My column in the TJ this a.m. comes at it from a different angle. My intent with the column is to systematically make the points that I try to convey on this blog: the underfunding of economic development; the misallocation of scarce resources to prop up bad business models for political reasions; new economic sectors with high growth potential; making the most of the resources you have; effective immigration; etc.

But this morning, it's more about setting the table - as I do here on occasion. Providing the masses with a little taste of the kind of data they rarely see in print or hear in the media - but that are critical to understanding the structural challenges in the economy. An understanding that is the basis on which actual change can be predicated. For example, why do we still have 100,000 collecting EI each year? Sure, between 3k and 5k are maternity leaves and probably a few thousand more are actual EI between jobs - the the rest are seasonal workers. Why do we need to foster seasonal work when we have low unemployment? Total EI income in New Brunswick is up 29% from 2000 to 2005 while total employment income in New Brunswick is up 19%. I thought things were booming? Samuel LeBreton told us last month that things were so hot in the labour market that he was expecting things to cool off. What a crock.

The new government funding program for small biz still provides dough for seasonal tourism jobs. After all we have learned.

I told you before but it is worth reiterating that there is value in work. That statement should be axiomatic but it is not anymore. Even the father of the US welfare state - FDR - was worried that just giving unemployment men money would be a disincentive to work so he made all the unemployed workers (that were able to work) work for their unemployment cheques. Some of the most impressive public works in U.S. history were built by people that were unemployed during the Depression.

In the 50s and 60s in New Brunswick, people working in seasonal industries would just rotate around. Guide in the summer, work in the woods in the fall and plow snow in the winter. Then, with EI, we started making each of those a discrete job and we formalized through government funding a permanent seasonal workforce subsidized in their off months with their neighbours EI premiums.

I think we now have an opportunity to rethink this. To look at someone having a summer job and a winter job.

This is more than just about EI. It's about income and productivity. To have 100,000 workers idled for periods ranging from a couple of months a year to six months a year is deeping draining on productivity and income and breeds a large underground workforce.

It's time to get on with it.

This is from a recent report out of B.C.:

Over the last five years, British Columbia has led the country in growth in the number of small businesses. Between 2001 and 2006, the count of small businesses in the province surged 11.0 per cent, more than triple the national growth average of 3.6 per cent. Alberta (+7.6 per cent), and Manitoba (+4.8 per cent) were the only other provinces to exceed the Canadian average. Declines among other provinces ranged from 1.4 percent in New Brunswick to 11.9 per cent in Saskatchewan.

They cut small business taxes to the bone, the CFIB cheered loudly, the Chamber of Commerce was grinning from ear to ear.....

...and the number of small businesses dropped.

Lovely.

It turns out that the New Brunswick government is prepared to give large scale incentives - just not to good projects. NB Taxpayer (with hand shaking on the mouse) sent this link.

$78.5 million to prop up 365 jobs. That's $215,000 per job.

Or almost exactly the amount that the Alabama government paid to get this:

http://www.edpa.org/pdfs/Automotive%20Industry%20Profile.pdf.

They claim the auto industry in Alabama now features 45,000 direct jobs and 79,000 indirect jobs and a payroll of $4.8 billion.

This is what you get when you attract C grade projects. We should have made the effort to attract A grade projects.

Someone sent me an email yesterday, talking about New Brunswick's GDP per capita has performed well in recent years and that I should stop spinning out distorted economic facts.

So, this morning, I will give you a little lesson in what not to do when looking at economic data.

New Brunswick's GDP growth in the past seven years underperformed the national GDP growth for six of the seven years.

However, because the population has been stagnant or even declining, some tricky political spin hacks, have compared GDP per capita over time (Lord's guys were good at this) to show how great things are.

So, here is my position on the thing. You compare "per capita" at a specific juncture in time to adjust for the size of the economy/population (i.e. GDP per capita adjusts your economy to a per person basis to allow for meaningful comparison). You do not compare "per capita" against yourself over time. If you take two seconds to think this through you will likely agree with me. If the population actually declined, your GDP per capita would look better - but what's the friggin' point? To me this is just a way for political spin guys to actually take bad economic data and spin it out as good economic data.

