Category Archives: Economy

Mar 23 2015
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Economy, Humour

A modest proposal for New Brunswick

We could sell the snow. There's plenty of that

We could sell the snow. There’s plenty of that

In the annals of economic perdition along Canada’s benighted East Coast, Cape Breton is often cited as the exemplar of Murphy’s Law, where everything that can go wrong always does.

An Alberta colleague of mine in the Toronto newsroom of the Globe and Mail in the mid-1980s once japed that about the only government-funded development scheme that region of Nova Scotia hadn’t tried was building a monorail around the picturesque Bras d’Or Lake for rich European, American and Asian tourists.

“Because,” he shouted giddily, pointing an index finger to the sky, “there’s an idea that might actually work.”

Canada is vast enough and diverse enough that its various laughing stocks are never in short supply (much, of course, to our national discredit).

So, it seems odd that outside of a few bureaucratic enclaves at Industry Canada, New Brunswick has yet to receive the brunt of scorn and ridicule its sister parts of the Maritimes – such as Cape Breton – have endured for generations.

After all, as the lovely butt of other people’s jokes, it’s a perfect candidate. Even our very own native son, Donald Savoie, isn’t above cracking wise every now and then. . .sort of.

The Moncton-based economic development authority and university professor was in fine form last week as he chatted with the Saint John Telegraph-Journal’s John Chilibeck. Referring to the ticking time bomb that is the province’s aging population, Mr. Savoie invoked several figures of speech, including “waiting to explode” and “bite us very hard”, either or both which could involve “slow, painful economic death spiral.”

Whichever case may, ultimately, transpire, the economist’s main message is clear: We’re in for a whole lot of fear and loathing unless we get off our collective derrieres and grab the bull by the horns and go for the brass ring in our effort to prove that, if nothing else, academics aren’t the only members of provincial society who can mix a wicked metaphor.

His larger point, though, is that “we’ve being saying ‘no’ to a lot of economic development over several years. We can’t (here comes the jokey part) turn all of New Brunswick into a national park.”

Of course, we can’t. Apart from any other consideration, national parks cost big bucks and – in case some of us haven’t been paying attention – we don’t have even little ones. Oh, we have the trees, alright, but not the variety on which money grows.

Perhaps, then, we should go with our strengths – or, rather, turn our weaknesses into competitive advantages the way we turn lemons into lemonade.

Take one-part aging population, add one-part pristine environment, shake, then pour. Hey presto: we’ve got ourselves an instant, province-wide retirement community. Forget about merely visiting the old folks’ home. New Brunswick is the old folks’ home

If we’re shrewd, we can sell this brand all over the world to, you guessed it, rich Europeans, Americans and Asians.

See what we did there? In one dramatic swoop, we’ve boosted badly needed immigration. And – thanks to the money pouring into provincial coffers from fat, international retirement trusts and savings plans to pay for new sanitoriums, nursing homes and assisted-living facilities, and then some – we’ve solved the fiscal crisis.

But let’s not stop there. If we start building a few monorails to replace the roads nobody will soon be driving through the countryside nobody will soon be fracking we’ll manage to keep our productivity up until, of course, we all just drop dead from natural causes.

As my Alberta chum might say, “There’s an idea that might actually work.”

Indeed, what could go wrong?

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Mar 13 2015
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Business, Economy, Energy, Oil and Gas, Politics

Just fracking grow up already!

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As former Quebec premier Jean Charest entreats New Brunswickers to step back, take a deep breath and, in an adult fashion, contemplate the shape of things to come in a province increasingly shy of economic options, local legislators are joyriding all the way to the political playground.

SWN Resources Canada’s vice president Jeff Sherrick sent a letter late last year to the premier’s office, advising it that the company was preparing to “suspend drilling plans and re-dedicate resources to projects in other jurisdictions.”

In other words, in the face of a government-enforced moratorium on hydraulic fracturing in the province, it has decided to pick up its toys and go home or, at least, elsewhere.

“Not knowing if or when the moratorium will be lifted makes it difficult for us to dedicate money to a project that may or may not go ahead in a given year,” Sherrick explained in the memo, a copy of which Opposition Tory Leader Bruce Fitch obtained through the right to information act.

