A financial tale of 14 solitudes

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Predicting years of fiscal health for the Canadian economy is like forecasting a warm winter for the customarily Great White North.

In some places across this vast country, conditions will be delightfully luscious; in others, downright lugubrious.

That said, according to news reports, the federal government is set to announce a trifecta, and maybe more, of solid annual surpluses totalling about $15 billion. If it manages to pull off such a feat, Harpertown will likely go down as one of the nation’s most prudent, careful administrators of other people’s money in modern times. And, indeed, bully for it.

“Strong job growth and tight spending will allow Finance Minister Joe Oliver to confirm Ottawa is poised for years of budget surpluses,” the Globe and Mail declared this week. “That scenario – which is the result of near historic lows in both government spending and revenues as a percentage of the economy – fits with Conservative pledges of low taxes and smaller government. It also presents a clear challenge for the opposition New Democrats and Liberals, both of whom have promised to increase spending in big-ticket areas.”

Still, the slow-and-steady expenditure strategy of the Tories, coupled with tax-rate moderation, are not without their perils.

For one thing, they depend on continued economic recovery over the period of promised surpluses. With a national unemployment rate of 6.3 per cent (substantially better than the predicted 6.6 percent for the last half of 2014), the Feds are happily confident that they’ve called labour market trends correctly.

But this assumes that the participation rate (the number of people actively looking for work) will remain robust overall. In some places, like Alberta, Saskatchewan and British Columbia, it will. In others, like New Brunswick, Nova Scotia, Ontario, and Quebec, the story is dramatically different, especially among young people – a cohort that is, increasingly, discovering that gainful work is harder to find than to actually perform.

Then there’s the hoary problem, once again looming on the horizon, of global economic uncertainty and weakening commodity prices for some of Canada’s most important resources – namely oil and gas. For about a year, this country’s petroleum producers have enjoyed a rare respite from OPEC pricing, thanks to steady demand from the United States and a low currency valuation, relative to the U.S. dollar.

Again, though, that could change if the Harper government’s recent trade deals with the European Union and, particularly, China, eliminate the advantageous export implications of the loonie’s float in world currency markets.

Apart from any of this macroeconomic mumbo-jumbo, though, there is the socio-economic stratification of Canada’s domestic economy to consider. Call it our 14 solitudes, one for each province, territory and, of course, Ottawa, itself.

It’s one thing for the Centre to judge itself well and fully solvent. It’s quite another to extend that merry conclusion to the circumstances that frame the provincial and territorial partners in Confederation.

The federal government’s success has come, in large part, due to its determination to hold the line on Constitutionally mandated spending on public health care, education and Employment Insurance. The burden of this approach on rich provinces has been negligible. The same can’t be said for those whose populations of ready, skilled workers are shrinking, even as their ranks of aging retirees are swelling.

As ever, the numbers tell the tale.

While Ottawa amasses enough lucre to predict three or five years of $2-5-billion annual surpluses, New Brunswick is facing, in all likelihood, three or five years of mounting annual deficits nearing $400-500-million in each fiscal period. Each pernicious term merely expands the provincial government’s already bloated $12-billion long-term debt, effectively crippling any meaningful, government-supported economic development (investments in innovation, higher education, even early childhood education).

The same pattern repeats in Nova Scotia, Ontario, Quebec and even, astonishingly, in oil and gas-rich Newfoundland and Labrador, which will lose its dubiously valuable “have” status  soon if it’s not careful.

So, yes, bully for Ottawa. It has managed to balance its books to the benefit of every Canadian.

It remains to be seen, however, which Canadians will benefit most from such probity – who will enjoy the warmth, and who will be left out in the cold.

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