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Wednesday, March 30, 2016

Infrastructure spending OK, but that’s not what the Trudeau gov. proposes to do.

Infrastructure spending OK, but that’s not what the Trudeau gov. proposes to do. (FrazerInstitute).

Some of the details of the Liberal's budget, which ran almost 270 pages, are now emerging, resulting in serious questions about aspects of the budget.

As a number of researchers have already observed, the rhetoric of the Liberal budget simply doesn’t match their specific plans (see here, here, here). This gap between the rhetoric of the budget and its actual proposals is front and center in one of the budget’s signature sections: infrastructure spending.

Without debating the specific merits of any of these individual initiatives, it’s fairly clear that most of the “infrastructure” spending is not aimed at improving the core infrastructure of the country such as our roads, bridges and highways. In other words, simply calling the spending delineated above “infrastructure” doesn’t mean the spending is actually on infrastructure.

In addition, there are genuine questions about the “multipliers” included in the budget as a rationale for this spending.

The argument, rooted in Keynesian economics, is that governments can spend one dollar and generate more than one dollar’s worth of economic activity.

The narrative employed in the budget, which combines the concepts of both improving the long-term performance of the Canadian economy and the multiplier of infrastructure spending, is that such spending pays for itself.

The problems with this argument are twofold.
One, as outlined above, almost none of the spending referred to as infrastructure is actually on infrastructure. 
And two, the concept of multipliers has been rigorously debated in economics and there is genuine debate about their validity. Read the full story here

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