Voodoo job creation schemes: NDP edition

I have said before that I am a fan of Dominic Cardy.  He is a sharp guy.  Cut his teeth outside NB (always a good thing) and speaks with authority about his ideas.

But I worry he falls into the same old trap when it comes to government job creation efforts.

In the NDP plan, Cardy would scrap the Department of Economic Development and “introduce a New Jobs Tax Credit which economists predict will create 15,000 and 20,000 jobs in our first term”.  This pledge will cost $29.3 million per year for four years.

I’m not sure what economists predicted that but it seems a little fishy.  If $29.3 million/year gets you 20,000 jobs why not double it to $58 million and get 40,000 jobs?  No government in history has ever witnessed 40k new jobs in one term.  It would be a miracle.  All for less than what is currently spent by the Department of Economic Development.

The problem is that the Department of Economic Development already spends more than $29.3 million per year mostly as grants to small and medium sized businesses to convince them to create jobs.

What will be different under the NDP?

My fear is that a lot of government funding to companies is mostly just substituting for private market funding.  Some may not but many firms will say government money is to be had for much better terms than the private market so why not take it?

The other point is that if a job creation scheme such as proposed by the NDP is available to all firms, it could just end up distorting the playing field for local market economic activity.  If you give Firm X a grant and you do not give Firm Y a grant and they both are primarily generating business only in New Brunswick, you are just giving Firm X a leg up on Firm Y as they compete for local business.

This is why the vast majority of government funding programs are for exporters – with the notable exception of the CBDCs – to avoid using government money to give some firms preferential advantages over others in the local market.

Now the Cardy job grant plan may only be targeted to exporters.  I’m not sure.

Or they may think that giving NB firms job grants will help them compete against the big, evil multinationals but if it is not tied to growing the size of the economic pie, it is still just chopping up the local market in a different way and it is hard to see how it will lead to much net new economic growth.

In the end, we need to hear how each of the parties plans to grow the GDP.  The real NB GDP is about $30 billion today and to get to a solid growth rate of about 3% per year the GDP has to grow by about $900 million per year.  What’s the strategy to stimulate private sector investment, stimulate incremental consumer spending or federal transfers to reach $900 million?

Waiting for the pols to tell us.

 

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