Warning – rant ahead

I have been saying for years now that the slavish adherence to balanced budgets in New Brunswick is a false security. That balancing NB’s books because of the largess of the federal government is not good public policy over the long term (short term it’s fine).

Of all the things people criticize me about that was probably the most pronounced. Specifically I have said that running a short term 3-4 year deficit in New Brunswick in order to invest in economic development would be a good thing. Even most of my economic development colleagues said the same thing.

Now I hear Jim Flaherty saying exactly the same thing – verbatim – about the Canadian economy. He is prepared to run significant short term deficits to support the economic development of the country.

This is the double standard of the decade. Miserable little provinces like New Brunswick – with population stagnation, industrial decline and being propped up by 3x the rate of inflation government spending – which desperately need economic development focus – ignore it to get some faux balancing of the budget but the national government has no problem running deficits in tough times for economic development (i.e stimulus packages, auto bailouts, etc.).

NBT was right (though we disagree about the fix). New Brunswick has been in a kind of recession for decades. Not the traditional GDP-based calculation but if you look at the significantly high rates of unemployment, the annual need for more Equalization to balance the budget, the chronic challenges with some of our industrial and regional development – we have been in a kind of recession. And yet successive NB governments point to balanced budgets and puff their chests out.

Bottom line. If Canada had the exact same economic performance as New Brunswick – it would be a national emergency. The federal government would run billions in deficit to try and fix it. In New Brunswick, we claim it as success.

Now, the feds are turning the screws on equalization and own source revenue in our province will be affected by the North American recession. We will probably start running deficits just to keep our inflated government spending up. But we should have been far smarter during the growth years of the Canadian economy.

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0 Responses to Warning – rant ahead

  1. vincerolly says:

    We should be skeptical about the prospect that balanced budgets and debt reduction IN THEMSELVES would contribute positively to economic development. But the dogma of deficit control has exerted a powerful hold on our political medium. The cardinal assumption has been projected that if Canadians controlled spending, we would be rewarded by international investment.

    Surely this assumption has breathed its last.

  2. mikel says:

    That again comes back to politics, sorry to hijack your rant. You are correct in all your points-except that the term recession has a very specific definition.

    If you look at where the deficit police came from, it was the ‘religion’ of the reform party. It was all their economic thinktanks that wanted ‘everybody else’ to ‘tighten their belts’.

    This was a small ‘lobby’ that got big enough for government to worry about, we can add Quebec to that mix. In a dysfunctional electoral system, once a party gains enough power to get seats, even if they don’t have the relative numbers, they can affect public policy. That’s why I mentioned before about people here getting involved in the Atlantica Party, or at least looking at the NDP.

    With enough seats, the policy switches from the idiotic conservative claims of handing NB some money to fix some bridges, to some real policies. But that involves a motivated and organized population, which the maritimes has never had.

    It only takes ten seconds to see through the lunacy of all this, you had a link of some blogger who had the timeline of Flaherty’s comments, from January to now, when they became virtually the opposite.

    The ‘fix’ is of course another issue entirely. Of course its obvious that IF NB had more investment things would be different, the point is how to get that…which again comes back to political involvement. Keep in mind that IF NB was underperforming, you never hear it from government, you never heard it from Irving, you never heard it from the respective Boards of Trade, or Chambers of Commerce. In other words, the business sector was doing quite well thank you, so obviously there needs to be policies away from the ‘status quo’ that they are happy with, to one which benefits the population. And of course there is only one way to affect policy…

  3. Anonymous says:

    If governments would be less wasteful, less self serving and less short sighted, there would be less support for reduced taxes and balanced budgets.

    Based on recent performance, a dollar not in government hands is 90 cents not wasted; or with deficits, $1.30 not wasted.

    Unless you are among the privlidged benefitting on the government gravy train, lower taxes and balanced budgets look pretty good.

  4. mikel says:

    The above is a popular view, but it doesn’t really hold up to scrutiny. It’s hardly true that money in the private sector is money ‘not wasted’. And at least even money that the NB government ‘wastes’ stays in the province, that’s certainly not true of Irving and McCain, where by some definitions its ‘not wasted’ because it is earning Irving more money. However, that doesn’t do NB any good.

    And while there is government ‘waste’, if you go through the books its really not as prevalant as people think-but of course people tend to think that government waste is money spent on things they don’t like or don’t benefit them, so its hard to quantify.

    But to continue my democracy kick, you can go to Maine or any place which has citizens and ballot initiatives, and in order to raise taxes, the government has to earmark the tax for a specific purpose, it doesn’t just go into ‘general revenue’ and never seen again so that people continue to think that ‘all taxes are bad’.