Editorial: Carrots and sticks drive the government donkey
EquipmentWatch analyst Adam Raimond threw out an interesting nugget during our webinar discussing third quarter 2018 rental rate trends. He noted that about seven per cent of spending on a construction project goes to equipment costs, be it paying for owned equipment or renting.
By Patrick Flannery
He said this in the context of noting that rate trends may be influenced by fluctuations in government infrastructure spending, and that tracking that spending is one way his organization forecasts which way rates will go.
Add this to the welcome news in our last issue that the Canadian Rental Association board has decided to be a more vocal proponent for the industry with the various levels of government. Obviously, there is a great deal to be gained here. According to the Financial Post, Ottawa has committed $180 billion over 12 years to invest in roads, water systems and the like. That’s the federal share of projects that attract their support – add up what the provinces spend and the figure will be many times higher. Lobbying to encourage continued investment of this kind will put money in everyone’s pockets and possibly even help reduce the number of potholes destroying your suspension next spring. And it is lobbying and continued pressure from industry groups that keeps government budget dollars flowing. Already, many of the planned expenditures have been delayed by slow-moving municipalities and contractors. Without strong signs of interest from the public, governments can become distracted and allocate unused dollars elsewhere in future budgets. As an industry association, the CRA is in a strong position to speak authoritatively for the industry without the suspicion that it is serving the interests of any particular company or region. If it joins with other construction associations and interested groups to deliver a common message, politicians will take note.
The CRA has already taken a step in this direction with its praise for a federal move to allow capital assets to be depreciated at 45 per cent on business tax returns in the first year they are used. This represents a tripling of the previous rate. The benefit to small businesses and the encouragement of investment it will create leaves only the question of why it has taken so long for successive governments to make this move. Actually, that’s no real mystery as the change reduces tax revenues…which is why it is important for organizations like the CRA to give politicians a public relations win when they do things like this. The only thing they like more than larger departmental budgets is an increased chance to get re-elected. Carrots and sticks – that’s how you drive a donkey.
Some people hate government spending in all its guises and would prefer Ottawa be told to get out of the business of helping business and give us our taxes back instead. Interesting idea, but fat chance. I only need to look at all the construction signs that pop up all over town every time there is a municipal election near to see how much politicians like to be associated with building things. And, on the list of things governments could spend money on, public infrastructure is hardly the worst. National Post columnist Andrew Coyne sometimes says government should do that which only government can do. On balance, I think that’s a good principle. It’s hard to see how we’d have roads to drive on if it were up to each of us to build them ourselves. Every time I stop at a toll gate in the U.S. or get my 407 bill in the mail, I’m reminded of how nice it is to have a network of free public roads to travel on. With the distances we have to drive in this country, I don’t know how we’d function any other way.
So as long as public infrastructure spending is a reality, we might as well do what we can to see the money flow in our direction. There’s a lot of backlogged infrastructure work around this country as a legacy of the penny-pinching governments of the ‘90s. Let’s all support the CRA as they get in front of lawmakers to keep those bulldozers and excavators working.