It's back to Plan A, but more of it. The economy is softer than experts predicted even six months ago, so the Liberals, who came to power promising to spend big on infrastructure, are betting on more of the same.
But the timelines seem out of whack. Tuesday's mini-budget told a dispiriting tale of an economy that's weaker now, and will be for four or five years. But its new measures mostly kick in later – like promising to pump even more into infrastructure, but mostly later, as far away as 11 or 12 years from now, or an infrastructure bank that is still on the drawing board.
And that's the political problem Finance Minister Bill Morneau faces. On Tuesday, Mr. Morneau emphasized that his fall update was presenting a long-term plan. But as much as it's good for governments to plan ahead, this was the political equivalent of asking for patience from voters facing a softening job market and years of lacklustre economic growth.
And notwithstanding the popularity of Justin Trudeau's Liberal government, if there isn't short-term improvement, faith in the long-term plan will be shaken.
Mr. Trudeau won office promising an infrastructure boom for what was already seen as a slow economy. It slowed before the March budget, and the planned deficit ballooned. The forecasts slowed again, and by Tuesday's update, the $6-billion-a-year safety cushions that were built into the annual deficit forecasts in March were wiped away.
The Liberals' election platform promised to double infrastructure spending to $120-billion over 10 years. Tuesday's update gave the appearance of doubling down on infrastructure, with more funding, for more years, and even the shiny new Canada Infrastructure Bank to bring in private investors. But growing deficits mean the Liberals don't have money in the short term.
The mini-budget promised a commitment of $180-billion, which sounds like a lot more than the platform – but isn't. The bigger figures come largely from extending the 10-year funding projections by two years, adding $22.6-billion in the never-never-land of budgets more than a decade away, and from counting existing Conservative infrastructure commitments differently. The $15-billion in seed money the government will give to the new infrastructure bank will come from general infrastructure funds, not an additional new allocation earmarked for the bank, setting it up will take time and Mr. Morneau could not even say when it will open.
There is some additional infrastructure spending, over and above what the platform promised, but it is modest and mostly comes later – only $400-million will be added next year. In other words, this was a mini-budget that warned of a slow economy now but acted to increase growth later.
In that sense, it is forward-thinking – partial plans for addressing a future where lacklustre economic growth lasts decades.
The Canada Infrastructure Bank, in theory, would eventually expand the pool of money for infrastructure by bringing in private investors, including foreign pension funds, to finance transit or municipal waterworks. Many towns, and public-sector unions, will criticize it, but it has the potential to dramatically expand the volume of infrastructure being built.
The update included a smart theme for growth policies – stimulating foreign investment and trade. Mr. Morneau promised a foreign-investment hub to try to draw business to Canada. A new infrastructure category announced Tuesday will focus on transportation and trade – projects like port improvements that might help export goods, increasing productivity. Mr. Morneau also promised a vaguely defined strategy to allow high-growth and global companies to get visas in two weeks, rather than six to 12 months, for top-level foreign recruits.
But the details on all that will come later. So will most of the truly new measures in this mini-budget.
As much as Mr. Morneau called this a long-term plan, the Liberals really wanted it to look like it offered some additional response to the softening economy. But really, they're left hoping that the Plan A infrastructure boom kicks in quickly, or that growth picks up somehow, so the public's faith doesn't wither. They wanted to tell Canadians they've got a long-term plan for economic growth, but part of the plan is asking for patience.