Where’s Anne Murray when you need her?

After reading Richard Currie talking about New Brunswick as a failing state sucking money from a fed up rich uncle, I figured it was likely time for a bit of a reset.

There is nothing wrong with Equalization or efforts by national governments to transfer some of the profits off natural resource extraction in one province to another.  This is done in every developed country in the world.  Imagine if Norway restricted the flow of wealth from its oil & gas production just to the epicentre of the drilling area?    Iraq has a direct mechanism to share revenue from its oil around the country.

In the absence of that (the dreaded NEP), you need other mechanisms to ensure some fairness and relative equality of public services for all citizens and Equalization has played this role.

In fact, all ‘have’ provinces in Canada with the exception of Ontario (forget the last two years) have a very high percentage of government revenue from non-renewable natural resource royalties and taxes.

I would argue it is a far stronger case associated with transferring natural resource revenue than transferring huge subsidies to prop up agriculture in Saskatchewan and Alberta.  But that’s just me.  Brad Wall, I suspect, disagrees.

So I do not agree with the rich uncle analogy.

But, and there is the other side of that but….

I do think the system is set up in such a way that ‘have’ provinces seem to be far more interested in their economic development than ‘have not’ provinces like New Brunswick. 

I’ve said this many times but if Ontario or BC had New Brunswick’s economic and population performance over the past 10 years or so, there would be an international crisis.  In New Brunswick, we get a collective shrug of the shoulders.

So the problem with the system as it is currently constructed is that it provides little incentive for New Brunswick to take economic development seriously.

So we do end up with this divergence where places like NB are less and less able to generate tax revenue to pay for public services and needing ever more from transfers.  

Quite frankly, I don’t see how NB will be able to balance its books in the future without even more transfers (I know that we will likely get less as a percentage of the budget but that is a discussion for another day).  

We’ve looked at the numbers here and NB is getting older faster than just about every other province in Canada  (NL is aging faster).

Where does Anne Murray come in?  We need some good news in the media and some clear-eyed thinking about this stuff.

We shouldn’t whipsaw from a strident defence of equalization (a la Bernard Lord) to blaming it as the source of all NB’s problems in just a few short years.

It is likely we will need equalization for my lifetime and probably yours – but that’s not really the point.  We need to have more ambition for New Brunswick and we need to focus on building our population, creating strong communities and, yes, generating far more own-source tax revenue.

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8 Responses to Where’s Anne Murray when you need her?

  1. mikel says:

    ‘Reboot’ is the term de jour. And I’d like to reiterate the data from several years ago where I added up the cost of educating an NBer to working age, and then even tracked the number moving to within Canada (as opposed to overseas, but I guess we can’t expect the same equalization) and found that all things considered, the rest of Canada owes New Brunswick MORE, simply for its educating its workers for them (that doesn’t even count retirees).

    That’s a pretty big ‘favour’, and doesn’t even get into the basic arguments of equalization. There is a hilarious idea in there, it would be funny to see Fort MacMurray talk about seceding from Alberta so it could keep its own money!

    However, to be critical, there is ample evidence that the province takes economic development VERY seriously-but some have different ideas of ED than others. Granting a huge property tax break to Irving-thats a direct subsidy. Likewise to Atlantic Yarn and Atcon. Not investigating the Caissie Populaire. Lord axed small business taxes to the lowest in Canada-how is that not ED? Mr. Campbell has reported the huge number of workers at various agencies doing ED in the province. Maybe their job is to sit in an office and discourage employment, I don’t know, but I doubt it.

    The province axed the highway toll, a HUGE favour to trucking and industry, and at this blog we’ve seen numerous reports about how much the province spends on highways vs any other province and even many other priorities. How often do you spend driving back and forth between Fredericton and Moncton? Every time I’m on an NB highway I notice that its practically empty.

    That sounds to me like taking economic development VERY seriously (oh yes, lets not forget NB’s ‘non renewables’-virtually no regulation enforcement on fracking, mining regulations that let you stake a claim even if its on somebody else’s property, a forestry industry that lets you ship lumber out of province to be processed).

    Those are all ‘developments’, but as Richard is fond of saying, they are designed only to benefit a few select players. But its certainly taking it ‘seriously’. Lord rewrote fifty years of history by letting Irving save on its property tax-you don’t get much more serious than that.

    And to be further critical, there haven’t been a lot of “they should do this” policy recommendations from this quarter. The only big standouts have been support for the Finn Report and support for the sale of NBPower. The former only has spurious relations with economic development (hardly serious), and the latter, well, its true it was pretty serious, and it did sort of have an economic development angle to it, but whether it would have helped or hurt we don’t know (and now won’t). Although for ED and energy, two recent studies out of the US showed that wind and solar power is now getting close to parity with nuclear energy. It would be interesting to see the ACTUAL dollars on Lepreau when its done, and I’d guess that community economic development using community co-ops would be a close competitor to the money sucking Lepreau.