In fact, SWN is not above playing its own games. According to a recent Telegraph-Journal story, “The gas company stated its desire to continue exploration in the province. (It) has requested a long-term extension of its licenses to search, which it said (in its letter) would provide ‘the stability needed to effectively plan and lessen the financial risks’.”

So, then, is it staying or going? Only Energy Minister Donald Arsenault, it seems, knows the answer as he alone holds the keys to the playground.

Still, when it comes to a vigorous round to “red rover” – of not, precisely, serious economic development planning – all are welcome.

Here’s Fitch on the subject of moratorium, as reported in the T-J: “The sad reality of the situation is that now, in the sixth month of this government’s mandate, the government members are more confused than ever as to what to do with this gas moratorium. . .They scramble to figure out how they can meet the conditions or excuses that they made up a few months ago while gas supplies dry up and companies pull up stakes and leave the province with their investment dollars and their jobs that would have been created here if the Liberals had not gone forward with their moratorium.”

Here’s Arsenault’s rebuttal: “The Opposition is all over the place. When it comes to shale gas and hydraulic fracturing, we have been very clear for two-and-a-half years. We will impose a moratorium in New Brunswick. Do you know why? It is because we care about what New Brunswickers have said all along. We care because we know that the royalty scheme is not maximizing the benefits for New Brunswick. We also care that the then government did not want to consult with First Nations. It is not only a moral responsibility, but it is also the law.”

Now here’s Charest on the subject at a business gathering in Moncton on Monday: “We want to see development of our natural resources. We want to see it done right, but we also see a lot of projects that are stuck and not moving ahead because we are not encouraging the right debate. Fracking in New Brunswick is an example of that. The challenge for us is to have a fact-based discussion on things like fracking, so that we can make a better decision on whether we want this industry to be part of our economy.”

Yeah, good luck with that. I believe there’s still more mud to sling in the political playground that is New Brunswick.

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Feb 26 2015
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Business, Economy, Politics

Juggling N.B’s balancing act

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For public leaders, the great challenge in stewarding an economy like New Brunswick’s is not, essentially, crafting jobs-vows and packaging promises for economic growth.

The great challenge is learning how to walk, chew gum, sing, dance, buy the groceries, and cook the dinner – all at the same time.

Of course, to prove to the common weal that they are, indeed, multi-tasking geniuses – gifted beyond reasonable doubt in the calculus of actually getting things done – young governments are inevitably tempted to issue a bevy of so-called “prosperity plans” and “opportunity programs”, which they insist clearly present the key that unlocks the door to durable progress.

It never does, of course. 

In fact, in every case, these “plans” and “programs” are anything but – more wish lists than articulate frameworks. But, they make great copy for newspaper editorialists; lamentably for everyone else, that’s about the sum total of their value.

Still, a government such as freshly minted Brian Gallant’s in this province owes itself and voters a valiant, mold-breaking exercise in economic specificity, in which plans really are plans, programs really are programs and vision is more than a talking point for a chamber-of-commerce audience of jaded luncheon rats. 

Happily, the early signs here are promising.

The new appointees to the province’s Jobs Board (notably David Campbell and Susan Holt) have, in recent days, made useful points about the ways and means of building and sustaining industrial capacity.

In effect, these boil down not to one ingredient, but many, operating in concert to slowly, incrementally, convincingly improve the conditions for commercial growth, innovation, expansion and, naturally, job creation.

These necessarily require Government to hone its juggling skills just as they require public shepherds of long-term prosperity to focus more on the steak of their proposals than the sizzle of their pronouncements.

The traditional temptation is, however, to stray from this noble, difficult purpose. Often, it’s the sweet, low-hanging fruit that distracts.

In this context,  alone, the ostensibly good economic news about New Brunswick from the Conference Board of Canada this week is actually troubling.

For the first time since 2007, the organization insists, the province is set to surge ahead, posting better year-over-year GDP growth than the nation as a whole. This, the argument goes, will surely boost employment, reduce labour shortages and go a long way towards narrowing the wage-and-skills gap, especially in natural resources and goods-producing industries.

