Organization Says Infrastructure Fund Canada's Immunization Against Recession

A study by economic forecasting firm, Informetrica Ltd shows that the Canadian First Ministers have a powerful recession-busting tool available to them.

The Federation of Canadian Municipalities (FCM) has released a study by economic forecasting firm, Informetrica Ltd., which shows when Canada's First Ministers meet in Ottawa next week they have a powerful recession-busting tool available to them. “This study shows that accelerated infrastructure spending is the best way to boost our country´s economy as it is about to be hit by a worldwide slowdown,” said FCM President, Sherbrooke mayor Jean Perrault. “Our study shows that spending infrastructure dollars already in the federal pipeline would be a kind of recession immunization.” The study was conducted last June and updated in October and looks at the economic impact of accelerated infrastructure investments. It compares the stimulus impact of $1 billion in tax cuts (personal and excise tax) to the same amount in accelerated infrastructure investment. The study shows that even a combined $2-billion tax reduction would produce fewer jobs and a lower economic stimulus than $1 billion dollars spent upgrading roads, bridges and water mains. This is good news for the federal government as it looks at ways to cushion the impact of a looming recession without dipping into the red. Administrative delays have been the reason, the cost-shared $8.8 billion federal Building Canada Fund (BCF), announced in the 2007 budget, has, so far, financed very few projects leaving close to $3 billion in unspent federal money. “There are hundreds of municipal infrastructure projects ready to go that can be financed from existing revenues once the construction season resumes next spring,” said Perrault. “And because the BCF is cost-shared between the federal, provincial and municipal governments it means that every dollar Ottawa invests must leverage an additional two dollars from provinces and municipalities.” An increase in infrastructure spending of $1 billion would grow the economy by about 0.13 per cent and create more than 11,000 jobs. An additional federal investment in the order of $3 billion, if supported by matching provincial and municipal dollars, could create almost 100,000 jobs. At a time when governments in Canada are struggling to deal with the twin challenges of recession and creeping budget deficits, infrastructure spending stands apart from other policy options available to them. “Infrastructure investments provide a ready economic stimulus while guaranteeing that tax dollars stay in Canada creating jobs and generating additional tax revenues,” said Perrault. “What is needed now is the political will to cut red tape and ensure that the money budgeted for these projects in 2007 and 2008 gets spent immediately.”