It's The Economy, Stupid

My favourite NB economist (turned court reporter?), Kurt Peacock, mentioned my blog “It’s the economy, stupid” in his TJ column yesterday.  I presented to a group in Halifax yesterday where the person who introduced me made some nice comments about the blog and its reach in Atlantic Canada – although he deduced from the blog that I would be a supporter of Mitt Romney – an observation that, upon reflection, is probably true.  I really like Obama – but probably lean towards Mass. Governor version of Mitt Romney.  But I digress.

When I google the term “It’s the economy, stupid”, I get the Wikipedia entry and then my blog.

So, does James Carville own the phrase because he said it way back when or do I own it because I have used it every day since October 2004?  If there was a big copyright battle over this, would I win?

I am not sure I have actually convinced many New Brunswickers that it is, indeed, the economy, stupid.  In fact, I probably should rework the term “It’s about a lot of things, but not the economy, stupid”.    I had hoped to move the needle on raising public awareness about the importance of the economic and economic development but after eight years of plugging away – there seems to be less interest than ever.  How many times has it come up during this municipal election cycle?  I mean beyond the boilerplate rhetoric.  How many municipal politicians will get elected because people think they have the strongest economic development platform?

Think back to recent provincial elections.  In the U.S. researchers now say there are only two measures that best predict the ability of a President to get re-elected: GDP growth and the unemployment rate.

In New Brunswick, re-election is based on not touching sacred cows or really annoying one of the special interest groups.

I’ll soldier on.  It puts food on the table and is certainly an interesting way to earn a living.

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One of my favourite Stats Can surveys is the household spending survey because you get the minutiae of how the average household spends its money and the results can be kind of interesting.

Only one province spends less of its avg. household income on shelter (mortgage, maintenance, utilities, etc.) than New Brunswick.   This province spends 23.7% of its avg. household expenditures on shelter compared to 30.4% in Ontario.  This is one reason why a lot of folks that earn a good income here resist moving to Ontario unless they get a $20k or $30k raise.

Just a few highlights.  New Brunswick households spend much less of their income (per $1,000 worth of spending) on income taxes than Alberta and Ontario – because those provinces have much higher income levels and therefore pay higher relative taxes.  In other words, if there was rate parity, paying more would be a direct sign of higher income levels.    The Nova Scotia and Manitoba higher taxes paid have to do with higher rates (and a little higher income).    But there is clustering between NS and NB on the chart – only a $14.50 spread between six provinces on this measure (taxes per $1,000 of expenditures).  BC is the outlier – it has higher incomes and lower avg. household taxes.  Again, don’t forget that this is relative.  On absolute terms, the average household in Alberta pays over $16,000 in income taxes compared to $10,076 in New Brunswick.

For those of you who chuckle when politicians wave credit cards and talk about not paying for health care – they should look at this survey.  The average household pays thousands per year through taxes for health care and then pays another $2,200 per year directly out of pocket for health care.  Adjusted for income level, New Brunswick households pay the third highest in Canada out of pocket – I suspect drugs are a culprit.

And for those who would suggest NBers pay less for utilities – nope – at least as a percentage of our household expenditures.   The average NB household allocates 80% more of its income to water, fuel and electricity compared to the average BC household.

Avg. Household Income Spent on Income Taxes (per $1,000 total expenditures)

Avg. Household Income Spent on Health Care (per $1,000 total expenditures)

Avg. Household Income Spent on Water, fuel and electricity for principal accommodation (per $1,000 total expenditures)

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I just read the CBC article about New Brunswick’s docs coming out calling for a moratorium on shale gas development.   They are definitely at the vanguard on this.  When BC just announced its new energy strategy which has hydraulic fracturing as its centre piece – not a peep from the BC docs.

For those of us who wonder why this approach to drilling is going ahead just about everywhere in the world where there has been interest – the UK just announced it would allow the process in Britain.   New York is forging ahead despite enormous – unprecedented outrage.

