Canadians – through their governments – spent billions during the recession in a Keynesian effort to create jobs, but the federal Auditor-General says taxpayers may never know how many people were actually put to work.
Interim Auditor-General John Wiersema released his findings as the Conservative government is planning its final report on the effectiveness of its Economic Action Plan, the $47-billion stimulus effort that focused on “shovel-ready” construction projects and temporary changes to employment insurance benefits.
The government’s final report is expected to be released in early 2012.
The Auditor-General’s report noted that instead of counting how many jobs each program created, Ottawa uses a broad economic model to determine the number.
The report says it “remains unclear” how Ottawa can measure the success of such programs without an accounting of how many jobs were created.
In the fall of 2008, governments around the world agreed that stimulus spending would create jobs to ease the recession. But many are now grappling with continued sluggish growth and much larger debt as a result of the deficit-financed spending spree. Stimulus advocates such as U.S. President Barack Obama insist the spending prevented a worse recession and should be continued, while opponents such as the Republican Party blame overspending for continued economic troubles.
Canada’s opposition pushed the Conservatives to approve stimulus spending in 2008 and argues more is needed, but it also accuses the government of inflating the program’s effectiveness.
NDP finance critic Peter Julian told the House of Commons on Tuesday the Auditor-General’s report shows Ottawa’s job numbers are “bogus and unsubstantiated.”
“The program was so badly monitored that no one knows if it was effective,” he said.
Finance Minister Jim Flaherty responded by pointing to Statistics Canada jobs data.
“One fact is clear: there are 600,000 net new jobs in Canada since the end of the recession,” he said. “The Economic Action Plan was the stimulus for that.”
Speaking with reporters, Mr. Wiersema said that while some economic models can be effective, he could not comment on the process Ottawa will use for its final report as he hadn’t been briefed on the details. Finance Canada said on Tuesday the final report will use the same model that it has used in the past.
University of Toronto professor Peter Dungan, who teaches economic modelling as director of policy and economic analysis for the Rotman School of Management, says models are the only proper way to measure the total jobs impact of stimulus spending.
Project-specific numbers would likely fail to capture all of the spin-off effects from construction jobs, he said. These can include work in the supply chain, such as cement making, but also employment created by construction workers buying more groceries or new cars.
Prof. Dungan was among a few outside economists who reviewed the model Ottawa uses for its job estimates. The government’s most recent report – tabled in January – said the Economic Action Plan “created or maintained” more than 220,000 jobs as of December, 2010.
Prof. Dungan said he concluded the government’s approach was reasonable, and possibly even too conservative.
“If they had asked us to do it using our model, we would have actually gotten a bigger number,” he said. “The fact that [Ottawa]used modelling, as opposed to that they somehow didn’t count all these things directly, I don’t have much sympathy for that criticism.”