Trudeau stands by infrastructure spending as solution to Canada’s economic woes

Nationalpost.com
Jan. 18, 2016

Even with the Canadian dollar and energy prices at rock-bottom levels, Prime Minister Justin Trudeau remains convinced that his long-promised, big-budget infrastructure investment will be the answer to all short- and long-term ills.

The original Liberal plan was to divide $60 billion between public transit, green projects, and social infrastructure like affordable housing over 10 years, with just $17.4 billion earmarked to flow during the party’s first mandate.

On Monday, however, Trudeau signalled that he is willing to bend the boundaries of that plan.

“We’ve always said we’re always open to a certain degree of flexibility in order to make these things happen,” Trudeau said in Saint Andrews by-the-Sea, N.B., after several hours of meeting with his cabinet.

A new report released Monday by the Federation of Canadian Municipalities said investment is needed now to prevent “a rapid decline” in the condition of much of the country’s infrastructure, which is overseen by local governments.

The annual report on the state of Canada’s municipal infrastructure showed cities weren’t spending enough on upkeep, and that were that trend to continue, maintenance costs alone would continue to increase.

Liberal ministers meeting with provincial and municipal counterparts have been warned of a capacity gap that could mean cities and provinces don’t have enough money to cover their portion of construction costs.

Not only could the traditional funding model for such projects change, but so too could how much will be made available to projects in the three areas the Liberals want to fund.

Ahead of the morning meeting, part of a three-day cabinet retreat and strategy session in New Brunswick, Infrastructure Minister Amarjeet Sohi said the government is also looking at the shared funding formula to see if provinces would also end up paying less, which would leave the federal government on the hook to pay more.

But given the chance to elaborate on how far he is willing to bend in other areas the size of the deficit, whether it would exceed his previous $10-billion threshold, moving up the budget timetable Trudeau would only say his government would put forward a budget that is “the right one for Canadians.”

He also talked about the ratio of government debt to the size of the economy when asked about the $10-billion deficit promise from the election.

Economists call the ratio a key indicator of the health of government finances, more so than the size of a deficit. So long as the deficit continues to decline, which Trudeau said he was committed to do, the federal government could run deficits of more than $10 billion.

That figure will be unveiled in the Liberals’ first budget, expected in March. Trudeau said cabinet would decide the size of the budget and not him alone, but he had instructed Finance Minister Bill Morneau to build a budget that is “focused on growth while remaining fiscally responsible.”

Paired with the steady decline in the value of the Canadian dollar, the drop in commodity values has delivered a financial one-two punch to resource-rich provinces like Alberta.

Battered by the plunging price of crude, the market is now bracing for what experts predict will be a flood of Iranian oil after the United States and the European Union lifted economic sanctions against Iran.

Rona Ambrose, the interim Conservative leader, urged the government Monday to come up with policies to deal with lower energy prices and their economic fallout.

“The government has been in office long enough to have a clear plan to deal with the current economic situation, but the sense of urgency from the Trudeau Liberals has been completely absent,” Ambrose said in a statement.

She also asked for a meeting with the prime minister, a confab Trudeau said he would be willing to have.