It's a joke and should be ignored. The facts are that New Brunswick's GDP growth has underperformed the national average for decades - with the exception of the years where there was a very large public sector capital project like highway twinning, the Confederation Bridge, Lepreau refurishment, etc.

The TJ is reporting this morning about the efforts to attract skilled workers back to New Brunswick. The Minister of BNB is leading a delegation of economic development guys/gals and business leaders to Montreal and Toronto to highlight "Up to 500 jobs that pay between $40,000 and $80,000 a year [which] are available in New Brunswick's information technology sector".

I like this initiative. When I was in Ontario two weeks ago there were billboards in several cities telling people about the wonderful jobs available in Saskatchewan.

But I sincerely hope they have actual jobs and not theoretical jobs. Don't forget that former Premier Lord did these road trips and they were met with outright scorn by some and frustration by others. The media reported at the time about several people who went to the session and then went to the jobs web site that the Premier was promoting only to find call centre jobs.

There is nothing wrong with call centre jobs per se, but don't go to Toronto and try to woo IT workers back to call centre jobs - it won't happen. If you really need call centre workers, there are ways to find these folks - although it is harder. You could recruit in places like Winnipeg and Sudbury (I often see advertisments in the T&T for call centre jobs in Nova Scotia and PEI). You could target Indian immigrants, etc.

Happy anniversary, Frank. This is the 20th anniversary of Frank McKenna's coming to power in 1987. A lot has changed since then, some good and some decidedly bad. In celebration of McKenna's anniversary, let's take a little look back at 1987 and compare it to today:

1987 - 9,600 births, 5,300 deaths
2006 - 6,700 births, 6,600 deaths

1987 - Net interprovincial migration -2,016
2006 - Net interprovincial migration - 1,114

1987 - population 710,000
2006 - population 729,000

1987 - population of Westmorland/Albert counties (Greater Moncton) 135,000
2006 - population of Westmorland/Albert counties (Greater Moncton) 160,400

1987 - population of Northumberland county 53,000
2006 - population of Northumberland county 48,800

1987 - population of Gloucester county 87,000
2006 - population of Gloucester county 78,000

1987 - Canada's population 25.3 million
2006 - Canada's population 32 million

1987 - New Brunswick's Equalization payment: $723.5 million
2006 - New Brunswick's Equalization payment: $1.45 billion

1987 - New Brunswick's Equalization per capita: $1,000 per person
2006 - New Brunswick's Equalization per capita: $2,000 per person


I guess that whole "boot straps" thing didn't really work out after all. Then again, neither did the Prosperity Plan. Maybe we'll have better luck with the Self Sufficiency plan.

NB Taxpayer has been particularly cranky lately calling me names, questionning my objectivity and my taste in clothing. However, in the spirit of goodwill and no hard feelings, I have decided to pass on here the contents of an email that I received yesterday (and that he/her might like to get his/her hands on). And, I feel compelled to point out that this is not a joke:

THE CANADIAN SUBSIDY DIRECTORY:

Updated yearly with a listing of more than 3,200 sources of financing and government programs, the Canadian Subsidy Directory is the most complete and up-to-date Canadian business publication available for anyone searching for Canadian grants, loans and government programs.

Canadian Subsidy Directory (All Canada, federal + provincial + foundations)
CD-Rom (Pdf file).............................................$ 69.95 Printed + free cd (430 pages)..........................$ 149.95

Also available for each province on CD-Rom only...........$ 49.95
Alberta British Columbia New Brunswick Newfoundland & Labrador Northwest Territories / Nunavut / Yukon Manitoba Nova Scotia Ontario Prince Edward Island Saskatchewan

==========
ORDER NOW!
==========

Call toll free:

1 ( 8 6 6 ) 3 2 2 - 3 3 7 6

....to my last post.

How many times have you heard (or said) the following style of statement:

You have to have a good education system to foster economic development.

You have to have a good health care system or people won't move to the community and you won't have economic development.

You need to have safe communities to have successful economic development.

Good highways are critical to economic development.

You need a competitive tax regime to foster economic development.

And on and on. Remember our erstwhile gym teacher/Premier said recently that we needed to be in good shape to become self sufficient.

