Thursday, January 22, 2009

The $64 billion question

So we now learn that the budget deficit in Canada over the next two years could hit as high as 64 billion dollars, which effectively puts us back in the accumulated debt to where we were before 9/11. The Conservatives can't entirely blame the global economy for this, a big part was the irresponsible 2% cut in the GST when we still couldn't afford such a cut. But we have to deal with the here and now.

So how to spend the stimulus money? One word: Infrastructure.

Anyone who has seen the state of our roads and sewer systems would know that we are dealing with a ticking time bomb. Just the other day, we saw an over hundred year old water main burst in Montréal, and an "unexpected" flood blacked out a big section of Toronto. To think that some of our sewage is going through pipes built in the 19th century is simply unthinkable for a developed country like Canada. And let's not forget, the state of schools and water supply on First Nations lands.

Spend the money on a good state of repair program, fixing what we have and building only smart transportation projects for new roads and transit lines, and we'll have a major competitive edge so when times get better the goods get there on time and businesses actually want to do trade here because they know the roads are good.

Bail out the banks the way they did in the States and the UK, and it will be just money down the drain.

That's what Michael Ignatieff needs to set as his bottom line. If the money won't go to provident projects, and at that projects that can be audited for value for money, then the Liberals will pull the plug.

The least one can say is that despite it all, our situation is still less than half as bad as it is in the States. At the rate they're running up the bills, their debt to GDP ratio will soon hit 100% -- that is, they'll become a banana republic. Sweet justice after the way the Fed's screwed the Third World all these years. Our debt-to-GDP ratio is still quite low, according to the government about 28% (although it's probably about 5 to 6 percent higher than that since it probably includes the surpluses in the Canada Pension Plan and Employment Insurance which both should be segregated) but this is no time to be complacent about our state of affairs which are pretty bad.

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susansmith said...

Also we can leave another legacy to our kids and that is building up our social infrastructure.
In a world which needs to produce less "stuff" we should be thus investing in the "service side" and public commons, such as parks, recreation, and so on. This is building up social capacity such as health, welfare and so on (eg. childcare).
It creates less unrecycable stuff and is in the public good.
I know Harper would hate that as he's into individuals buying more environmentally unsustainable stuff and for wasteful individual use end.

BlastFurnace said...

You raise some good points there, Jan, especially on universal child care.

Why I would focus on the hard infrastructure first is that it would put a lot of people back to work right away. Since most would be in a 30% bracket, a $30 billion injection would mean about $10 billion back into federal and provincial coffers; then with the spinoff jobs created the projects would pay for themselves.

From there, we'd have the money to pay for what needs to be done -- not just on the remaining infrastructure projects but also to make our social safety net work for the next generation while still paying down market debt.

I also agree with you on the last point -- Harper still doesn't get it on the environment.

It would be nice to see some of that money used for wind and solar projects rather than continuing to give corporate welfare to the tar sands, unless Big Oil commits itself to coming up with ways to extract the oil with net zero emissions to water and air. And actually a process has been patented to do just that but no one's interested.