Archive

Archive for March, 2006

A contrarian view on the the provincial budget

March 31st, 2006

If you want my thoughts on the provincial budget, you should check out Moncton CBC Information Morning tomorrow between 7 and 8 am. I think they asked me to comment assuming I would have a contrarian view.

Don’t get me wrong. I don’t mind tax cuts, energy HST rebates, etc. but I strongly believe that the government should be seriously acting to stop our population decline through a sustained economic development program.

It’s actually quite surreal. If Ontario was losing population it would be a national crisis. If Ontario had seen a 40% increase in Equalization payments, it would be a national crisis.

In New Brunswick, this is considered ‘good news’ or at least not worth discussing.

Weird, huh?

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We’ve got a way to go

March 30th, 2006

I was asked to join a panel discussion on Maritime Noon today (CBC) about the role of government when it comes to providing incentives to industry. This has become a topical issue because of the Stora Enso pulp mill in Cape Breton and the company’s demands for support. It also applies to the pulp & paper mill in Miramichi, I suppose.

There were some interesting callers with points of view varying from governments should never give money to industry all the way to full support for subsidizing a plant indefinitely not to lose the jobs.

I think that economic development may be starting to raise the interest of the general public – which is a key objective of this blog – although the readership is limited to the Web-savvy segment of the public.

I think we need to discuss this in the town square. The public needs to know that there are things that can be done to help communities transition from being based on old economy industries to new ones. These are longer term strategies and involve reorienting a community around new ideas, but I think it can be done.

I’ll reiterate the Miramichi model. The community college in the Miramichi is cranking out highly talented video game developers. Many go out of province to work and in fact several have started successful video game development firms. There is very little direct value to Miramichi from this training program. I think the city and the economic development group should try and leverage that advantage to attract game development studios to the Miramichi. Over 10 years, it is reasonable to think that 300-400 gamers could be working and living in the Miramichi. Will it replace the mill? No, but it’s a start.

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Quick budget assessment

March 29th, 2006

Since you won’t get this from any other source (likely), here’s my quick and dirty take on the new provincial budget from an economic development perspective:

$6.4 million for ‘investment and exports’ – which I assume is for investment attraction and export development. That’s 0.1% of the budget. That’s one tenth of one percent of the budget. Remember that the staff costs and other overhead comes out of this number. Lovely.

$8.6 million for ‘strategic assistance’. Given that they gave $7.5 million to Molson – I guess they are planning to do one or two deals next year that require ‘strategic assistance. I get goose bumps just thinking about it.

Now, flash back to 2000-2001 – the Tories first year to bring down a budget. In that budget they allocated $15.8 million for ‘investments and exports’ and $25.3 million for ‘strategic assistance’.

So, to sum up. New Brunswick population is in the first period of decline since the Great Depression. And the government has cut the budget for attracting business and increasing exports by half since they came into office. In addition, they have cut the ‘strategic assistance’ budget by 70%.

Can it get any worse.

Yep.

Alberta actually increased it’s economic development budget by 12%.

Ontario raised its economic development budget from $230 million last year to $351 million this year – a 53% increase.

Quebec just announced it is “earmarking $1.4 billion in additional funding for sustainable economic development. These priority initiatives are part of the government economic development strategy, The Québec Advantage.”

$1.4 billion.

And now for the grand finale. From the 1999-2000 budget to the 2006-2007 budget, total government expenditures in New Brunswick are up 36%. In Ontario, budget expenditures are up 46% but they added almost 1 million people in the same time frame. New Brunswick, has actually witnessed a slight population decline in that time frame.

The New Brunswick Tory government is a wonder. You’ve heard of tax and spend Liberals? In New Brunswick, we have ‘cut taxes and spend more Conservatives’.

Here’s how Bernard Lord’s Tories can actually cut taxes and massively increase spending while facing a declining population:

$397 million more Equalization in 2006-2007 than in 1999-2000
$265 million more in Health and Social funding from the Feds in 2006-2007 than in 1999-2000
$63 million more in ‘conditional grants’ from the Feds in 2006-2007 than in 1999-2000

Yes, you say, but we must have raised some additional taxes from New Brunswickers?

