Investing in the future

In the coming years we will need major investment in public infrastructure. A vibrant economy requires effective infrastructure including good roads and an efficient transportation system, schools and hospitals, reliable power and clean water. And we have a growing population, placing greater demand on services. Years of funding cuts have created a pent up need for reinvestment in both social programs and in major capital projects.

In 1997 and 1998, total government investment in fixed capital — everything from public sector buildings to schools, roads and highways, public transit, water and waste treatment facilities — was just 2.1 per cent of Gross Domestic Product (GDP). This is down significantly from the 2.5 per cent level in the 1980s and even further down from the 3.5 to 4 per cent level of the 1960s and 1970s. Falling investment in basic public infrastructure over the past 20 years has undermined public services, creating major environmental problems such as poor water quality and increased pollution, and stagnant private sector productivity.

Governments at all levels need to invest to replace and extend aging public infrastructure to meet new demands. But governments, anxious to avoid debt, are increasingly unwilling to commit the needed funds.

In some provinces, balanced budget legislation prohibits debt. In other cases, there is concern that increasing public debt will jeopardize bond ratings. Raising taxes to invest in public assets is increasingly rare. The dominant political thinking holds that public investment has a negative economic impact while private investment is positive. So governments turn to the private sector to come up with the cash for long-term, capital investment projects.

A decade of public policy founded on debt avoidance and deficit reduction has not improved Canadians’ standard of living or the services they count on. Focusing on spending cuts to the exclusion of all other priorities has created serious problems that need immediate remedies. There is every reason for public investment in Canada’s future — investment in the public infrastructure that forms the foundation of our society and a growing economy. A reasonable level of public debt can easily be sustained at current and projected rates of economic growth.

Together these conditions create a situation where public borrowing — and a reinvestment of the government’s sizeable surplus — become not merely possible but essential.