The elusive third way – complex math

Simple math for economists is a little harder to grasp for us mere mortals.  The TJ has a good story today on the need to bring the NB government a strong measure of fiscal discipline.  I don’t disagree one bit with the premise of the story.  We will have to reign in public spending which has been running at an average of six per cent per year growth for almost a decade.  But there is one quote which I think is emblematic of New Brunswick’s reality:

Craig Brett, the Canada Research chair in Canadian public policy at Mount Allison University, said politicians and New Brunswickers will have to confront these serious challenges before the election this fall. “The government keeps saying that people in New Brunswick don’t want to have service cuts,” he said. “That leaves you with two options. You either keep running deficits or bring taxes back up. It’s only simple math.”

Dr. Brett, conveniently, leaves out the third option just – I presume – to keep his simple math simple.  Newfoundland didn’t generate huge supluses and pay down its Equalization deficit by either running deficits or bringing taxes up.  Alberta didn’t run up billions in surpluses by bringing up taxes or running deficits.  Saskatchewan didn’t cut services, raise taxes or run deficits while running up among the fastest growth in public spending in the country.

I raise this because it’s too easy in New Brunswick to ignore economic development.  Dr. Brett could have easily stated that New Brunswick’s private economy has struggled to generate the tax base the province needs to provide public services and that a focus on generating new economic activity would be a third option to the simple math.

But in New Brunswick it is simpler to ignore the economic dynamic.  I know some of you will say I am being petty – that the economic option is a given/implied here.

But I don’t think so. 

New Brunswick does need to reign in its spending and probably does need to find ways to be smarter in service delivery but the long term viability of New Brunswick as a province and as a place trying to have successful communities where people can enjoy a good quality of life will be tied more to its economic development than efforts to chip away at social programs or tweak tax rates up or down.

5 thoughts on “The elusive third way – complex math

  1. I won’t put words in the mouth of a distinguished academic, but there is another possibility that I believe your analysis overlooks. some informed observers and many citizens write off economic development because they’ve seen every government since Richard Hatfield throw money at it with negligible impact, while increasing the province’s long-term debt obligations and the scope of the civil service. this is the culture of defeat in action – but it’s also how New Brunswickers have gotten through a depression that has lasted since the 1870s. those who stawy hunker down. those who hunger for a better life, leave.

  2. In the long run, yes, the province needs better growth numbers to help generate tax revenue. But in the short run, Brett’s two options are the only ones available. The sad thing is, we will not even see those two options discussed honestly over the next few months by our politicians. I see no sign of reality sinking in yet re economic growth prospects and the implications of NBs poor performance. Unlike NF, AB, or SK, we don’t have oil revenues to fall back on.

  3. @richard I don’t think those 3 oil provinces have much to fall back on besides oil, take away the oil and you take away their success.

    Maybe this government (and I mean this one, the one before and the one before that) should spend less time cozying up to a few large corporations that are woven into the fabric of the province and try to change the landscape, clean the slate, nothing else has worked. I think that the NBP deal was a good effort, the execution was a little off. Maybe NB just isn’t prepared to change.

  4. “I don’t think those 3 oil provinces have much to fall back on besides oil, take away the oil and you take away their success.”

    Yes, that is exactly my point. Those oil revenues are available to some provinces – that revenue has been used to hide the incompetence of their politicians and ED experts. When those revenues fall, we quickly see that their emperors have no clothes. NB has a much more difficult situation – our leaders actually have to work to fix things.
    And, yes, NBers have to want change; we say we want change, but keep electing people who do not, or lack the capacity to deliver.

    “spend less time cozying up to a few large corporations ”

    Again, a common refrain. But many are employed by those corporations and those employees vote.

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