You are correct, sir.

$249 million in personal taxes
$21 million more in corporate taxes
$85 million more in property taxes (this grinds me the most)
$63 million more in gasoline taxes (as I have said, they cut personal taxes by a piddly amount and made more than enough back from gas tax increases)

So to sum up,

Over $630 million more from the Feds ($400 million of it straight Equalization) on a declining population base.

48% more new Equalization than new corporate and personal taxes combined.

Keep that in mind as you read Al Hogan gushing over the wonderful budget tomorrow.

It is, in my opinion, a travesty beyond words that they can dole out tax breaks and slash economic development funding in the context that we find ourselves in circa 2006.

It is egregious.

I might have to get out the dictionary to throw in more superlatives.

Rome is burning and the Lord’s Tories just want to make it to another election.

Aw shucks.

Tomorrow I’ll be more upbeat, promise.

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On rural call centres and thick skin in politics

March 28th, 2006

Another rural call centre
Representatives from Virtual-Agent Services were in Hillsborough yesterday to announce the company’s thirteenth customer contact centre in the province.The centre has been up and running for a little more than a month and currently employs 33 people. The company is aiming to have between 40 and 50 employees within a year.

I have a couple of points on this:

1. That’s great. 40 jobs in rural Albert County should be welcome news. I worked on the VAS file back in the 1990s and it was a novel idea then that has blossomed into 13 call centres around New Brunswick.

2. The PCs were highly critical of McKenna for just attracting ‘call centres’ back in the 1990s. Lord himself said he would initiate a ‘made in New Brunswick’ alternative. Well, since they came into power, over 80% of their new investment projects have been call centres. So much for the ‘made in New Brunswick’ solution, eh? And the other sectors that were beginning to percolate circa 1997-99? e-Learning, animation/games development, etc.? Gone like the wind….

Tanker the Speaker
That’s one of the things I like about Miramichiers, you can always count on them to have thick skin. Premier Lord tears a strip off Tanker Malley questionning his integrity and ultimately insinuating that he is a liar and Malley continues to call the Premier ‘his friend’. Then we read today that the Premier has reconsidered and will be making Malley Speaker of the House after all. It seems that the Premier isn’t so eager for a 2006 election after all.

NB Power announcement
They criticized former PM Martin for trying to be all things to all people. Now that the provincial Liberals have signalled their intention to move the ball firmly to the left, the PCs have gotten in on the action – at least that’s how the energy plan released yesterday reads to me. Don’t get me wrong, I think that cutting the HST on power bills is a neat little political trick – it should save me several hundred bucks a year (thanks!) – but I am firmly against both the PCs and the Libs and their attempts to make New Brunswick a more regulated place.

Al Hoganisms
If you were to do a search on the Times & Transcript using the terms ‘Premier Lord’ and ‘visionary’ in the past six years you would get probably hundreds of articles (including today). What exactly is the definition of ‘visionary’? Isn’t it someone who has a good grasp of the future? Maybe Al and I have different dictionaries. A ‘visionary’ politicial in New Brunswick is one who sees the imminent demographic and economic crisis and takes bold steps to deal with it. Not someone who reacts at the last possible moment on every potential file from auto insurance, to energy rates, to democratic reform (where is that one again). We had the Prosperity Plan to guide us 10 years. That fizzled – none of the targets are even close to being hit. So we now have the ‘Five in Five’ plan – again great concepts with no real plans and no real budgets to make it happen. So it would seem for Al Hogan, Visionary means pulling the wool over everyone else’s eyes and then saying ‘trust me!’ I can see.

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Malcolm Bricklin update

March 27th, 2006

I have been keeping a lazy eye on Malcolm Bricklin over the past few years – and have brought readers up to speed on his activities over the past two years on the pages of this blog.

I still, in the back of my mind, think that he could have a role to play in our future economic development.

