The Parliamentary Budget Officer's report that up to $500-million in federal stimulus money could go unspent may be a blessing in disguise. Jim Flaherty, the Finance Minister, is right to say that "we need an exit strategy" for stimulus spending. But it would be wrong to end needed projects just because they do not meet the deadline. Some projects should be shelved, and governments should quickly assess which projects provide the greatest long-term economic benefit, and ensure that those get funded.
The Infrastructure Stimulus Fund was meant to fund "shovel-ready" projects, and is supported by $4-billion in federal funds. Under a worst-case scenario outlined by the PBO, up to 1,814 projects, or 46 per cent of the total, might not be completed by the March 31, 2011 deadline.
Canada's infrastructure needs are still great. But infrastructure stimulus spending was borne of haste, with many proposals getting little scrutiny, and with partisan considerations appearing to guide project selection in some cases.
It was also slow to roll out. By September, 2009, only $242-million had been spent on the program, by all levels of government, and although most of the money has now been allocated, only around one quarter of ISF projects were completed by March of this year.
Canada still needs more and better jobs, but while the unemployment rate is now at 8 per cent, the construction industry is actually doing quite well, with employment growing by 8.6 per cent in the last year, the highest of any sector. Long-term unemployment is a greater concern. Meanwhile, a $50-plus-billion budget deficit stands as a constant threat to Canada's prosperity.
So the ISF, created in the March, 2009 budget, is not the best tool to build needed infrastructure and create jobs.
This does not mean that the federal government should renege on its commitments, or be inflexible merely for the sake of austerity. But some projects should be left on the drawing board.
While funds have now have been largely allocated, the federal government appears to have some wiggle room: It said from the beginning that it would not reimburse "costs incurred for projects that are intended to be substantially completed after March 31, 2011."
There is a sensible course, if the provinces and municipalities agree to it. The best policy would be to accelerate planning on those projects that have been neglected the longest and where the public benefit is the broadest - the most needed water system upgrades, and road, rail and regional transit improvements, for instance. The immediate economic crisis is over, and instead of emergency spending, Canada should focus on smarter spending.
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