Can’t government spend your way to prosperity

I have seen very little analysis of the rapid rise in provincial government spending since 1999. This is a bit perplexing considering that the bulk of the funding for this expansion of spending comes from federal transfer payments.

So, I did a little analysis for your edification. A study out today from Stats Can looks at non-residential construction spending.

The chart below is a little confusing so let me explain it. What the chart says is that for every dollar spent in Canada in 2005 on industrial construction (which includes all buildings used for manufacturing and processing; for communications or other utilities; for agriculture or forestry; and for mining) there was $1.50 spent on institutional construction (mostly government funded construction – includes schools, universities, hospitals, health clinics, day care centres, churches, museums and nursing homes).

In New Brunswick, for every dollar spent on industrial construction, there was $2.50 spent on institutional construction – yet again the highest rate of public spending in Canada.

I still maintain you can’t use government spending as a proxy for private sector industry spending. I’m all for public investments in infrastructure, but there must be a similar spending in the private sector.

Non-Residential Construction (2005)
Institutional to Industrial Construction Ratio