Well, here’s an update from a recent analyst in this area:

In February, Bricklin landed $225 million in financing to invest with Chery for product development. Using this capital, Chery will develop the first line of vehicles for Visionary to sell in the USA. This $225 million buys Visionary 40% of the platform which will include a sedan, a sport coupe and a sport utility vehicle. Bricklin describes these vehicles as Audis for the price of Hondas. He wants high style, high quality, reliable cars that can compete head-to-head with the best the Japanese have to offer.
If this investment ignites aggressive product development NOW, it is still questionable whether or not Bricklin can launch in the USA as early as 2007 with these uniquely developed cars. He might be able to launch before the end of 2007 if he accepts other cars under development by Chery (as he has alluded to in several interviews), but not with the Chery Audi competitors.

Just remember that if Chery (China-based) wants to seriously attack the North American market it will need North American manufacturing (KIA is setting up now). So, look out 5-7 years, Chery may need a facility.

As I have said before, time for Bernard Lord to get out Hatfield’s Rolodex.

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Looking for a little Savoie-faire?

March 27th, 2006

Donald Savoie’s new book is being written about alot considering I can’t get it at the local Chapters. However, I ordered it online and should have it in a week or so.

Here’s the TJ’s take on it:

Maritime ‘glory days’ within reach, says professor
NB Telegraph-Journal
March 25, 2006
Donald Savoie says economy could make great gains if Harper Tories embrace radical changes
By Rob Linke
Telegraph-Journal


Transfer thousands of civil servants, including senior policy-makers, out of Ottawa-Hull to the Maritimes – and pay them less than they’d earn in Ottawa.

Fold the economic development agencies of New Brunswick, Nova Scotia and Prince Edward Island into one.

Tighten eligibility for employment insurance even if it means “closing some villages” as people leave unsustainable rural areas.

While Liberal governments have been more supportive of transfer payments over the years, Mr. Savoie’s book says transfers aren’t the answer to the region’s lagging economic performance. Rather, they amount to “guilt money sent to us while they get on with what they think is the real policy of supporting wealth creation in Ontario and Quebec.

“When you create 42 Crown corporations, and every single one of them is totally earmarked for Ontario and Quebec, well, I’d give up on transfer payments if we could get national policies to create wealth in Atlantic Canada as easily as it does in Ontario and Quebec.

“There are more federal civil servants in Ottawa-Hull than residents in either Moncton or Saint John, and their numbers are growing in the capital while declining in the regions.

Mr. Savoie also argues that market forces hold more promise for the region than either transfer payments or an activist federal government. He sees great opportunity in reduced trade barriers and in forging greater links with New England.

He approvingly quotes the like-minded Frank McKenna, who said, “If you piddle around with taxes one or two points, just keep your money because it won’t make a difference. If you are going to be a bear on this, be a grizzly. You have to go after the people around the world who will pay attention to this kind of incentive.”

I’ll have more to say about Donald’s book after I read it. I am uncomfortable relying on a TJ jounalist to make up my mind. But I will say that I have said, and will continue to say, that he and McKenna are 100% right about cutting taxes. These little piddly (great word) tax cuts that the Lord government put in place did nothing but reduce the government’s revenue by a few million dollars. It made for great PR but I see ziltch in the data to suggest there were any new investments or job creation as a result.

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Who lobby’s for focus on FDI?

March 27th, 2006

Wouldn’t it be neat if guys like me advocating more foreign direct investment had a lobby group with the power of the CFIB behind us?

Those guys are well financed, well staffed and well researched. If we had anything like this lobbying for more investment into Atlantic Canada, I am sure we would get some results.

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The more things change, the more they stay the same

March 26th, 2006

Alec Bruce’s piece in the Times & Transcript that was refreshingly indignant about those who would say that Alberta’s economic boom is benefiting Atlantic Canada because our highly skilled tradespersons are going out there and ‘sending back their cheques’ to be spent in Atlantic Canada.

Well, a quick history lesson will reveal that perils in that approach to local economic development.

Here’s a piece in the Salem News from a couple of weeks ago:

Job opportunities fueled early immigrant wave on the North Shore

Gloucester [North of Boston, Mass.] in general boasts an ethnically diverse population. In the 19th century, the town’s world-renowned fishing industry came to rely on Irish and Nova Scotian mariners to man its ever-growing fleet of Grand Bank schooners. Initially many of the newcomers lived in Gloucester only between voyages during the fishing season. But by 1890, nearly 40 percent of Gloucester’s permanent residents were from Canada and its maritime provinces.