The problem with this rosy forecast is that it relies entirely on factors beyond New Brunswick’s control: an uptick in export business with the re-emergent American northeast and the consequent effect of depressed oil prices, i.e., a low Canadian dollar.

When things are fertile, who thinks about the inevitable drought?

Who thinks to leverage the good times (with, for example, ground-breaking, world-beating product and service innovations, strategic infrastructure, advanced training and education) to ameliorate the bad?

Similarly, the promise of better days ahead might lure policymakers into believing that the timing for a general tax grab has rarely been more efficacious. Several economists and, at least, one poverty group, have issued strong injunctions against such a move.

They are correct. Rash increases in income or consumptions taxes are not the way to go at the moment.

But neither is hand-wringing.

Everything must be in play in this province, and everything is of a piece – a piece of every other.

The Gallant government’s approach to date has indicated that it knows this. Temporary upticks in the economy are no more promising, in the long-term, than are sudden, socially irresponsible hikes in levies on citizens.

The future is in the long game – in the simultaneous chewing of gum, walking, singing, dancing, grocery buying and dinner cooking.

Let’s see that the big-picture plan contains enough meat to nourish future generations of this province.DSC_0005

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Feb 24 2015
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Economy, Energy, Politics

Dear potash, you may now kiss the bride

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Until recently, Potash and shale gas in New Brunswick have gone together like a horse and carriage if not, precisely, love and marriage.

But are we now witnessing from the sidelines of a new provincial Jobs Board – more concerned with marrying this region’s disparate economic opportunities than allowing their pervasive separations to widen – the opening gambit of some type of betrothal in the natural resources sector?

Politically, Liberal Premier Brian Gallant’s stern insistence on slapping a moratorium on hydraulic fracturing was a smart move. His Tory predecessors had utterly bungled the file with the predictable result of having neutralized any chance of engendering informed debate, let alone winning hearts and minds on either side of the controversial issue.

Those opposed to the practice of exploding rock deep beneath the ground to extract natural gas, potentially poisoning drinking water, relied on Internet research (some compelling good, some stunningly bad) to reinforce their intractability.

Those who supported the practice, believing that it could be safe as long as regulations in this province were tougher and more reliable than any found in the developed world, remained bewildered by the road blocks and burning police cruisers at Rexton, N.B., in the summer and fall of 2013.

And, as usual in these sort of contretemps, never the twain would meet.

Economically, though, Mr. Gallant’s “wait-and-see” policy regarding shale gas development (Is it benign? Can a social license be negotiated with affected communities? What’s the long-term, dollars-and-cents impact on the province’s finances?) is running down the clock.

The debt clock, that is: hundreds-of-millions of dollars in annual deficits; a $12-billion long-term debt that no degree of public-sector austerity will settle without robust, private-sector economic growth.

So, it comes as no surprise that the Grit government is now talking boldly about vastly expanding potash mining in the province.

In an exclusive for Brunswick News Inc., Adam Huras reports this week that the Province “will issue a request for proposals. . .to explore a massive stretch of land in southern New Brunswick it believes could be home to the province’s next potash mine.”

The area in question reportedly incorporates more than 24,000 hectares (240 million square meters) of land less than an hour’s drive north of Saint John.

Question: What do potash mining operations here use to power their facilities? Answer: hydraulically fracked shale gas.

Another question: Why? Another answer: Because it’s reliable, plentiful and, frankly, cheaper than any alternative.

Now, when a provincial government raises the possibility of opening up its public pocketbook to help finance a major expansion of a demonstrably successful resource industry in order to create good, sustainable, long-term jobs, the long bet appreciates that said government must also understand the importance of the fuel supply said resource industry deploys to justify embroidering its business plan.

It also stands to reason that Mr. Gallant’s cabinet and Jobs Board recognize that any move, on government’s part, to so convincingly enlarge a sector that depends on shale gas will goose opinion about the energy supply (for and against) in the public square, regardless of any moratorium.

Inevitably, that means a conversation – one that ended, unproductively, when the Grit team took office last fall.

Naturally, the talking points from the premier’s office, over the next few days, will tow the party line. No, we haven’t changed our minds, they will say. Yes, we believe there exist legitimate questions about the safety of hydraulic fracturing. Of course, until we know the truth, we will not act precipitously.