  2. richard says:

    Other provinces have used their electoral clout or economic clout to obtain favorable treatments from Ottawa, whether that be lax regulatory environments, cash support for industry sectors, sole-source purchasing, or trade agreements. We don’t have much clout, although perhaps a single Maritime voice might have a bit more heft. But I don’t see any reason to believe that much attention will be paid to us re equalization or any replacement fed investment.

    Nor do I think we should try to trade equalization for e.g. more fed R&D investment, unless that investment is part of a strategy we develop for economic growth. Otherwise we will see fed R&D pissed away on things that don’t really help us much.

    “In New Brunswick, we get a collective shrug of the shoulders.”

    That is one of the real problems. The anemic growth of several decades has resulted in a very short-term outlook. While that is understandable, we need to have both a medium-term and long term strategy to move ahead. I’d have R&D as a big part of that mix, but that means getting the unis on board and focussed on NB. When we have decided what we need, then we should go after the feds to participate. Otherwise, we will just get a band-aid fed ‘solution’.

    “Lord rewrote fifty years of history..”

    Perhaps history does repeat itself. The McCains received prop tax breaks back in the 50s from Carleton County, with the approval of Hugh John, I believe.

  3. MikeinCalgary says:

    You guys don’t get it. Currie does. Government does not create any value. Nadda, zero. NB needs to go back to square one, and work on the fundamentals. That is what Currie is saying. You will not get out of this giant hole by waiting for the government to offer incentive A or incentive B or rebate C. Who cares. Start by getting your population to read.

    The biggest difference between Alberta (where I live) and NB (where I grew up), is that people here IGNORE the government. Most would not be able to tell you who their MP, MLA or City councillor is, let alone rely on them to solve your problems.

    Stop talking about what the government can do for you, and start working your ass off. This is a how things change. My two cents.

  4. richard says:

    ” people here IGNORE the government”

    Except for spending the oil revenue money, which is the result of a royalty levied by govt. Oil revenue makes for easy money. I guess you don’t remember the days when we paid a premium at the gas pump to keep the oil rigs in AB working.

    ” start working your ass off. ”

    There is no demonstrable relationship between work effort and renumeration. There is a relationship between where you work and your renumeration. You should consider yourself fortunate to be in AB, where the livin’ is easy. My guess is you would be just another Timmies loud mouth had you stayed here.

  5. Glenn says:

    I’ve seen this error made a few times in the last couple of days…it’s remuneration. Forgive me it’s one of my pet peeves!

    Thanks

  6. richard says:

    You are right, Glenn. My apologies.

  7. MikeinCalgary says:

    @richard

    “There is no demonstrable relationship between work effort and renumeration. There is a relationship between where you work and your renumeration. You should consider yourself fortunate to be in AB, where the livin’ is easy. My guess is you would be just another Timmies loud mouth had you stayed here.”

    Are you kidding me???? I don’t know where to start with this. You must work for the government. Or, ultimately, I guess you work for me because I am an Alberta taxpayer.

    You don’t understand Alberta. It is not about the oil sands, it is all about natural gas. Exploration and production of natural gas has been what has been driving the AB economy for years, even at the current low prices. This is done by small companies with people who write cheques by putting their houses on the line and taking big personal risks. If successful, they then sell their little companies to big slow fat corporations and do it over again. This sense of risk and entrepreneurship is absent in NB.

  8. richard says:

    “You must work for the government. ”

    I own my own business. The fact is one’s pay has little to do with how hard one works; it has much more to do with where you are working and what the economic opportunities are in that area. Exceptions to tha tgeneral rule might be govt employees, but for most of us, it is where we work not how hard we work.

    There are many, many owners of small and medium businesses in both NB and AB. They are proportionately more successful in AB than NB, not because they work harder or smarter but because the natural resource – fuelled economy has provided more business opportunities. I know several people who struggled to make a go of things here but made big bucks in AB. Not because they worked harder, but because of the opportunities available due to the increased value of oil and gas world-wide. Did Newfoundlanders suddenly develop a work ethic when oil royalities started flowing in to NFLD? No, they had that all along; now they just had more business opportunities.

    “Exploration and production of natural gas has been what has been driving the AB economy for years,”

    Exactly my point. Its being in the right place at the right time that makes the difference, not the degree of hard work or the level of entrepeneurial skill.

    “This sense of risk and entrepreneurship is absent in NB”

    No, I don’t think so. As you indicate above, what’s lacking in NB is oil and gas royalities at the scale of Alberta’s. That’s because the oil and gas reserves just aren’t here in similar amounts.

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