Deficit chickens coming home to roost

From my TJ column last Saturday:

One of the challenges facing government when it comes to budgetary deficits and debt is that the public doesn’t really understand how it impacts them specifically. It’s a vague notion that people don’t spend too much time worrying about unless it starts to impact them directly. Voters have a clear understanding of the impact on them when a public service they enjoyed is cut or taxes rise as the result of the deficit.

The budget delivered by Finance Minister Blaine Higgs this week will hit most New Brunswickers in the pocketbook. As evidenced by comments on public news websites and the chatter at the coffee shops, a lot of folks are not very pleased. Somewhat surprisingly, even a bigwig among the youth wing of the Tory party in New Brunswick tweeted his disgust with the budget.

It seems that public debt and deficits do become real to people when the government has to dip further in their pockets to try and address them. The chickens eventually do come home to roost.

In reality the tax increases were modest and the budget deficit continues to be a serious problem. Even with the spending cuts and tax increases, the government is forecasting a $400+-million deficit in the coming year.

New Brunswickers are now starting to get it. We have a structural deficit that we will not be able to fix without either deeper service cuts, fairly significant tax increases or robust economic growth that will drive new tax revenues (or a combination of two or more of these).

We need to have a broad conversation about how we can truly stimulate economic growth in this province to fix the short term structural deficit, but also to address the longer term fiscal vulnerability of the province.

In Nova Scotia, the president of Acadia University is heading a commission that is touring the province to ask Nova Scotians how that province can do just that – put Nova Scotia on a long-term, fiscally sustainable trajectory. Maybe something similar should be done here.

John Herron, of the Atlantica Centre of Energy, is fond of saying you can’t address an environmental concern with an economic response. People chafe at the notion of despoiling the environment even if there is a substantial economic payoff.

I agree with John on this point but I think many of us are too quick to exaggerate the potential environmental concerns and downplay the economic impacts of certain economic opportunities. Shale gas is the most obvious example, but we see it with other mining projects, forestry developments and even wind energy, as a growing number of New Brunswickers are grumbling about the visual pollution.

New Brunswick is blessed with substantial forests. It has trillions of cubic feet of natural gas. It has fairly sizable deposits of minerals in high demand around the world. In addition, we have land for more agricultural opportunities and other renewable natural resources.

The province has also started to leverage its brainpower for economic development. The recent Startup Week in New Brunswick was an impressive display not only of entrepreneurial spirit but of the widening support for startups among a broad cross-section of New Brunswickers. If we could see a new generation of entrepreneurs emerge building products and services here and taking them to the world – that would certainly change our economic trajectory.

Talk of economic growth as a solution to beating down government deficits is cold comfort to those grumbling about higher taxes now. But if we don’t fix our tepid economic growth, those same people will have a lot more spending restraint and tax increases to look forward to in the years ahead.