As is the case with most NBers (including the docs), I don’t know enough about the science to say one way or the other but I continue to find it curious that of the dozens of locations where shale gas is being developed – NB is among the top two or three where resistance is the greatest.   I guess the opponents have done a great job – the BC natural gas strategy was hardly mentioned here – I didn’t see much coverage at all.

I have said it before and I will say it again.  If the masses do not want shale gas, it will be shut down.  We live in a democracy.  The Liberals are continuing to call for a moratorium as are the NDP.  It is political red meat.

No one has made even the slightest attempt to explain to me why this is okay just about everywhere but here.  The one place that really needs the economic activity.  You think BC needs another multibillion dollar economic injection?

I guess we know something the rest don’t.

I will say that doctors – of all public servants – should have an appreciation of the important link between the economy and our ability to pay for public services.

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More statistics on absenteeism for your review.

Provincial Comparison: Total, days lost (excluding maternity leave) – 2011
Both sexes/Total, all industries/15 years and over

Gender Split: Total, days lost (excluding maternity leave) – 2011
15 years and over

By Industry: Total, days lost (excluding maternity leave) – 2011
Both sexes
15 years and over

By Occupation: Total, days lost (excluding maternity leave)
Both sexes
15 years and over

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In a forthcoming column, I am talking about the new Statistics Canada data on charitable giving across the country – using taxfiler data.  I won’t replicate that content here but I will point out a few interesting findings in the data.  It is important to realize this is one of those data sets that is open to a wide variety of analysis and interpretation.  For example, I didn’t even touch the data on male versus female charitable giving because so many couple families optimize charitable giving based on income levels.  If the male earns more money, he will claim the charitable giving on his taxes.

So, assuming all of this data can be sliced and diced a variety of ways, here are some interesting points:

Alberta’s economic growth and new wealth has translated into substantial increased charitable giving.  Manitoba is a bit of an outlier as its was not proportional to its increase in charitable giving (in the aggregate).  NB had the lowest increase in overall charitable giving from 1997 to 2010.

Calgary with 1.2M people gives more to charity than Montreal 3.8M people.

The percentage of people claiming any kind of charitable donation has been dropping – slowly – across Canada.

Sources: Statistics Canada. Tables 203-0018 and 111-0001 to 111-0003.

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Brian Gallant, the dewy-eyed dragon slayer running to lead the provincial Libs, wrote an op/ed recently where he elegantly called for ‘real’ consultation of the people and for government that goes beyond four year cycles.

I wonder if Bernard Lord’s 10 year Prosperity Plan was long enough?  How about Shawn Graham’s 20 year Self-Sufficiency Plan?

There are two problems with the idea of long term government plans.  One, when they are launched with great fanfare, there is never any real effort to achieve them.  Let’s be honest, the prosperity plan became a slogan used in government press releases.  Everyone would include the line “as part of our Prosperity Plan”, but beyond that there was little effort to measure progress and very little actually done within the machinery of government.   Not to reopen old wounds, but as I have said before, the problem with the PP was that it didn’t say how the government was planning to implement it other than vague generalities.

The Self-Sufficiency on its face was a grand vision – 100,000 increase in the population, elimination of the need for Equalization, a salmon in every pot.  Beyond the fact it people immediately criticized its ambition, it also didn’t lead to a fundamental change in the way government was done – to line up with this grand vision.  I asked several Deputy Ministers about how the Self-Sufficiency plan guided their departments – the answer was “It didn’t”.    Note to politicians: If you want your grand plan to be realized,  you should bring along the people tasked with implementing it.

As for the long term view, why not set a bipartisan set of principles up front that are mostly agreed upon by your opponents?  Then, when they take the reins of power – nowadays every four years? – they won’t change direction.  Otherwise, as we saw with Lord, Graham and Alward, when in Opposition they campaign to repudiate the long term vision.    There must be a set of guiding principles that could be agreed upon that wouldn’t fundamentally change every four years.  I understand that bipartisan (multipartisan?) politics has no tradition in a place like New Brunswick but now might be a good time to start.  If the NDP were to gain traction, it could be forced upon us via minority governments.