That’s over a hunded years ago folks. Substitute ‘Alberta’ for ‘Gloucester’ and you are in circa 2006. Eventually, people will get tired of the commute, give up and bring their families out to Alberta to stay – just as they did 115 years ago.

So I agree with Mr. Bruce on this one folks. Sending paycheques from Alberta to Atlantic Canada is a poor substitute for real economic development here and the ultimate results will be inevitable.

Gloucester is one example out of probably hundreds.

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Fodder for the blogger

March 26th, 2006

Quite possibly the worst thing to do to a blogger is lock him up in a car for 15 hours. You see, he (me) will seek out all possible news programming and then end up with a mind full of hundreds of potential blog items. And to make things worse, when he (me) gets home and browses through the papers and magazines, again copious amounts of potential blog content.

However, being a busy guy and not wanting to bore readers with a seven volume version, you get the Cliff Notes version of a few of the things that caught my eye in recent days.

Iraq Hostages “released” uh, “rescued”.
You have got to hand it to the CBC. I was in the car when that story first broke and every reference was to the ‘release’ of the hostages – this despite the fact they were were talking about military forces and the ‘brave’ men and women, etc. But within an hour or so of the so-called ‘release’ of the hostages, CBC journalists were sliding in the word ‘rescue’ and by the end of my 7.5 hours in the car (one way to Quebec City) there was no mention of ‘release’ and the word ‘rescue’ was pervasive.

Why? Is it because the Christian Peacekeepers originially called it a ‘release’ of the hostages? That doesn’t make any sense but it’s neat.

Harper – the $6 million man.
It is not hard to please Monctonians these days – or at least Al Hogan. To read his story on the potential federal funding for a new stadium – it’s contingent on winning a games bid – you would think that all of New Brunswick’s problems were solved. Ditto for the 10 year, $400 million highway announcement. That’s $40 million a year, folks. There was a time when governments announced $1 billion highway deals for one stretch of highway. Now we have 10 years worth of funding announced by two minority governments that may not last 12 months. You gotta love politics, folks.

Pot, kettle, black and such.
But the real fun was the “We Say” in Saturday’s Times & Transcript where Al Hogan gave the insurance industry a major tongue lashing for its anticompetitive behaviour. Shame on them, says Al. Shawn Graham’s best platform component, says he. Buddy Bernard better reconsider, threatens he, or get a gentle spanking on the pages of the We Say.

I can’t be the only person in New Brunswick to recognize the searing irony of Al Hogan on this one. Here is he, a principal cog in the wheel of the most anti-competitive industry in probably all of North America – that being the English print media in New Brunswick – lecturing another industry about anti-competitive behaviours. I realize there are fundamental differences between these industries but I still have to laugh out loud when I read this stuff. But I gain some comfort when I dialog with others in small town America. It seems that it is quite common to have such buffoonery in small town, single newspaper towns. It still remains sad, however; as this paper could be such a force for positive change in our little province….

The Calgary boom.
It is commonplace for MacLean’s magazine to hype up the Alberta boom – why not – it’s a good story. And, as usual, the readers outside Alberta are told not to envy Alberta – Alberta’s success is Canada’s success, etc. Then they fill the pages will stories of avarice, and even more concerning – the fact that Alberta is skyrocketing ahead of the rest of Canada for its public education and other public institutions – because of all the new money, no less.

The Ontario utlimatum on the fiscal imbalance.
But the most interesting media item of all, for me, was the interview on CBC’s The House on Saturday with Ontario’s Minister of Intergovernmental Affairs. She had all the numbers on the imbalance. $23 billion more in than out. Billions more EI in than out. Education. Health care. On and on. Then the finale. She states: “We will not sit idly by and let Ontario become a have not province!” This caught the interviewer a little off guard. He asked a lame final question and terminated the interview. But I was left thinking what does that mean? It has become clear to me that virtually all Ontario politicians and the majority of thinkers (academics, pundits, etc.) have trained their sights clearly on this imbalance thing – blaming it, in large part, for Ontario’s economic woes. I knew this would happen. It was inevitable. When the Harris government first started saying that it couldn’t properly fund education because of all the money it was giving to the poor provinces (or something to that effect), I knew it would be only a matter of time.

