A federal budget is coming, so it is time to contemplate the meaning of the word “invest.” In last year’s budget book, variations of that word – invest, investing, or investment – were used 675 times.
The major English-language dictionaries all provide primary definitions of the word invest similar to the one in Merriam-Webster: “To commit (money) in order to earn a financial return.”
But the 2021 budget tabled by Finance Minister Chrystia Freeland repeatedly confused the word with another verb, “spend.” Merriam-Webster defines that as: “To use up or pay out: expend.”
The question for the coming budget, expected in April, will be whether Ms. Freeland continues to conflate the two concepts. This year’s budget, like last year’s, will talk about economic growth. But in 2022, mistaking spending for investment would be costly.
That’s especially true now that the governing Liberals have struck a deal for a parliamentary alliance with the NDP that calls for spending on things such as public dental care and pharmacare. And at the same time, the government is under pressure to increase military spending. Last year’s budget had already outlined a $101-billion program to boost the economy over three years. A lot of that should be cancelled now.
Obviously, governments have to spend, to build roads or buy ships or pay for services such as health care. Everyone knows from their own lives that smart spending can pay for necessities or improve one’s quality of life.
But the difference between spending and investing should be pretty clear. After spending, you will have less money. After investing, you hope to have more.
Admittedly, that equation is more complicated with government because public investment is usually intended to generate a return by spurring growth in the economy, which would make it possible for governments to raise revenue. But the difference is still important. Especially now.
There is growing concern that as Canada emerges from the COVID-19 pandemic with a short-term economic boomlet, its long-term growth is likely to be relatively weak.
Canadian business leaders fostered the creation of a thing called the Coalition for a Better Future, whose more than 120 members include NGOs, think tanks and companies, to voice that anxiety.
“You have to have economic growth to have the resources to build the kind of society you want,” said Anne McLellan, the former Liberal deputy prime minister, now senior adviser with Bennett Jones, who is co-chairing the coalition with former Conservative cabinet minister Lisa Raitt.
Economist Donald Drummond, who recently co-authored a “shadow budget” for the C.D. Howe Institute, warns that pandemic debt, expected higher interest rates, and long-term pressures such as population aging and the costs of climate-change transition could spell danger, especially if growth is weak.
Governments can look at growth in a couple of ways. When the economy is slow, they can spend borrowed money as stimulus to increase demand in the short term. That’s what the Liberal government did with CERB cheques and wage subsidies during the pandemic to prevent a recession, and it worked for that time. But debt eventually carries a cost.
The government can stimulate growth by investing in things that will improve productivity and spur a higher rate of growth year after year, perhaps developing key infrastructure, or encouraging research. But those things must somehow incite additional growth that the market economy cannot, or it’s just shuffling money, Mr. Drummond noted.
But the economy is rolling at the moment, and labour markets are going strong. There’s no need to spend all the money planned in the 2021 budget in order to provide a temporary boost. That’s more likely to cause inflation than growth. What is needed is investment in long-term growth.
Last year, former Bank of Canada governor David Dodge criticized Ms. Freeland’s 2021 budget because there wasn’t enough growth in it, despite the words of her speech. An estimated 75 per cent of the money was devoted to consumption, and 25 per cent to growth. In other words, a lot more spending than investment.
“That has to change,” Ms. McLellan said. “You have to flip that equation.”
Some things might be counted as a bit of both. The $10-a-day child-care program has the potential to spur a long-term increase in economic growth by encouraging the participation of more women in the labour force.
But for the most part, the Liberals have taken to conflating spending with investment because, well, they want to spend. In 2022, it’s important to tell them apart.
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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.