Those darn multipliers

One of the main ways that economic developers convince government to invest in new economic development projects is by using an economic multiplier analysis. The logic is that for every new private sector dollar invested in a local economy, the government will receive benefits (i.e. new taxes, less people on EI, etc.). So, the academics have come up with complex formulas that basically forecast what level of economic benefit that a government will get over time from a project (say 10 years) then calculate the net present value of that investment (i.e. what it is worth in today’s dollars) and that is the maximum amount the government can invest in a project.

For example, when Frank McKenna attracted UPS to Moncton, he gave them $10,000/job which was roughly equivalent to about 2-3 years worth of provincial taxes paid by the new workers.

Now, along comes General Motors. It was announced that the provincial and federal governments will put $400 million in for 500 new jobs – or $800,000/job.

There is no economic multiplier anywhere that could ever justify that level of investment.

But they did it anyway.

Wouldn’t it be nice if New Brunswick politicians would show such hutzpa.

One day a leader will step foreward in New Brunswick and have the guts to make these kinds of deals. Have the guts to fight for jobs and not for Equalization. Have the guts to fight for year round jobs – not EI.

One day.

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