Still, that’s what every marriage broker says when he or she is conducting their due diligence.

Will the groom behave honorably? Will the bride comport herself in the best interests of her extended family and community?

How deliciously ironic that those who signed the first divorce papers might now officiate at the new wedding?

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Feb 22 2015
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Business, Economy

Is it a whole new ball game for N.B.?

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When a government seeks a home run in the early innings of its time at bat, it helps to have a couple of heavy hitters warming up in the dugout.

Last week, New Brunswick’s Grit Premier Brian Gallant announced his appointments of three all-stars in the field of economic and business development to help shepherd the province’s new Jobs Board secretariat.

According to the premier, Jacques Pinet (as the group’s new chief executive officer), Susan Holt (as the new chief of business relationships) and David Campbell (as the new chief economist of New Brunswick) “will work to set the conditions for growth so that we can help our province’s businesses and entrepreneurs create jobs which will, in turn, help improve our finances. . .These individuals each join government with a strong and diverse background in the private sector.”

For their part, the individuals in question appear as fired up about their new positions and the promise of making a difference as do their bosses Gallant and Economic Development Minister Rick Doucet, who jointly chair the Jobs Board.

“The time is right to change the way we approach economic development and job creation in New Brunswick,” said Pinet, a Moncton lawyer and former senior executive of Assumption Life. “It is clear the status quo is not working. Jobs Board represents a fresh opportunity to re-invigorate our economy. I am honoured to be part of these efforts.”

Added Holt, the former chief executive officer of the New Brunswick Business Council, “New Brunswick has a history of entrepreneurship and innovation. I am looking forward to working with our business community to unleash their ideas and establish the kind of environment that will lead to job creation and prosperity in today’s economy.”

In fact, said Campbell, an economic development consultant and researcher, “Together, Opportunities NB and Jobs Board will help the government better co-ordinate and evaluate job creation efforts. Diversifying the economy, developing the workforce and making strategic investments in infrastructure are all examples of the way we can work towards the common goal of job creation.”

To say that these folks have their work cut out for them vastly understates the case.

The province’s fiscal morass of rolling annual deficits amounting to hundreds-of-millions of dollars a year on a longterm, structural debt of some $2 billion reflects an even more worrying combination of conditions that have, for years, conspired to undermine economic capacity in the province.

The labour force is dwindling, strategic infrastructure for business development is only just keeping pace with the rest of the developed world, and innovation, commercialization and productivity rates haven’t budged convincingly since the turn of the century.

As the national unemployment rate continues to drop (to 6.6 per cent last month), New Brunswick’s remains stuck in the 10 per cent range (though, this is likely the most optimistic number a statistician will average, as the actual, seasonally adjusted, rate in many parts of the province is closer to 18 per cent, especially among young, employable people).

I know Pinet only by reputation. I know Holt only slightly better. But I’ve been a friend and colleague of Campbell’s for years and he is – as is I imagine each of his new colleagues – the right person for the right job at the right time.

He is certainly correct when he writes, as he did recently, on his blog, “If we don’t find a way to get the province’s economy back to at least a moderate level of economic growth no amount of fiscal austerity will be enough to bring balance to the province’s books.”

That sounds like a cue if there ever was one.

Dear Messrs. Campbell and Pinet – dear Ms. Holt – your time at bat is drawing near. Let’s see how you hit it out of the park.

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Feb 05 2015
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Democracy, Economy, Politics

Clucking all the way to the knowledge(less) bank

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Chickens come home to roost in surprising numbers, even when the coop has been closed and the barn doors have been bolted. Any farmer will tell you this.

Of course, we don’t listen to farmers, or barn builders or coop-tenders, anymore. We no longer regard the expert opinions of teachers, economists, writers, artists, scientists, urban planners, and early childhood developers.

And when we talk to our neighbours, who may have something cogent to say about the way we live now, we’re apt to smile lamely as we dismiss their pontifications as rarified opinions. . .Nothing to do with us.

Evidence is, after all, just a matter of conjecture – is it not?