In fact, it really is one of those [insert your pet issue here] kind of scenarios. You need [industrial parks] to have economic development. You need [an arts and cultural focus] to drive economic development. You need [successful small biz] to have economic development.

But how come nobody turns it around? IMO, that's an even more important analysis.

You need successful economic development to [have the funds for health care]. You need successful economic development to [have the funds for education]. You need successful economic development to [properly fund safe communities].

The reality here is that it is essentially an eco-system that feeds on itself. Education supports ED, successful ED leads to better education outcomes.

So, with that as the premise, why have we increased provincial funding in every one of the areas I mention above - except economic development?

Something to think about.




Okay. All of this stuff makes some level of sense.

1,517 blogs spread over there years.

Over 6,000 comments.

300+ graphs and charts.

I started with my first blog on October 28th, 2004. You can read it here to get a sense of what I was trying to do. I think, political context aside, the message is still on the mark.

So, for my little stab at profundity, I will tell you what I think is the most important learning from the past three years.

Ready?

Here it is:

It is far more easy to get money from the Federal government for non-economic development related activities than for economic development related activities.

If you want funds to top up EI, no problem (thanks Stephen!). If you want more health and social dough, no problem. If you want to twin a highway, no problem. If you want more Equalization, no problem.

But if you want money to invest in economic development, problem. Federal spending on direct economic development in New Brunswick is down - and down significantly - in the past 10 years as a percentage of total program spending (and on an absolute basis).

Money to help bring an auto plant here? Fat chance.

Money to support a serious data centre strategy? Fat chance.

Money for more R&D to bring NB up from it status of having the least R&D in Canada? Fat chance.

Federal government jobs moved here to support economic development? Fat chance.

Federal dough to build serious cluster strategies for the province? Fat chance.

Now, even my right wing readers will see the unfairness of cranking up economic development spending in other provinces (for example the recent hundreds of millions for Centres of Excellence, the billion+ dollars for biofuels in the West, etc.) and down in New Brunswick - one of only four provinces with almost no oil & gas revenues.

Why this is uniquely important at this juncture is this issue of Atlantic Gateway. The feds are likely going to throw $500 million in to Atl. Canada under this umbrella over the next five years. The province of New Brunswick has a very tight window of opportunity to figure out what it wants from this initiative. It will likely default to twinning the SJ -St. Stephen highway.

I say it should push for a major inland port and a serious strategy to get the rail infrastructure from Halifax into New England working effectively. I don't even know what that means but if that cargo coming through Halifax could go directly to markets in the U.S. eastern seabord it would be far more relevant to all of the Maritime provinces than the system in place today.

But further than that, I think the province should trick the Feds. The next $70 million Equalization cheque - instead of plowing it into health care, how about a strategy for data centres? Or animation industries? Or financial services back offices?

The T&T is selling dreams of oil & gas exploration powering the NB economy. Once again, Al Hogan loves to hype stuff up with no facts. The McCully field is producing and is profitable (as I understand it). Last year, the field led to the export of $53 million in natural gas. By way of comparison, NS say $870 million, Manitoba $775 million, Sask $5.8 billion, B.C. $4 billion and Albert $55.5 billion (in the words of Kirk Macdonald "that's billion with a b").

So, economic developers and government policy makers need to chill out and stop selling pipe dreams. They should aggressively promote New Brunswick for oil & gas exploration but to expect that anytime in the next 20 years there will more than a couple of hundred million in export sales (of which NB would take a few million in royalties - tops) - is pipe dreaming.

They should have tried to use that gas to power economic development right here in New Brunswick - but it's too late for that.

I'm just going to let you read this. It is taken from the application requirements for the new NB Growth fund:

Eligible salary costs are the initial year gross salaries of full-time (i.e. 35 hrs/week) positions which are newly created by Eligible Businesses and which relate solely to the activities of an Eligible Business.

Note that the portion of any annual salary in excess of $30,000 is ineligible for consideration, and therefore the maximum salary-based assistance level is $15,000 per “year-round” position for start-up projects and $9,000 per “year-round” position for expansion / diversification projects. For eligible seasonal tourism operations, the position must provide at least 90 consecutive days of full-time employment and provide a monthly gross salary of at least $1,600. For such positions, the portion of the monthly salary in excess of $2,500 is ineligible for consideration.

