As the Trump Administration tries to convince lawmakers to get on board with an infrastructure overhaul, Canada may provide a cautionary tale on what not to do, according to a new report.
Only 11 cents of every Canadian dollar in new federal government spending on infrastructure will be spent on highways, bridges, railways and ports, according to a newly released study from Canadian public policy think-tank the Fraser Institute. It's a woeful percentage of a large sum that was supposed to jumpstart the Candaian economy.
“The federal government has pinned its economic hopes on a major infrastructure spending plan, but only a small fraction of the money is going towards projects that are likely to spur economic growth,” said Charles Lammam, the Fraser Institute’s director of fiscal studies and co-author of the report entitled "Myths of Infrastructure Spending in Canada."
Fraser researchers discovered that of the nearly $100 billion in new spending on infrastructure announced in the past year by Canada’s federal government, only 10.6 percent will be spent on projects relating to transportation and trade. Instead, a majority of the money will go to so-called “green” and “social” projects like new parks, community centers and hockey arenas. According to the report, projects such as these typically do not improve economic growth in the areas that they are built.
“It’s a myth that governments have neglected spending on infrastructure. The issue, however, is that too few dollars are going to projects that would actually strengthen our economy,” Lammam said.
Despite this discovery, the study shows that the Canadian government has in fact increased infrastructure spending significantly over the past 15 years and that the total value of the country’ system is at its highest levels in 40 years.
The Fraser Institute also concluded that the more local governments of the individual provinces are spending a small fraction of infrastructure funds on projects that would improve their economy as well.
Ontario’s government plans to spend a whopping $138 billion on infrastructure over the next decade but only 18.8 percent will be spent on roads and bridges. In Alberta, only 20.6 percent of the government’s $34.8 billion capital plan will be spent on roadways.
The report comes at a time when President Trump has called on Congress in the U.S. to pass legislation that would help pave the way for a $1 trillion infrastructure overhaul to fix aging highways, bridges and other roads.
“Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports and railways gleaming across our beautiful land,” Trump said in his Tuesday address to a joint session of Congress. “The time has come for a new program of national rebuilding.”
Some opposition to the project has come from the more conservative wing of Congressional Republicans who are concerned that the plan will increase debt and eventually taxes.