Pulling New Brunswick back from the brink



Conspicuous by its almost complete absence from the agonizing ruminations over New Brunswick’s perilous fiscal situation has been any suggestion of a real solution. 

No one in government, it seems, has wanted to poke the 800-pound gorilla that is the electorate for fear of getting squashed en route to the ballot box.

That is, of course, a politician’s prerogative: to hand-ring with the best of them, pledge to swallow the bitter pills and persevere for the sake of all our children, only to turn around and waste millions of dollars on doomed schemes in the name of economic development, if not calculated self-aggrandizement.  

Economists and academics are at somewhat greater liberty to tell it like it is without concern for public reprisals.

Indeed, Donald Savoie, the Canada Research Chair in public administration and governance at the Universite de Moncton has made the province’s $12-billion debt, $500-million deficit and public-spending crisis key features of his public commentary, almost delighting (if that is the word) in jabbing voters for their refusal (or unwillingness) to reconcile their expectations of government programs with the reality of their province’s circumstances.   

Now, his colleague, Richard Saillant, the Director General of the Canadian Institute for Research on Public Policy and Public Administration at UdeM, has produced a tight book of 150 pages, or so, provocatively entitled, Over the Cliff? Acting Now to Avoid New Brunswick’s Bankruptcy.

Dr. Savoie is right when he enthuses in the preface that the author, who is also a former federal public servant, “has done New Brunswickers a great service.” In fact, what his dissertation contains is precisely that which has been missing since the discussion began: a solution, or, at least a credible stab at one with enough detail to both warrant and fuel serious debate. 

Be warned, however; Mr. Saillant’s fixes are far from easy, and he pulls no punches in describing them or the conditions that make them necessary.

“For several decades, New Brunswick’s economy has surfed on a rising tide of labour force growth, fueled by the baby boom generation and the steady, largely successful march of women towards equal participation in the workforce,” he writes. “The tide is now receding, dragging down the economy with it. A new Age of Diminished Expectations is upon us.”

Most sobering, perhaps, is his message about public priorities. While he congratulates the Alward government’s success, since 2010, in holding program spending growth to less than one per cent, he insists that the austerity can’t last “while maintaining today’s levels of public services, particularly in the health care sector.”

Indeed, “if the government does not raise taxes further and if it maintains the same public spending patterns as it did on average over the past quarter century,” by 2035-36 New Brunswick can expect to run an annual deficit of $5.5 billion on a long-term debt of $62.3 billion and a whopping debt-to-GDP ratio of 172 per cent. Not that things would likely get that far: “Credit-rating agencies would most likely pull the plug long before this happens.”

As for the solution, Mr. Saillant’s cold-eyed approach involves cutting down “baseline program spending growth every year by at least one-third of the previous year’s deficit from 2014-15 to 2029-30. Starting in 2030-31, this proportion is reduced to one-sixth.”

At the same time, he writes, “The government increases taxes and other revenues above their baseline growth by at least one-third of the previous year’s deficit from 2014-15 to 2029-30.” Again, “starting in 2030-31, this proportion is reduced to one-sixth.”

In the end, this strategy would effectively stabilize the province’s accounts. The annual deficit would fluctuate between $100-500 million. The net debt would peak in 2035-36 at about $17 billion.” 

It’s not, perhaps, the most favorable scenario (we weren’t smart enough, early enough in our collective unravelling to now expect a better result), but it’s the best we can do given our current demographic and economic challenges. And, realistically, even this approach is fraught with all the usual political perils.

But, as Mr. Saillant correctly observes, we voters “need to stop rewarding politicians who make lofty promises without explaining where the money will come from.”


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One thought on “Pulling New Brunswick back from the brink

  1. Katherine says:

    Does the government really need to raise taxes? Or does it need to finally get serious about investigating and charging income tax dodgers and the people that work “under the table” and claim next to nothing on their income tax and subsequently rip off their fellow tax payers further by receiving fraudulently high child tax benefits, GST refunds and other benefits for low income earners. It’s a joke. Check out what’s happening in a similar society – Greece.

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