For all other Eligible Businesses, the position must provide at least 365 consecutive days of permanent employment and an annual gross salary of at least $20,000.


Now, I think I understand their logic here but I still had to laugh.

I guess I am feeling sarcastic today but I couldn't help a little laugh when someone sent me the link to the progress on the $300 million resort being built in Louisbourg, Nova Scotia. This is a foreign investor led project very similar to the one that was being planned for Elgin, New Brunswick but pulled off the table due to a) the negative crap published in the media about killing old growth forests and huge environmental damage, b) the Conservation Council actively campaigned against it - petition and all and c) the goverment's tepid support and foot dragging.

If you get a chance, check out the all smiles photo of Peter Mackay, Rodney Macdonald and the developer.

If you read my previous blog, what do you think the chances of either 2) or 3) being the more likely scenario?

Come and listen to a story about a man named Jed
A poor Albert County man, barely kept his family fed,
Then one day he was shootin at some food,
And up through his iPod earphones he heard about Nova Scotia's bubblin crude.

Natural gas that is, liquid gold, Sable tea.

Well the first thing you know ol Jed's still not a millionaire,
Kinfolk said "Jed move away from there"
Said "Nova Scotia is the place you ought to be"
So they loaded up the truck and moved to Shubenacadie.

Halifax, that is. Bermuda banks (from successful attraction efforts), movie stars (from the lucrative tax credits).

Well now its time to say good by to Jed and all his kin (500,000+ since 1976).
And they would like to thank you folks fer kindly droppin in.
You're all invited back a gain to this locality
To have a heapin helpin of their hospitality (and contribute to the $8/hr, seasonal tourist industry)

Hillybilly that is. Set a spell, Take your shoes off.

Y'all come back now, y'hear?.

-Theme to The New Brunswick Hillbillies


EnCana has decided to proceed with the Deep Panuke natural gas project off Nova Scotia has given fresh hope to an offshore industry that has stalled in the province in recent years. This is well over $1 billion worth of work over the next decade for Nova Scotia companies." Just maintaining the production platform will put about $150 million into the local economy every year. Deep Panuke will also generate an estimated $400 million in royalties over the next 10 years.

Now, let's put that into perspective, shall we? $400 million in royalties over ten years and the $150 million in local economy activity would be the equivalent of the economic activity generated from about 10,000 new high paying jobs ($70,000 and up per year).

There are two learnings from this (er, three):

1. I am not very good at playing the role of Weird Al Yancovic"

2. If New Brunswick is going to be successful it will be based on our brain power and not our "'bubblin' crude". And that, my friends, is much harder.

3. Why all the whining? There are always winners and losers in the area of economic development. Why shouldn't New Brunswick be the loser? Think about it. All this new money sloshing around (Ed Stelmach is taking $1.4 billion more from the oil & gas guys in Alberta as well) means more money the Feds can use to buy off Quebec and pay New Brunswick's Equalization payments. The richer Nova Scotia gets, the more Equalization we get! Chink Chink. We just hit paydirt!

Politically, all the government has to do is sit back and put their feet up and wait for the Equalization cheques to come in. Just like Lord did (his Equalization went up by $400 million per year).

Why expect the political capital to make any tough decisions? Why make any bold efforts in the area of economic development that will raise the ire of UNB Calgary ripoff economists?

Once again it seems that Al Hogan and I are at opposite ends of the spectrum. I said the other day that maybe we should rethink how we get funds from Ottawa - it seems much easier to get money for highways than for R&D, for example and that we should push for a different model. Al says:

Thus, it seems, the province will attempt to get its federal funds piecemeal and via assistance for such things as continued twinning of highways, crucial infrastructure for growing economic activity.

So, in Al's mind having more twinned highways is more important than attracting industry or boosting R&D or having a more effective approach to immigration.

As I said before, twinned highways are important. I would like to see a four lane highway from Moncton to Edmundston across the top of NB. But I do see this disturbing trend of New Brunswick being able to get money for the not so critical stuff and going up against a brick wall for money for stuff that I deem to be critical. And not to put too fine a point on it but giving New Brunswick $100 million to twin a highway would be ignored in Ontario. Giving New Brunswick $100 million to support a bid to attract the next KIA plant would be met with outrage in Ontario.

