Stimulus hardens the territory

In Canada, two jurisdictions escaped the ravages of the global economic meltdown - the Yukon and PEI. Yahoo! But before you break out the bubbly, you should ask whether such spending is sustainable. Or whether it was the best use of the cash.

In Canada, two jurisdictions escaped the ravages of the global economic meltdown – the Yukon and PEI.

Yahoo!

But before you break out the bubbly, you should ask whether such spending is sustainable. Or whether it was the best use of the cash.

On the surface, the territory did well last year.

The territory actually doubled the economic growth of the PEI, expanding its GDP by 1.4 per cent compared to the province’s .6 per cent.

The island’s aquaculture industry raised more fish and its lobster fishers caught more crustaceans, both industries helping to offset declines in agriculture, according to Statistics Canada.

Government service industries and retail trade also saw growth, as did manufacturing.

So the growth was driven by the private sector.

Compare that to the territory.

Here, the robust growth got a boost from construction of the Wolverine and Minto mines. And that private-sector investment, which comes as a result of record-high mineral prices, should help the territory for several years to come – provided, of course, that mineral prices don’t sag.

But the lion’s share of the territory’s growth came through government spending on new transmission lines and direct expansion of the civil service.

Despite its new mines, the territory generates barely a smidgeon of the cash it needs to pay for its government. And despite the mines, the growth of government over the last eight years has far-outstripped economic diversification.

If you strip away the hoopla, government is still far and away the region’s fastest growing corporation.

And it’s all paid for through transfer payments from Ottawa.

But even those transfer payments aren’t enough any more. The Fentie government spent even more than the annual billion, sinking the territory deep into the red.

The money sloshing through this pipeline is helping expand the Whitehorse airport, build the new jail, housing, roads, a new high school, two hospitals, a residence, transmission lines, dams … a veritable orgy of public infrastructure spending.

Of course, the territory will see a benefit from these projects. The dilapidated Whitehorse Correctional Centre and FH Collins are long past their best-before dates, for example.

But will it be prudent to build all this at once?

Oh sure, what’s done is done. And we’ll be paying off the bill for years. Maybe decades.

Might it not have been smarter, in such a small jurisdiction, to schedule this construction over a few more years?

The spending frenzy – much of it crammed into a two-year period – pushed the territory’s construction capacity well beyond its means, driving up prices and forcing companies to import labour and supplies.

It’s as if the territory decided to chug a growler of beer. Try it some time – most of that amber nectar will spill onto the ground, wasted.

Same thing’s happening here, except the benefits of the spending are spilling into the surrounding jurisdictions, primarily BC and Alberta.

That’s clearly happening because, according to Statistics Canada – and unlike PEI – retail trade actually dropped here despite all this pre-election stimulus spending.

As well, with a shortage of labour, prices have skyrocketed. The result is that government is building needed infrastructure at premium prices.

And citizens are paying stupidly high prices for simple projects.

The inflation is not in anyone’s best interest.

But the crazy busyness dulls the electorate even as it fattens their wallets. Makes ‘em complacent.

And that’s just what a government wants when it’s pondering an election.

It wants people so busy they’re swept up in the hoopla, not considering the coming bills.

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