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Finance Minister Jim Flaherty presents an update on the government’s Action Plan at the University of Winnipeg. (John Woods)
Finance Minister Jim Flaherty presents an update on the government’s Action Plan at the University of Winnipeg. (John Woods)

Stimulus gamble: How Ottawa saved the economy – and wasted billions Add to ...

After the budget was tabled and the government avoided defeat, the political pressure moved from Mr. Flaherty to Mr. Baird. Infrastructure spending would be effective only if the money was spent quickly. At the same time, no government wants scandals from money spent hastily – and badly.

To speed up projects, Mr. Baird pushed for a one-page application form and demanded that municipalities submit only projects that could be completed by March 31, 2011. Long-standing rules were being sidelined, creating some concern and resistance in the public service, and fears about political embarrassment. “We just didn’t want to be lampooned,” Mr. Baird said in an interview in his Parliament Hill office.

In the weeks after the budget, ministers were frustrated at the slow pace of action. That tension between the public service and cabinet built until June, when Mr. Baird’s deputy minister, Transport Canada veteran Louis Ranger, was replaced by Yaprak Baltacioglu. The government hoped she would get things moving.

“There was a huge dynamic change when Yaprak came in in terms of co-operation,” said Chris Froggatt, who was Mr. Baird’s chief of staff at the time.

In the end, the Auditor-General tabled two reports on the Conservative government’s Economic Action Plan – as the stimulus was called – and both were positive. A third report specifically on a $50-million G8 Legacy Infrastructure Fund, which was part of the stimulus plan, criticized the government because auditors could not find documents showing how projects were selected. Auditors also discovered that G8 spending was presented to Parliament as border-related, when in fact it had nothing to do with border infrastructure.

The fact that the largesse was concentrated in the Parry Sound-Muskoka riding of then-Industry Minister Tony Clement inspired much of the criticism from the opposition that Mr. Baird was hoping to avoid.

The opposition attacked the spending as a partisan slush fund, asking why it was used to build gazebos and parks in the riding that had no obvious connection to the 2010 G8 summit.

Mr. Baird argues that in the grand scheme of things, very few stimulus projects were controversial. “People joke about the gazebo [in Mr. Clement’s riding] – I mean there’s a gazebo right there,” he said, pointing out the window to one behind the Parliament Buildings. “By and large, it was pretty good. We did some incredibly exciting things.”

Mayors across the country would certainly agree. Stimulus spending meant new cash for community centres and splash parks, as well as less glamorous projects like sewer and road work. Ottawa’s determination to receive credit for the spending remains a point of heated debate.

Extensive rules ensured that large signs promoted all spending big and small –including a new doorknob at an RCMP building in Charlottetown.

“The one thing I suppose I’d like to see less of is less advertising and billboards,” said Ottawa Mayor Jim Watson., who was an Ontario cabinet minister when the stimulus was launched. “It seemed a little overkill to have these signs plunked up everywhere.”

Measuring results

But did the government’s plan achieve its number one goal – to mitigate the worst effects of a recession that drove the unemployment rate to 8.7 per cent?

The Parliamentary Budget Office (PBO) – then led by Kevin Page – tracked stimulus spending by surveying groups on the receiving end of the government cash. Its 2010 report concluded that some projects, such as solid waste management projects, were not very good at creating jobs, while spending on public transit was “very effective” at creating employment. Spending on ports and highways was also seen as a good way to create jobs.

Pedro Antunes, an economist at the Conference Board of Canada, said Canada invested in mostly productive infrastructure and got the money out the door relatively fast. Looking back, it’s now clear that public investment infrastructure as a percentage of GDP shot up noticeably in 2009 and 2010, countering the effects of the recession.

“The timing was okay. The type of spending was okay,” he said. “Over the longer term, it’s not like we were overspending. We needed the infrastructure.”

Good infrastructure benefits the country over the longer term, he pointed out. Even hockey rinks in remote locations, he suggested, improve the quality of life in Canada.

But once the short-term jobs are gone, the lasting economic benefit of planters and arenas and gazebos pales next to cutting-edge labs or major new highways. Ottawa’s demand for shovel-ready projects created a bias for the quick-and-easy over higher-quality productive infrastructure. The Great Recession was a missed opportunity to build a better legacy.

Some experts also argue that much of the government stimulus came too late. It had almost no impact when it should have counted most – as the economy pulled out of recession in 2009.

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