Infrastructure spending OK, but that’s not what the Liberals proposed

The dust is settling from the Liberal government’s first budget, which proposed large spending increases, some tax hikes, and deficits throughout their mandate with no balanced budget in sight. Some of the details of the budget, which ran almost 270 pages, are now emerging, resulting in serious questions about aspects of the budget.As a number of researchers have already observed, the rhetoric of the Liberal budget simply doesn’t match their specific plans (see here, here, here). This gap between the rhetoric of the budget and its actual proposals is front and centre in one of the budget’s signature sections: infrastructure spending.The Liberal Party ran on a promise to improve the long-term economic growth prospects of the Canadian economy, which is a laudable goal. The rationale for infrastructure spending, both during the campaign and in the budget itself, has focused on improving the ability of the economy to grow over time.The logic behind the argument is straightforward—invest in infrastructure like roads, bridges, highways, etc. that enable producers to more efficiently (i.e. at lower costs) deliver goods and services to customers. Put differently, the economic rationale for infrastructure is to reduce the costs of doing business. Put aside the argument advanced by a wide range of economists that such investments could be achieved without public funds by using tolls and other pricing mechanisms.The problem with the Liberal plan is that very little of the $11.9 billion in new infrastructure spending is proposed for these types of investments. The Liberal budget proposes to…Read more at…

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