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Feb 22, 2016

Spending Our Way to Economic Strength

As 2016 unfolds, the Federal Liberal platform plank supporting infrastructure spending is front and center in local and national discussions. At a Kelowna Chamber of Commerce luncheon January 8, we hosted our two MPs (Liberal Stephen Fuhr and Conservative Dan Albas) alongside our local MLAs as they addressed our group.

Mr Fuhr’s comments synopsized much of the forward planning going on in Ottawa. Certainly infrastructure spending is extremely high profile, and if pundits are correct, much needed.

At present, the federal plan for infrastructure growth is centered in three areas: Public Transportation; Social Infrastructure, especially affordable housing, early learning, and cultural infrastructure; and Green Infrastructure – water, climate and energy.

With energy income dropping precipitously – currently oil is at a 12-year low, and mining ore prices continue to fall – it is possible that stimulus programs could, at this particular tipping point, prevent a worse downturn. The good news is that the Liberal majority is planning immediate spending of $5 billion a year for the next two fiscal years, a 100 per cent increase over previous levels.

Importantly, the federal debt to GDP ratio was highlighted by Mr. Fuhr when he addressed 180 of our members at the January 8 luncheon. A balanced budget is touted for 2019, only three years away, with the 31 per cent “Debt to GDP’ in 2015 dropping to 27 per cent in 2019. This is the short-term deficit of less than $10 billion in each of the next two fiscal years we see in the government’s charts.

These investments in infrastructure spending are expensive – but, one positive effect is that they reduce manufacturing production costs. One predicted drop in those costs is 5 per cent a year – it depends on the return on investment – it would be stellar to achieve the 25 per cent ROI that one study predicts as possible.

Employment, of course, drops when commodity prices drop. One way to get employment figures back up is to inject the infrastructure spend into areas of seriously depleted employment numbers: Fort McMurray, or Calgary, say, at the expense of less-impacted centers.

Jobs are one side of the equation; boosting trade back up is the flip side that will also improve if the new spending is properly allocated.

Let’s not see spending in certain spots – let’s not further inflate the housing market in Vancouver, for instance. Let us instead, look for a return to healthy employment and investment in the energy sector, and cut some of the infinite red tape that stands in the way of comprehensive energy sector growth.

We have a window of opportunity, it seems, just now with a new government, and a will in the general population to allow some economic experimentation on spending to optimize growth over the next 24 months. Two years from now we could be looking at an improved landscape in terms of economy; of job growth, of societal stabilization, and progress on multiple fronts as sensible infrastructure spending takes hold.