To be sure, they won’t cut Atlantic Canada off – at least not short term. But a fundamental ideological shift is working its way into the machinery of government and no matter of howls from Bernard Lord about our ‘Constitutional’ right to more money will amount to much in this new reality.

Regardless of who is in power in Ottawa, you can expect a slow but deliberate shift out of propping up poorer provinces. It will take 10 years, maybe more (or a big recession) for it to become obvious to all but it will come.

The best way to buffer New Brunswick from such a mindshift in federal politics would be to start now (or in say 1987) an aggressive economic development program which over time will lead to less reliance on tax dollars collected in Ontario. As I have said many times before this would even be in the best interests of Ontario. If all four Atlantic provinces became ‘have’ provinces and the aboriginal communities in Canada become mostly self-sufficient, Ontario would be able to keep virtually all of its $23 billion.

So how about a new deal. Money and support to revitalize Atlantic Canada and a firm commitment to reduce, over time folks (20-30 years), our tax grab of Ontarioians’ pocket books.

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NB Libs release faulty auto insurance premium survey results

March 24th, 2006

I don’t understand the provincial Liberal’s positioning on the auto insurance issue. I realize they are trying to differentiate their policies from the PCs and they see this as an opportunity but from a rationale perspective I can’t figure this out. A decade ago, Premier Frank McKenna was in Toronto trying to convince financial services firms to locate in New Brunswick – many of them did – there are close to 2,000 people working for RBC, CIBC, etc. that would not be here if it were not for the efforts of the former Premier. Ironically, perhaps, several of these firms handle insurance business in the province. Now, provincial Liberal leader Shawn Graham is in Toronto (figuratively) telling the industry that he would socialize auto insurance. What’s next? Home insurance? How about life insurance? Heck, why not socialize the entire financial services industry while you are at it. I, personally have more problems with the lack of investment capital here than auto insurance premiums.

Here’s a clip from the T&T article today:

A Liberal-sponsored poll released Wednesday suggested the average annual automobile insurance premium in the province is more than $1,800. However, the polling company miscalculated the findings and the Liberals were forced to resend their release late yesterday, saying the average premium was actually $1,128.

Now, the first rule of these types of surveys is that the numbers have to fall in the bounds of reality or they should be questioned. $1,800 wasn’t the average rate at the height of the auto insurance crisis. The Liberals should have realized that these numbers were bogus long before they released them.

If I was advising the Libs, I would say they should position themselves as the party of economic development. It’s obvious that the Tories are not. I guess that leaves the NDP to be the champion of economic growth.

Look it. I am not defending the auto insurance sector. In response to rapidly escalating claims – particularly soft tissue – they panicked and raised their rates all at once freaking out a bewildered public. But I think that the reforms seem to be working and the Liberal should move on.

Unless they can get accurate data that backs up their position – which they haven’t yet.

Let me give you a friggin’ case study. My auto insurance rate today on my minivan (yes, three kids, no less) is about $100 bucks more than it was five years ago. My property taxes went up almost $400 in one year (that whole reassessment thing). My power bill will go up 13% – or hundreds of dollars – because of NB Power problems.

So, for me, auto insurance is a backburner issue. It will lead to acrimony between the NB government and the business community and I figure we don’t need that. How about fixing the bloody house assessment process so that citizen’s like me don’t get gouged? How about focusing on NB Power?

Remember that huge white elephant – the Tory promise to remove the tolls on the Fred/Mon highway? Remember that deal that has cost NB taxpayers tens of millions since 1999 and will utimately cost us hundreds of millions? Well, the Tories would have won without that silly promise. Now Nova Scotia is raking in millions on their toll highway. PEI the same. NB nada.

Auto insurance just may turn out to be the provincial Liberal’s white elephant. An election platform that garners limited votes but costs the province deeply in other ways.

Focus on what matters. If we can turn around the serious economic challenges facing most of New Brunswick – nobody will care about auto insurance – especially if rates are in line with national trends.

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