It’s nice to see that the Federal Department of Finance agrees with me. I said during the provincial government’s discussion on taxation that reducing consumption taxes would be a benefit to foreign manufacturers because it stimulates more consumption. Here’s a quote from the Globe today:
“..domestic spending triggered by handouts could benefit foreign manufacturers, it noted. “We import 27 per cent of goods we consume. This rises to 50 per cent for durable goods,” Finance says.”
Of course, their context is the stimulative budget while mine is that I think it is a good idea provincial government idea of raising the HST to 15% and simultaneously cutting income taxes or putting in place tax incentives for specific company expansion activity – but the logic is the same.
However, you will recall that the NB Tories and several editorials were highly critical of raising the HST – so I don’t think it wil happen.
As with most people, my thoughts tend to coalesce around certain themes. I look for a common thread or the connective tissue. It seems to me that governments have agreed that during a time of recession, they need to spend more money - not less. Even many right of centre economist are calling for short term deficits to prop up the economy during these down times.
My issue is then why don’t we use that thinking to our advantage and make serious investments in economic development? We could (and probably will) just plow a few hundred million more into highways, bridges, schools, etc. but wouldn’t it be interesting if we sat down and discussed what types of investments would lead to longer term economic advantage? For example, how about investing in research and development in key growth sectors? As pointed out elsewhere on this blog, New Brunswick as a government spends among the least in Canada per capita on R&D. A little bit of operational funding for RPC and a few bucks through the Innovation Foundation but comparatively very low. There are a host of other areas as discussed here in the past.
I am not against funding transportation infrastructure. It is a needed, ongoing public expenditure. But I do think we get swept up in national trends and would be wise to step back a bit. If you are in Ontario which has added 3 million in population over the past 15 years, you could argue it is bursting at the seams and needs new infrastructure. New Brunswick’s population has remained essentially the same in that time period. We also spent more on highway infrastructure during that time than any other period in our history. At best, we might need some maintenance dollars but we don’t need to go around spending like we have been growing strongly – when we haven’t.
We are better off focusing on the growth and worry about funding the consequences of that growth after the fact.