CBC  Money  Page     Infrastructure  Debate   Nigel  Wodrich  &  Sarah  Roach   Students   University  of  O1awa       Kevin  Page      Jean-­‐Luc  Pepin  Research  Chair   University  of  O1awa     Key  Messages   1.  There  has  been  no  growth  in  private  capital  formaDon  since  2012.   There  has  been  no  growth  in  public  capital  formaDon  since  2010.   Capital  investment  represents  about  20-­‐25%  of  GDP.  Weak   investment  is  a  drag  on  current  and  future  growth.  The  economy  is   in  a  technical  recession  in  2015.  We  need  to  boost  our  investment   rate  in  Canada  to  support  future  growth.   2.  Investment  in  public  capital  declined  in  the  1980s  and  1990s   relaDve  to  the  size  of  the  economy.  The  high  deficit  years  over  this   period  likely  encouraged  restraint  on  infrastructure  spending  and   contributed  to  the  infrastructure  deficit  highlighted  by  Canadian   mayors.  The  spending  share  on  public  capital  picked  up  since  the   late  1990s  and  appeared  to  have  peaked  with  the  sDmulus   programs  of  2009-­‐10.     Key  Messages   3.  Government  financing  of  public  capital  has  changed  fundamentally   since  the  middle  of  the  last  century.  The  municipal  share  has   almost  doubled.  The  federal  share  has  been  cut  more  than  half.  At   present  Dme,  the  federal  government  is  contribuDng  only  15  cents   on  the  public  dollar   4.  The  federal  government  has  compounded  the  problem  by  not   spending  all  the  infrastructure  dollars  authorized  by  Parliament  in   recent  years         Key  Messages     5.  There  has  likely  never  been  a  be1er  Dme  to  invest  in  public  capital.   Economic  growth  has  stalled.  Canada  is  facing  significant   producDvity  and  aging  demographic  challenges.  We  have  record   low  long  term  interest  rates  –  low  cost  of  borrowing.  The  highest   fiscal  mulDpliers  (big  bang  on  the  dollar  invested)  are  a1ributed  to   infrastructure  spending     6.  All  poliDcal  parDes  are  saying  posiDve  things  about  the  need  to   increase  infrastructure  spending.  Are  we  allocaDng  public  dollars   efficiently?  Returning  our  public  investment  rate  to  levels  of  the   1960s  (or  investment  rates  in  many  other  countries)  would  be   equivalent  of  adding  an  addiDonal  $20  billion  a  year  (1%  of  GDP).           Investment  Required  for  Economic  Growth   Total  Business  Capital  Investment,               Year-­‐to-­‐Year  %  Change   20%   15%   15%   10%   10%   5%   5%   %   %   -­‐5%   -­‐5%   -­‐10%   -­‐10%   -­‐15%   -­‐20%   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   Source:  CANSIM  380-­‐0068   Total  Government  Capital  Investment,     Year-­‐to-­‐Year  %  Change     -­‐15%   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   Source:  CANSIM  380-­‐0068   Infrastructure  Deficit  Created  through  Low   Public  Investment  in  1980s  and  90s   Total  Canadian  Public  Capital  Investment   %  of  GDP   6%   5%   SQmulus   4%   3%   2%   1%   0%   Sources:  CANSIM  031-­‐0002;  CANSIM  380-­‐0064;     CANSIM  380-­‐0017   Federal  Government  Is  No  Longer     a  Big  Player  in  Public  Capital   Share  of  Public  Investment  by   Level  of  Government  in   Share  of  Public  Investment  by   Level  of  Government  in     1955   2013   Municipal,   27%   Federal,   15%   Federal,  34%   Municipal,   48%   Provincial,   37%   Provincial,   39%   Source: CANSIM 031-0002 Federal  Government  Has  Not  Spent  All  Money   Authorized  by  Parliament  on  Infrastructure   Billions   Office  of  Infrastructure  Canada:  Total  Budgeted  &  Total  Spent    $10      $9      $8      $7      $6      $5     Total  Budgeted    $4     Total  Spending    $3      $2      $1      $-­‐         2006-­‐07   2007-­‐08   2008-­‐09   2009-­‐10   2010-­‐11   Source:  Public  Accounts   2011-­‐12   2012-­‐13   2013-­‐14   A  Great  Time  for  Public  Investment   Canada  Long-­‐term  Interest  Rates     18%   16%   %  per  annum   14%   12%   10%   8%   6%   4%   2%   %   1975   1980   1985   1990   Source:  OECD  Main  Economic  Indicators   1995   2000   2005   2010   2015   A  Great  Time  for  Public  Investment   The  Value  of  Spending  and  Tax  (Fiscal)  MulQpliers   1.6   1.5   1.5   1.4   1.4   1.2   1.0   0.8   0.6   0.4   1.0   1.3   2009   2010   1.0   0.8   0.9   0.8   0.4   0.2   0.2   0.0   0.5   Infrastructure   Measures  for   Housing   Other   Personal   Investment   Low-­‐Income   Investment   Spending   Income  Tax   Households   Measures     Measures   Measures   Source:  Department  of  Finance,  Budget  2009,  Annex  1   Employment   Insurance   Premiums   0.1   0.2   Corporate   Income  Tax   Measures   What  the  PoliQcal  ParQes  have  to  Say   The Parties The Promises Conservative •  •  •  New Democrats •  •  Liberals •  •  •  Greens •  •  •  $5.3 billion a year, on average, for provincial and municipal infrastructure under the New Building Canada Plan A New Public Transit Fund committing the federal government to spend $250 million in 2017, $500 million in 2018 and $1 billion a year after 2019 $150 million for Canada 150 Community Infrastructure Program to fund community and cultural infrastructure projects across the country Dedicate an additional one cent of the existing 10 cents per liter federal gas tax to roads, bridge and other core infrastructure, reaching an additional $1.5 billion annually by 2019 Develop a better transit plan with the provinces and territories and invest $1.3 billion annually over the next 20 years Boost infrastructure funding though “alternative sources of capital” Provide infrastructure funding for affordable housing, public transit, transportation, climate change and “smart cities” Hold an annual big city mayors’ meeting in Ottawa to discuss infrastructure Reinvest in the national rail systems Increase the gas tax transfer to municipalities to 5 cents a liter to be used for sustainable transportation initiatives. Commit 1percentage point of GST to municipal infrastructure. Create 6 municipal superfunds $500 million per fund per year which municipalities can apply for for various infrastructure initiatives (replacing the Canada Strategic Infrastructure Fund). Create an Infrastructure Bank Thank-­‐you   Nigel  Wodrich   Sarah  Roach     Kevin  Page     Jean-­‐Luc  Pepin  Research  Chair     University  of  O1awa,  Canada   Faculty  of  Social  Sciences   +1  613  562  5800  x3544   kevin.page@uo1awa.ca   www.jlp.uo1awa.ca