That, at any rate, is what certain federal politicians want us to embrace and hold close to our hearts, as, thanks to them, we have been without a mandatory long-form census at Statistics Canada for nearly five years.

But, wait, the chickens are finally coming home to roost.

According to a Globe and Mail story this week, “planners” insist that the cancellation, in 2010, of this worthy instrument of public and social policy – on nothing more than a whim to warm the backbenches of certain Conservative office holders in Ottawa – has “damaged research in key areas, from how immigrants are doing in the labour market to how the middle class is faring, while making it more difficult for cities to ensure taxpayer dollars are being spent wisely.”

How? The answer is: We literally don’t know.

We don’t know enough to ask the right questions, sculpt the right surveys, obtain the right data.

What we suspect, however, is that the preponderance of evidence we do have strongly indicates that our federal government, in its move from a formal census to a voluntary question-and-answer sheet, actively wants to keep Canadians in the dark about themselves and their communities.

Worse, the new-normal actually costs taxpayers more money. “The last census in 2011 cost a total of $652-million, including an extra $22-million due to the change to the voluntary National Household Survey, “ the Globe reports. “The total budget for the 2016 census won’t be decided until February or March, Statscan has said. But the current plan is to hold another voluntary survey. All told, 35,000 people will be hired for this effort.”

Says Charles Beach, a Queen’s University professor of economics, in the Globe piece: “It has certainly impacted my own work on what has been happening to middle-class earnings in Canada.”

Indeed, he says, it has “inhibited research into inequality and identifying winners and losers in economic growth, research into understanding the national problems of the have-nots in the economy, and research into how best to provision local government services.”

Adds Harvey Low, Toronto’s man in charge of social research for that city: “It has definitely had an impact in the way we plan for services. . .We are less sure. . .We definitely have to spend extra dollars on pursuing other sources of data. . .and the staff time to assess whether we can use it to compare over time.”

Meanwhile, complains Sara Mayo of the Social Planning and Research Council of Hamilton, Ontario: “In terms of fiscal prudence, this made no sense. Why would any government want to pay more for worse-quality data?”

As the group, Evidence for Democracy astutely notes: “Voluntary surveys receive lower response rates when compared to mandatory ones. Typically, vulnerable populations [new immigrants, Aboriginals, low-income, single parents] and those with the highest income have lower response rates; thus, data about their demographics is poorly represented in voluntary surveys. This lack of robust information about important groups leads to skewed data sets, poor decision-making, and costly government policy mistakes.”

Shall we count the ways in which governments make poor policy decisions even when presented with good, countable evidence?

After all, the price of oil was supposed to soar forever, pundits insisted, despite the fact that, historically, it has always plunged.

Cluck, cluck. Something scratching this way comes.

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Jan 29 2015
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Economy, Education, Government, Politics, Society

Let’s get serious about early childhood education

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If the federal government is truly concerned about the welfare of women and children, then it should rethink its social policies before it pours good money after bad.

The current thinking in Harpertown posits a minefield of ideological presuppositions that is as breathtaking in its scope as it is in its peril: That young children benefit only when mum is chained to a doorknob in her kitchen; that women find their best, truest selves only when raising a brood with Captain Canada’s monthly cheques (about enough to cover the cost of novice hockey-league membership); that dad should, but should not necessarily be forced to, engage in raising the children he sired in the first place.

Did I say “Harpertown”? Let’s properly call it “Pleasantville”.

Pleasantville is now spending tax dollars to hike the children’s fitness tax credit; arrange for income-splitting among worthy, affluent families; and double down on the Universal Child Care Benefit (UCCB) for children under age six, to wit:

“As of January 1, 2015, parents will receive a benefit of $160 per month for each child under the age of six – up from $100 per month. In a year, parents will receive up to $1,920 per child.”

That notice comes directly from the Canada Revenue Agency, by way of the Prime Minister’s Office. What it doesn’t bother to mention is that these election goodies will cost, all tallied, upwards of $7 billion a year – just about as much as a truly scientific, comprehensive, empirically designed program of national, government-subsidized early childhood education.

