligned vision of what we want to achieve.  This makes it more likely to do the wrong things wrong.  And while we should be concerned about the growing debt as a result of the stimulus spending, we should be even more concerned that nothing is solved and the liability of continuing to expand our public infrastructure inefficiently.  Coming from a mindset of performance objectives rather than pet projects will go a long way. The order of operations matter. It’s not about deciding how to shovel spend billions of dollars into grey infrastructure. It’s about prioritizing demand side management, conservation, and public education first then seeing what needs to be done. 

While it’s proven that any stimulus will help the economy, we need to ask when will we invest in projects that will help our country?

Robert Stupka
MASc., P.Eng