Liberal infrastructure plans to be paid for via privatization

Parliamentarians got their first chance to debate ambitious plans for a national infrastructure bank as a hearing revealed general support from the Conservatives, strong concern from the NDP and signs of division within the Liberal caucus.

Speaking via video link from Seoul, Mr. Barton [the head of Finance Minister Bill Morneau’s Advisory Council on Economic Growth] argued that Canada faces a $500-billion infrastructure gap and that public money alone is not enough to address the problem.

He said private investors such as pension funds have so much money parked in low- or even negative-interest savings that they would be willing to accept relatively small returns in exchange for long-term equity in reliable Canadian infrastructure like airports, seaports, rail lines and energy grids.

Mr. Morneau has expressed support for the concept of an infrastructure bank and the government recently hired Credit Suisse to conduct a detailed study of options for fully privatizing Canada’s airports, but it is not clear exactly how Ottawa will respond to the growth council’s advice.

“I’m trying to see how this privatization, or this move, will actually be to the benefit of the country. Especially since most of the risk will be assumed by the federal government,” he [NDP member Guy Caron] said. “We never had this debate in this country. I don’t recall the word privatization being said during the electoral campaign and now this is the direction we’re going towards.”

http://www.theglobeandmail.com/news/politics/mps-grill-morneaus-growth-a...

If they follow through on this plan, then it's another broken promise.

Quote:

Parliamentarians got their first chance to debate ambitious plans for a national infrastructure bank as a hearing revealed general support from the Conservatives, strong concern from the NDP and signs of division within the Liberal caucus.

Speaking via video link from Seoul, Mr. Barton [the head of Finance Minister Bill Morneau’s Advisory Council on Economic Growth] argued that Canada faces a $500-billion infrastructure gap and that public money alone is not enough to address the problem.

He said private investors such as pension funds have so much money parked in low- or even negative-interest savings that they would be willing to accept relatively small returns in exchange for long-term equity in reliable Canadian infrastructure like airports, seaports, rail lines and energy grids.

Mr. Morneau has expressed support for the concept of an infrastructure bank and the government recently hired Credit Suisse to conduct a detailed study of options for fully privatizing Canada’s airports, but it is not clear exactly how Ottawa will respond to the growth council’s advice.

“I’m trying to see how this privatization, or this move, will actually be to the benefit of the country. Especially since most of the risk will be assumed by the federal government,” he [NDP member Guy Caron] said. “We never had this debate in this country. I don’t recall the word privatization being said during the electoral campaign and now this is the direction we’re going towards.”

ETA:  the title of the thread is a bit more definitive than it should be. This is still in the discussion stage; so there hasn't been a concrete decision.  Yet there are very strong indications that this is the direction the government plans to go in, which is simply more ceeding control of government and ultimately social policy to the private sector, IMO.

As an electoral strategy, the Liberals’ campaign promise to increase infrastructure spending and use deficit financing to pay for it was bold and clever.

[..]

But now that the Liberals are in power, that deficit-and-infrastructure mandate is looking more and more like a lobster trap.

Quebecers of a certain age will recognize that reference: it’s the analogy that then-Quebec premier Jacques Parizeau used in relation to his strategy of turning a Yes vote in a referendum into a unilateral declaration of independence. Once Quebecers had voted to negotiate with the rest of Canada for some form of autonomy, so the reasoning went, there would be no going back, even though many of them didn’t know they were voting for a unilateral declaration of independence.

The Liberals’ lobster trap mandate works much the same way. Canadians voted for deficit-financed infrastructure spending, and that’s what matters. The fact that they also voted for a small and short-lived deficit, and that nothing at all had been mentioned about tolls and user fees is no longer important. Once you enter the lobster trap, there’s no backing out.

[..]

When NDP MP Guy Caron asked where user fees were mentioned in the Liberal platform, he was told, in effect, that increased infrastructure spending was a good thing and that Canadians had voted for more of it. But the question of user fees deserves a better answer than that — especially if you’re also promising “inclusive growth,” as there may well be people who end up paying more in tolls than they receive in benefits. These distributional issues are real and cannot be dismissed so easily.

[..]

The decision to expand the use of tolled infrastructure and abandon balanced budgets in favour of a stable debt-to-GDP ratio is not entirely indefensible. But the Liberals chose not to defend those positions in the last campaign.

[..]

This is not a promising trend: the Liberals have casually blown past every fiscal limit they set themselves. It may be that the decision to hold a constant debt-to-GDP ratio is a line that they will not cross, and that we won’t end up in the sort of deficit-and-debt cycle that started 40 years ago under similar circumstances. But I’m not as hopeful as I used to be that the state of public finances will eventually stabilize. Stopping before things get worse is not how lobster traps work.

Someone should convince this Gordon fellow to join babble.  It would be nice to hear economic analysis from someone with a PhD in it.  But would he be welcomed?

No, I mean that Joe is the one who gets hurt when he can't keep up. It's called 'other people's money'. When government has spent it all they devise deferral accounts to access more, hoping that the payments will stick to the next guy, not them.