On a lighter note, the CAW is deeply opposed to free trade with South Korea. I am not being cynical here either but it would seem to me that if that next KIA plant came to Canada and if it was unionized - the CAW would be thrilled. But because it won't be, the CAW is deeply opposed. At some point, you would think the CAW would be able to look at this stuff with a slightly wider lense - but maybe that's not their job.

Dithering in politics
Someone asked me yesterday why Premier Graham was so quick to back track on his post-secondary education plan. I don't know. I have never had a conversation with the Premier let alone have an understanding of his thought process. All I can say is that these guys aren't good at dropping trial balloons. They should get better.

For example, Premier Lord wanted to deeply cut agricultural subsidies in his first budget. He announced the cuts, the farmers drove their tractors up to Freddy Beach, there was a major rally and the Premier announced he would 'study' the issue and it quietly dropped out of view.

McKenna wanted to make Snow Birds pay for health insurance when they are in Florida. He thought it was wrong for them to be spending all their money there half the year and still get full Medicare coverage. He announced this, the seniors came to Fredericton and waved their canes and walkers at him and he announced he would 'study' the issue and it quietly dropped out of view.

In fact, it seems like Bernard Lord left his playbook on his desk in the Premier's Office and Shawn Graham picked it up. The basic play is this:

1. Don't do anything until there is a crisis (and by crisis I mean constant media criticism). Until said crisis try and keep things under wraps (think health care, auto insurance, education, forestry, population, ect.)

2. When it becomes unavoidable, then announce you are going to study it (set up a year long commission) - hope it dies down.

3. If it doesn't die down, announce you will restudy it (think the current rethink of the post secondary review). Wait another six months.

4. If you still can't get resolution, announce you are making the much needed changes - but over ten years (like the prosperity plan, education plan, etc.). Then avoid any accountability on it until you get booted out of office (in less than the ten years).

Then everyone forgets about the 10 year plans and the new guy (thinking ahead) will put a 20 year plan in place. Then start over at point #1.

In the 1990s, I had the opportunity to take an executive sales course. We were learning how to sell big ticket items to C level executives. The thought was that selling New Brunswick to a company on a deal that would cost them $25 million or so of investment, was worth an 'executive sales' approach.

Anyway, the facilitator of this session told me at the time I had a "radio quality voice". Judging from the mug shot the TJ has associated with my column today, I seem to also have a "radio quality face". Anyhoo.

The TJ biz editor Stonehouse is quite cheeky. He runs a full story on the state of the call centre sector above my column saying we need to get beyond call centres. This actually makes sense as I am not slamming the CC sector in my piece. I like the CC sector. There are a lot of great firms. I just think we need to get beyond the $9/hour version.

I don't know much about how government decides how to spend its money. I study it probably more than most - but I still don't understand the mechanics of how money is spent.

For example, it seems relatively easy to get money out of the Feds for highway construction (I see that Premier Graham is looking for more federal dough to twin the Saint John-St. Stephen highway) than for R&D. It seems far more easy to get money from the Feds for health care spending than for economic development projects. It seems far more easy to get money from the Feds through Equalization than through economic development programs.

Maybe it is an issue of limited funds and the province deciding where they want to put their lobbying efforts. For example, the TJ is reporting that the Premier is in Ottawa looking for more money for highways and a natural gas pipeline (arguably the latter could be considered economic development, I guess). I, on the other hand, was blown away when the Feds announced hundreds of millions of dollars last week to fund research and development "Centres of Excellence" across Canada - and none in New Brunswick. Why weren't we in there pushing for the R&D?

I am evolving my position on highways. I used to think that having a kick arse, four lane highway system all over New Brunswick was key to our economic future. But I am revising my position. Maybe the highway system will just make it easier to drive through New Brunswick or to move on down the road.

In other words, beyond highways, you need a strategy for economic development.

My new thinking on this is simple. If the Feds will give us a few hundred million more for R&D, I'll trade in my Passat for a horse and buggy.

In other words, when somebody says "Mr. PM, we spend less on R&D in New Brunswick than any other province including Newfoundland", he can respond but we give them piles of dough for highways.

