OTTAWA— A five-year $50-billion public infrastructure spending initiative would generate a return on investment to Canadians over the long term as high as $3.83 per dollar spent, trigger significant private sector investment and stimulate wage increases, according to a new study by an independent economic modelling firm.

The federal Budget to be introduced on April 21 should have one clear priority – to boost public and private investment so as to create jobs now and a more productive and sustainable economy tomorrow.

The slowing Canadian economy continues to be mainly driven by household borrowing fuelled by ultra low interest rates. With wages stagnant, families are still going deeper into and deeper into debt to spend more than they earn, setting the stage for a nasty housing crash and a rude shock to family finances down the road.

Which gives us a better picture of where the economy is headed -- near record low interest rates on government bonds or a stock market that is not far below record highs? 

In Canada as well as the United States, bond yields are just above record lows. The interest rate on 10-year Government of Canada bonds is about 1.4%, meaning that investors are prepared to lock in their money for 10 years for a return well below the official 2% inflation rate target. 

The gloomy view that the global economy faces a prolonged period of slow growth and high unemployment holds increasing sway among mainstream economists.  A new eBook from the Centre for Economic Policy Research (CEPR), “Secular Stagnation: Facts, Causes, Cures” edited by Coen Teulings and Richard Baldwin includes interesting contributions from such luminaries as Paul Krugman, former US Secretary of the Treasury Larry Summers, and the International Monetary Fund chief economist Olivier Blanchard.

While the authors look at the issue from diverse perspectives, it is striking that the solutions offered by many are more radical than those commonly discussed in Canada.

Budget sets the stage for income splitting, a costly and unfair tax giveaway

OTTAWA—Despite its commitment to eliminating the national deficit, Stephen Harper's 2014 budget denies Canadians the help they need to reduce inequality and create good jobs. The budget also prepares the way for the implementation of income splitting, a $3 billion tax giveaway that offers no help to the Canadians who need relief the most. 

With almost 1.5 million unemployed workers and a record 13% youth unemployment rate, Canadians need a government that prioritizes productive investments and secure, well-paying jobs over attacks on unions and ads for a phantom jobs grant. A lack of much-needed infrastructure investment further compounds problems for Canada's municipalities.

In October, 2011, two leading U.S. economists, Nobel prize-winner Paul Krugman and Lawrence Summers, squared off in Toronto in the high-profile Munk Debates. At issue was the question of whether North America faced a Japan-style era of prolonged economic stagnation.

Mr. Summers, former Treasury secretary under president Bill Clinton, a key White House economic adviser in President Barack Obama’s first term, former president of Harvard University, and for a time a highly paid adviser to a leading hedge fund, is as close to an establishment economist as one can get. He was widely reported to be President Obama’s personal choice to replace Ben Bernanke as chairman of the Federal Reserve Board, and probably would have been nominated if not for strong opposition from the many Democratic senators who saw him as too close to Wall Street.

When it comes to food, drug and consumer-product safety, the storage and transportation of hazardous goods, and the control of pollutants that threaten human health and the environment, Canadians would almost universally agree that governments should regulate business to ensure that public health and safety always comes first. This is particularly true in the aftermath of preventable human tragedies such as that at Lac-Mégantic.

Ontario politics in the coming months are set to revolve around a debate on whether taxes should be raised to pay for a massive expansion of public transit and transportation infrastructure in the highly urbanized and acutely congested Greater Toronto and Hamilton Area (GTHA), home to about half of the province’s population.

Finance Minister Jim Flaherty is said to be considering extending funding for public infrastructure investment in his forthcoming budget, as urged by the Official Opposition, the provinces and municipalities. Let’s hope, for the sake of jobs and the environment, this is a significant, long-term initiative.

On the eve of the 2013 federal and provincial budget season, public sector austerity is still the order of the day, even though the economy is rapidly slowing down.