February 18, 2013

Don’t balance budgets on back of infrastructure

View from the Board | Philip Hochstein

The B.C. government is set to come down with the provincial budget on Feb. 19. It’s the final budget to be delivered before the May election. And the promise is that budget will be balanced.

While the Independent Contractors and Businesses Association is and always has been a strong advocate for fiscal restraint and balanced budgets, we know that the belt tightening has be to done in the right places and avoided in the wrong spots.

And for our economy in general, and the construction industry specifically, the wrong place to look for savings is in infrastructure.

Bridges, roads, powerlines and other capital projects like these aren’t particularly glamorous but are essential to our lives.

Investments in these projects have a big impact today – in the construction jobs they generate. And they have a big impact tomorrow, in their positive impact on the economy.

That’s why ICBA has just released a special report and the economic rewards of infrastructure investments – and the very real risks of cutting those investments. (Available online at www.icba.ca)

Every dollar invested in infrastructure ripples through the economy to create a multiplier effect. This drives job creation in construction and other industries, and unleashes benefits for everyone.

A recent estimate from the United States tallies the impact of $1 billion of infrastructure spending at close to 30,000 jobs, split equally between construction and its direct spinoffs, and employment in the broader economy.

Every dollar spent on infrastructure generates big benefits for its users and the economy.

An assessment of the Lower Mainland Gateway Transportation Program, of which the Port Mann Bridge is just a part, found a one-to-three relationship between the project’s lifecycle costs and the value of reduced travel time and vehicle operating costs alone. And that doesn’t include construction-related benefits and impacts on longer-term economic growth.

After B.C.’s infrastructure spending was slashed in the 1990s, the cost of digging out of the infrastructure deficit was much higher that it need have been.

Major assets that are allowed to fall apart become much more expensive to fix. We can’t afford to fall into that trap again.

Infrastructure investments are felt in every corner of the economy. Construction is the biggest and most direct beneficiary, but you might be surprised by the other sector.s that also get a boost from each and every dollar of infrastructure spending.

A U.S study found that manufacturing, professional and business services, wholesale trade, and retailing all benefit from capital investments.

And that is the second big benefit for the construction industry. When the entire economy prospers it means higher demand for the services we offer.

After all, a booming retain sector needs new stores and new retail space. New workers need new homes. And expanding industries need new plants.

When the B.C. government maps out its fiscal vision for the next year, infrastructure spending must be a part of it.

We need to keep investing in capital projects to help keep our entire economy growing – and keep increasing the revenues needed for everything that government does.

Philip Hochstein is the president of the Independent Contractors and Businesses Association of British Columbia. Phil is also a member of the Journal of Commerce Editorial Advisory Board. Send comments or questions to editor@journalofcommerce.com.

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