I don't like that trade off.

I guess the Jack Mintz Straight Talk Tax Express didn't make it to British Columbia. What was it Jack said just last week in New Brunswick? Oh, that's right. He said that tax credit programs were what "poor nations, less developed countries try to do, to target things. It really just creates a big fiscal cost where you could do things a lot better."

Well, B.C. is extending its lucrative 'tax breaks' to support the $1.2 billion, 20,000 job film industry in that province.

I guess B.C. would quality as a 'poor nation' or maybe just a 'less developed country' just like Ontario which is the best 'targeter' of them all.

I have a theory that guys like Mintz love to come down to the 'poor nations' like New Brunswick and wax poetic. The shame is that the newspaper editors and policy influencers eat this stuff up like, well like, less developed countries listening to the World Bank or the IMF.

There's a lesson to be learned here somewhere.

Sometimes I can't believe I am the guy arguing against tax cuts in New Brunswick. It seems, on the face of it, to be counter to a pro-economic development mindset.

But after reading Al Hogan's 743rd editorial asking for deep tax cuts, I feel compelled to ask him and everyone else to think a bit. Forget AIMS for a minute. Forget Rotman. Just think.

14.3% of Ireland's total budget comes directly from corporate taxes - 3% of New Brunswick's budget. I know that this is not an apples to apples comparison but think it through.

The average Calgarian taxpayer pays $11,431 in income taxes alone. The average Monctonian taxpayer pays $6,906 in income taxes. The Calgarian pays 65% more income taxes than the Monctonian even though his/her tax rate on average is almost 10 percentage points lower than the Monctonians.

Think this through.

Economic development has got to be about creating the environment for successful companies and successful people.

Now, again think this through. Cutting the personal income tax will not raise the income level of New Brusnwickers by one iota. It will not attract one more high paying job. In fact, if the money is diverted out of economic development infrastructure funding or R&D or health care or education, you might actually conclude it will lead to even less high paying jobs over time.

Rotman, AIMS and the boys don't conclude this because their thinking is based on either ideology only, national economies with no relevance to little old New Brunswick or other models in strong economies (again not relevant to New Brunswick).

Ask anyone on the street. Would you rather have $10,000 more in income every year or pay $1,000 less in taxes. Unless they are crazy, they would respond with the former.

The same thinking has to apply in New Brunswick. We need to be focused on wisely investing taxpayer dollars in ways that will raise the economic potential of this province - not just cut away taxes at the margin and cross our fingers. That's bad policy and an abdication of the trust the public puts in their government.

The time for tax cuts will come. But it is not now.

One last point on this. People are moving to New Brunswick - and particularly Moncton - because it is considerably cheaper to live here than in larger urban centres in this country. I know that some folks argue about this but it is true. Even when we were in the middle of the bitter auto insurance debate a few years ago I noted with some glee that the rates were still well below Ontario. Your house insurance is higher, property taxes are higher, etc. - sure this is tied to home values but it is still a cost out of pocket.

So to say that someone will pay an extra $900/year in personal tax in New Brunswick and ignore the $8,000 in housing cost savings is just silly.

So, I see almost no economic benefit from across the board tax cuts and potentially serious negative implications as we fall deeper and deeper into the Equalization trap. It is very hard for me to ignore the fact that for every dollar cut out of the revenue stream by Premier Lord's tax cuts - we have added three in Equalization (using their own estimates).

I don't see the merit. So Al Hogan would be advised to step out of his bubble for once and take a wider angle look at this stuff.

I read Rodney Weston's op-ed piece in the TJ this morning. He basically was telling Shawn Graham "I told you so" - it easy to lob softballs from the opposition benches but much harder to make decisions once in power.

Maybe it was coincidence or maybe on purpose but the TJ editorial was about Graham's inability to make a decision and the parallels with Bernard Lord's inability to make decisions.

So, Weston glee over Graham's problems is a little misplaced. We had seven years (maybe less 200 days) of dithering and inaction and now we hear from old Weston that this is just the reality of running a government.

I don't think so. We keep hearing that Graham is about to make some bold decisions. In fact, he said that year one was about studying and year two would be about action.

We'll see. But the grumbling begins.