Bricks and mortar build out the federal balance sheet

The federal government rolled out a new approach to budgeting this week, and the subtext is obvious: bricks and mortar are the foundation of Prime Minister Mark Carney’s fiscal policy design.

Physical capital, tangible assets, infrastructure or “build, baby, build” – call it what you may, but it’s clear Ottawa believes that to deal with the country’s economic challenges, its fiscal power needs to prioritize the construction of things.

Which begs the question: what ever happened to all the banter about the importance of human capital, our people being our best assets and a future built on talent and skill?

If the ultimate goal is boosting Canada’s productivity, then actual people— armed with their skills, creativity and brains— need to be at the centre.

There’s a notable lack of human touch in the government’s fiscal discourse to date, and that prompts some concern about whether the taxation, spending and investment powers of the federal purse are aligned with an economy that treats its people well.

A bit of background:

Finance Minister François-Philippe Champagne laid out the changes to budgeting this week, and they’re meant to reflect a Liberal election campaign commitment to distinguish between operational spending and long-term investment.

The technical aim is to move towards a balanced operational budget but worry less about deficits on the capital investment side of this new ledger.

“This new framework will guide decisions and help prioritize investments that generate long-term benefits for Canadians, such as major projects, housing, clean energy

and infrastructure that will help grow our economy and attract private investments,” he said in a news release.

As the argument goes, such investments will expand Canada’s ability to produce and export things, boosting Canada’s productivity and improving Canada’s standard of living – the key economic measures for quality of life.

There’s no doubt, Canada has a troubling record on productivity. Both the private and the public sector have serious work to do there.

The issue I am raising here is that Champagne’s list for what counts as a capital investment does not, by definition, include many of the programs and tax incentives that directly affect and also improve quality of life – the Canada Child Benefit, childcare, incentives to stay in the workforce, incentives to upskill and public transit, for example.

Those types of fiscal policy clearly help the country with its productivity, but don’t fall into the traditional “capital investment” category, including Champagne’s list of things that he will count. But much like financing a new road or bridge, the up-front investment in skills, training, children and public infrastructure pay off over the long term.

It’s obvious to Canadians that support for kids in their formative years, training and decent jobs is actually very productivity-enhancing, especially in the long run. But if those supports don’t make the A list for enhanced government investment, they fall into the B list for government austerity.

We will learn more in the Nov. 4 budget about whether the penchant for bricks and mortar squeezes out training, education, care and health-oriented programs that are just as important for driving prosperity, with returns that are immediately apparent to most people.

For sure, the budgetary changes improve transparency and align revenue streams behind the government’s top priorities.

But it’s hard to believe that anxious Canadians facing a no-growth economy, a trade war with the United States, rising unemployment and stubborn inequality won’t see their everyday quality of life figure prominently in Mark Carney’s fiscal to-do list. Especially because that’s the message coming loud and clear from the public right now.

Abacus pollster @davidcoletto’s numbers on national priorities this week showed that the public is deeply concerned about healthcare, housing costs and making ends meet. Infrastructure, not so much.

As Coletto writes, “Canadians are not simply worried about day-to-day costs; they’re anxious about control, fairness and their future ability to get ahead.”