Be careful with this Equalization thing

I am watching the Premier’s debate over Equalization quite closely (as evidenced by the number of blogs on the subject). I just have one sort of overarching point to make today.

Using a quick back of the napkin analysis and government figures, for every dollar in tax cuts the NB Conservative government has made they have added 4 more dollars in Equalization payments.

In other words, they have (slightly) cut taxes and received (significantly) more Equalization.

So when I heard Brent Taylor on Friday defending Harper’s proposal to rework the Equalization formula to remove natural resources revenues from the calculation, I was quite shocked. His own government is relying more and more on Equalization every year and Taylor is defending a modification that could over time cost New Brunswick hundreds of millions in Equalization.

I think they have to tread very careful on this. Alberta, BC, SK, NS and NL all want natural resources revenue dropped from the calculation. Ontario wants to give less. Quebec wants more. Manitoba and New Brunswick are sort of out of the loop and just crossing their fingers.

If it is the intention of Bernard Lord and J. Volpe to continue increasing New Brunswick’s reliance on Equalization, they should push for a model that will address that need and not risk serious trouble with this ‘natural resources’ thing.

You all know my preferred model. Freeze Equalization at the current level for ten years (put in escalators on Health and other federal transfers) and set up a 10 year 2 billion dollar economic development fund that can be drawn down at a rate of $200 million per year. The New Brunswick government should match those funds and then go to work.

Hire the best minds in economic development.
Invest strategically in training workers to feed into targeted growth industries.
Go out and attract companies to come into the province and invest in those targeted industries.
Invest in growth-oriented infrastructure.
Sell, sell, sell.

But there is zero, zip, zilch, nada, nein, non, chance of that.

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0 Responses to Be careful with this Equalization thing

  1. Anonymous says:

    So provincially it comes down to spending $200 million on economic development. The other part is federal and isn’t really their decision.

    Wouldn’t it be nice if they hadn’t blown more than that in year one on forestry. Where exactly is the 200 million coming from though?

  2. David Campbell says:

    Funny thing. They always cry poor but they seem to be able to find money for stuff they consider to be a ‘priority’. $600 million to scrap the toll highway. $200 million tax cuts. Over $1 billion more on health care every year. $1 billion for the Lepreau refurbishment. $67 million for the Nackawic pulp plant.

    If they wanted to, they could find the money. It is only 3.3% of the total budget. I think it is reasonable to spend 3.3% to take a serious stab at securing our future.

  3. Anonymous says:

    The toll highway is paid for through the use of ‘shadow tolls’. The taxpayers are still paying for it. Likewise it’s pretty hard to maintain or increase taxes, especially in NB, where the ‘relatively’ well to do are your only supporters. Most of Nackawic came from tax credits, while Lepraeu is amortized through NB Power. In other words its more debt.

    Most of concessions made even to big business hasn’t been in cash handouts, most is tax credits on infrastructure and fewer environmental regulaltions a la the forestry industry.

    Health care is one thing, but as you’ve pointed out, that’s from Ottawa increases, which doesn’t hand out money for economic development except through ACOA or bigwigs like Irving. If you go through their budget it’s pretty hard to come up with $200 million, let alone try to sell the public on it, particularly in a province which has been trained to think that government involvement in the economy is paramount to burning money.

  4. scott says:

    Your message, though a bit more specific, has not wavered.

    I guess that is the beauty of good solid messaging.