In tough economic times, government stimulus packages should focus on infrastructure projects that will leave behind "a valuable asset for the future," such as better roads or light rail transit, experts say.

According to economist James Brander, infrastructure spending has a high rate of economic return, as spending on building a road or better public transit will have trickle-through effect to a number of industries.

Improving light rail transit, for example, will not only create jobs for construction workers, but will benefit those who are in lower income brackets, who will be particularly hard hit during a recession, Brander says.

Building new roads or improving old ones also provides considerable economic benefits. Industries that supply materials will get a boost, and those roads will allow workers to commute faster and make it easier for companies to ship their goods.

And people who are employed also spend more money, Brander says.

"Of course, the people that are hired in that process -- the people that are hired to build the roads and bridges and so on -- they spend more money because they have more money and that, of course, percolates through the economy and that's the idea of a stimulus package," Brander, an economics professor at the Sauder School of Business at the University of British Columbia, told CTV.ca in a telephone interview.

"So we're better off if we give money to someone who says, 'Okay, I've got this money, I'll build a new building, or build a new bridge, or build a new factory,' because that's spending but it's spending that will leave behind a valuable asset for the future."

The budget that Finance Minister Jim Flaherty tabled in January contains nearly $12 billion in infrastructure spending, including a $4 billion stimulus fund to which the provinces will have to contribute for the maintenance and repair of existing facilities.

The budget also includes:

• $1 billion for environmentally friendly projects
• $500 million each for community recreation facilities and for small-town projects
• $2 billion to repair, retrofit and expand college and university facilities

While construction projects are viewed as the best option for creating jobs and injecting cash into the economy, one downside is that they can sometimes take a long time to get off the ground.

"By the time you get everyone onside and all the approvals in place and you've lined up your contracts, you're not looking at infrastructure stimulating the economy until well into the second half of this year," Derek Holt, a senior economist with Scotia Capital, told The Canadian Press last month.

Flaherty has predicted that the money will be spent by the end of fiscal year 2010.

Targeted tax cuts

Any good stimulus package will not just contain infrastructure spending, says Grant Bishop, an economist with TD Economics.

However, it should not include big tax cuts or rebates to high-income earners, who are traditionally more likely to save extra money rather than spend it during a financial crisis, Bishop says.

Higher-income earners are more likely to avoid purchasing big-ticket items, in part because they hope prices will continue to drop and in part so they can focus on maintaining their own financial health.

And baby boomers who may have just seen their retirement savings decline in step with the stock market will need to "save in a hurry" to rebuild net worth that they can live off in their retirement years, Bishop said.

In contrast, lower-income households traditionally tend to spend more when they receive tax breaks or an increase in benefits, because they feel they have more economic security.

"Their spending is much more regular unless there's a major interruption to it," Bishop told CTV.ca in a telephone interview.

Middle-income and low-income households are the places where you get "the most bang for your buck" when you offer them tax cuts or an increase in benefits, Bishop said.

The federal budget contains about $2 billion per year in permanent income-tax cuts and an increase in the working income tax benefit, which goes exclusively to low-income Canadians.

Abandon auto-sector bailouts

Finally, multi-billion-dollar auto sector bailouts will do little to stimulate the overall economy, Brander says.

The federal budget contains more than $2 billion in short-term loans to the ailing auto industry, and automakers are requesting billions more in repayable loans to keep themselves afloat.

However, pouring money into the auto sector will only lead to the manufacture of goods that will sit unsold in car dealership lots as consumers keep a tight grip on their pocketbooks until they see sure signs that the economic crisis is over.

"What we should do is make a list of the things we really want to have," Brander said. "And this is a good time to pay for the infrastructure things that we're going to be really happy we've got five or 10 years from now."