Only 20.6% of Alberta’s $35 billion capital spending plan will pay for roads and bridges
When the Notley government unveils Alberta’s 2017 budget next week, it will likely trumpet its multi-billion infrastructure spending plan as a way to grow Alberta’s faltering economy. That was certainly the message in the recent speech from the throne, where the government asserted infrastructure spending will make the province one of “tomorrow’s economic leaders.” The reality, however, is that only a small fraction of Alberta’s “infrastructure” spending is earmarked for projects that will actually improve the provincial economy.
In principle, sound infrastructure projects can improve the economy’s productive capacity. A needed road or bridge that helps move people, goods and resources more efficiently—and at lower costs—can help build a more prosperous economy.
In practice, however, not all of the government’s infrastructure projects fit this bill. Of Edmonton’s $35 billion in planned core government capital spending, just 20.6 per cent is for roads and bridges. Put differently, 21 cents of every dollar of the Alberta government’s five-year capital spending plan will go to the province’s core public infrastructure.
A large share of the spending—34 per cent of the total—is for projects related to education, health care, and social services including social housing, schools and post-secondary campuses, and medical facilities. While these initiatives may be appreciated by the communities in which they are built, there’s no evidence such spending will improve economic growth.
In fact, the government may end up hurting the economy by focusing on such projects, especially if the productivity gains of the infrastructure projects are less than the economic costs caused by the taxes required to fund them.
Nonetheless, the Alberta government has stated that its infrastructure plan will not only generate long-term economic gains but that it will also stimulate the economy in the short-term. Even this argument fails in practise because of the considerable delays from when the infrastructure spending is announced to when the spending actually takes place and shovels hit the ground. Infrastructure projects typically require time for planning and debate. Often, by the time infrastructure dollars are actually spent, it is long after the announcements were made.
In the upcoming provincial budget, the Notley government will likely tout the economic benefits of its debt-financed infrastructure spending. Albertans, however, should be skeptical of such claims.
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