Spending cuts

One of the things that kind of gets lost in the conversation about spending cuts is the secondary impact of the cuts.  Premier Graham is asking the Tories what hospitals they will close or what schools will they downsize and that question, rightly, needs to be answered by both parties.

So the primary impact of cutting public spending will be felt in the quality of public services but you have to remember the government has been propping up the economy itself for quite some time.  Since the late 1990s government spending has risen two to three times private spending in this province and much of it was to create good paying public service jobs.  That was a kind of economic stimulus that when pulled out of the economy will have a multiplier impact.  Let’s say, for example, that the government freezes all new public sector hiring (health, education, public admin, etc.) over the next 5-6 years.  That means we will not get the several thousand new good paying jobs we have over the past 5-6 years.

My point is simple.  With robust public spending New Brunswick still had a very tepid job creation rate over the past decade.  Without it, we may end up in a sustained economic funk.

Not that I am advising government to spend willy nilly.  I am just pointing out that federal cuts are coming, provincial austerity is coming.  That’s going to cause some broader economic pain.

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