I have been saying for years now that the slavish adherence to balanced budgets in New Brunswick is a false security. That balancing NB’s books because of the largess of the federal government is not good public policy over the long term (short term it’s fine).
Of all the things people criticize me about that was probably the most pronounced. Specifically I have said that running a short term 3-4 year deficit in New Brunswick in order to invest in economic development would be a good thing. Even most of my economic development colleagues said the same thing.
Now I hear Jim Flaherty saying exactly the same thing – verbatim – about the Canadian economy. He is prepared to run significant short term deficits to support the economic development of the country.
This is the double standard of the decade. Miserable little provinces like New Brunswick – with population stagnation, industrial decline and being propped up by 3x the rate of inflation government spending – which desperately need economic development focus – ignore it to get some faux balancing of the budget but the national government has no problem running deficits in tough times for economic development (i.e stimulus packages, auto bailouts, etc.).
NBT was right (though we disagree about the fix). New Brunswick has been in a kind of recession for decades. Not the traditional GDP-based calculation but if you look at the significantly high rates of unemployment, the annual need for more Equalization to balance the budget, the chronic challenges with some of our industrial and regional development – we have been in a kind of recession. And yet successive NB governments point to balanced budgets and puff their chests out.
Bottom line. If Canada had the exact same economic performance as New Brunswick – it would be a national emergency. The federal government would run billions in deficit to try and fix it. In New Brunswick, we claim it as success.
Now, the feds are turning the screws on equalization and own source revenue in our province will be affected by the North American recession. We will probably start running deficits just to keep our inflated government spending up. But we should have been far smarter during the growth years of the Canadian economy.