Finally, on this issue of ‘consultation’s, I hope Gallant et. al. understand what this really should mean.  If not, read, Savoie’s work on effective political governance.  Consultation is all the rage but do we really want the general public to tell government what to do?    First, there would rarely be a consensus about what to do and when there is (i.e. everyone likes lower taxes) it doesn’t necessarily jive with reality.

Second, as a member of the aforementioned general public, do I want my ideas about health care or nursing homes or workers’ compensation programmes to guide the government?  Given that I know very little about them – beyond my personal observations – the answer is no.   Elected officials listen to their constituents and then set broad strategic direction for government.  Then they rely on professional, talented civil service to implement that strategic direction.  When the elected layer of government – gets too embedded in the machinery of the public service it is bound to be problematic.  That is why we are supposed to hire highly talented leaders for government departments and agencies.  The Premier and his elected colleagues set direction and then rely on their professional bureaucracy to implement.

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As part of the Greater Moncton Chorale, I sang with Kim Stockwood at the ECMAs on Sunday night.   We sang Ode to Newfoundland.  Another singer sang about having to leave her native Nova Scotia and the pangs of regret and lonliness.

I have been thinking quite a bit in the last few years about culture, connectedness and how it impacts our economic development.  Some people look at their community or province and see something of unique value that we should work to protect and nurture.  Others shrug and say they were born here but could take it or leave it.

Or as someone once said “There are two types of New Brunswickers.  Those who like it here and those who can’t wait to get out of it”.

Does having a strong affinity to a place make you want to fight to protect its economy?  Not necessarily.  There are those who have had to leave NL or Cape Breton and never really leave – they remain Cape Bretoners in their heart for ever – but that feeling hasn’t translated into a stronger Cape Breton.

Like most people, I know a few folks living in Fort McMurray and one old friend is involved in politics out there.  His Twitter feed is filled with comments and links about building a stronger sense of community and local culture.  They have the strong economy but many folks still feel like they are just passin’ through – even after living there for years.  The objective of local politicians is to build infrastructure and make investments to create something of value beyond the economy – community.

We may have the reverse problem here.

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I have pointed out before that the federal government was a significant source of employment growth in New Brunswick over the past decade.  They cut hard in the 1990s and then added back almost 2,000 high paying jobs from 2000 to 2011 – a growth rate of 25%.  Now they are cutting and cutting hard.  We know about the ACOA cuts and the cuts in Shediac.   Now DFAIT is gone. They are closing the NB, PEI, NF offices and consolidating in Halifax with no additional staff.  The Immigration office in Moncton is being consolidated in Fredericton even though the region will need thousands of immigrants over the next 20 years.

DFO cuts haven’t been announced yet but they are coming and will hit hard as well.

The National Research Council (NRC) is expected to cut back its New Brunswick operations. The Canadian Institutes of Health Research (CIHR) is cutting its Regional Partnership Program, which is the main federal source of funding for health research in New Brunswick.

What bugs the people I talk to about this is the seemingly indiscriminate nature of the cuts.  If the feds didn’t need the hundreds of employees in NB they are now cutting, why did they put them there in the first place?

I guess it is somewhat inevitable that all these things hit at once –  fed transfers flatlined, hundreds of jobs removed, provincial austerity – at a time when the private sector economy is weak.

Federal government public administration employment across Canada

Source: Statistics Canada. Table 281-0024 – Employment (SEPH), unadjusted for seasonal variation, by type of employee for selected industries classified using the North American Industry Classification System (NAICS), annual (persons).

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The following chart shows economic growth in Canada on a per capita basis during the ‘boom’ years of 1999 to 2008.  I put this chart together to illustrate an important point.  The government sector grew strongly during that decade but there are wide variances from province to province in the relationship between private and public sector GDP growth.  Predictably, AB, SK and NL grew public spending significantly faster than the national average over the period but that was in large part a response to the booming private sector economy.  New Brunswick, by contrast, grew its public sector spending in spite weak private sector GDP growth over the period.

GDP Per Capita Growth 1999-2008

Source: Based on Statistics Canada CANSIM Table 381-0015 Provincial gross domestic product (GDP) at basic prices in current dollars.

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