In a 2013 syllabus on the broad effects of early-years instruction, TD Bank Group’s senior vice president and chief economist Craig Alexander had this to say: “There is a great deal of evidence showing overwhelming benefits of high quality, early childhood education. For parents, access to quality and affordable programs can help to foster greater labour force participation. But more importantly, for children, greater essential skills development makes it more likely that children will complete high school, go on to post‐secondary education and succeed at that education. This raises employment prospects and reduces duration of unemployment if it occurs.”

In fact, according to his research, “for every public dollar invested in early childhood development, the return ranges from roughly $1.5 to almost $3, with the benefit ratio for disadvantaged children being in the double digits.”

Indeed, around the world, the happiest results correlate with the earliest starts.

A recent OECD report states that in Sweden “The system of pre-school education is outstanding: (a) in its fidelity to societal values and in its attendant commitment to and respect for children; (b) in its systemic approach while respecting programmatic integrity and diversity; and (c) in its respect for teachers, parents, and the public. In each of these categories, the word ‘respect’ appears. There was trust in children and in their abilities, trust in the adults who work with them, trust in decentralised governmental processes, and trust in the state’s commitment to respect the rights of children and to do right by them.”

In Finland, the OECD concludes, “The early childhood education workforce has several strengths, such as a high qualification level of staff with teaching responsibilities, advanced professional development opportunities and favourable working environments. Staff with teaching responsibilities are well educated and trained with high initial qualification requirements. Professional development is mandatory for all staff; and training costs are shared between individual staff members, the government and employers. Working conditions in terms of staff-child ratio are among the best of OECD countries.”

All of which confirms that early childhood education is not the expensive experiment that cynics decry. On the contrary, it is a plausible, workable application for meeting some of our hoariest, long-term social challenges.

The sooner this federal government understands that this nation is not, as its political operatives like to assume, a blank canvas for partisan portraiture, the sooner we can get on with investing good money where it belongs: In the future of our kids, who will return dividends that Pleasantville can’t begin to imagine.

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Jan 28 2015
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Business, Demographics, Economy, Energy, Politics

The good news for New Brunswick: Here, in this place 

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“Finances bleak, but province not bankrupt” – headline news in the Moncton Times & Transcript, Friday, January 23, 2015

Dear New Brunswick,

Here’s what you do when you’re about to go under: Put on your Sunday best, paint a smile on your face, take a walk through all your favorite haunts, count your blessings, and, above all, keep your mouth shut.

You would not believe how ennobling simple measures can be when you are about to lose everything.

After all, what is “everything”?

Is it a house, a car, a snowmobile?

Is it a wife, a husband, a son, a daughter?

Oh well, easy come, easy go.

We can’t have it all.

Gone – that’s the poetry of our times.

Gone.

In fact, when you think about it (and you’ll have plenty of time for that), “Gone” is a pretty fantastic place to live.

No more obligations, expectations or dreams. No more plans, plots or potting beds. No more of. . .well, anything, really.

Just silence, sleep, and the slow inexorable crawl to the circus tent, where all are destined to find their final resting places – just some sooner than others.

Still, dear New Brunswick, don’t forget to slap on that lipstick, don that boater, adjust the suspenders on the oak barrel you’re wearing. The world is watching you. You want to be presentable when you finally succumb.

Don’t you?

Fear not at all, noble province. Those who were smart enough to leave in time to make their bones in far-off places – where big, rock candy mountains still transform black gold into fountains of toonies – will return to bless your own inert skeleton.

Speaking of them, what of Jules and Jim 15 years from now.

In January 2031, Jules is running a hand through his thinning, grey hair, glancing occasionally at the clock on the wall of the departure lounge. “Looks like we’re running out of time,” he mumbles. “What else is new?”

The storms of late December had minced the schedules of the one airline that still bothers to call on New Brunswick. Normally, any delay en route to the oil and gas fields of northern Alberta mean long lineups for itinerant Maritimers arriving late to Fort Mac’s weekly job lottery.

But, today, Jules doesn’t mind so much. His traveling companion is late. Might as well sit tight, he tells himself. A pipe-fitter by trade, 25 years of going down the road and back has taught him how to wait. He’s good at it; waiting and thinking.

He’s old enough to remember a different New Brunswick, when his native home was not just a regional staging ground in the brisk business of exporting human capital. That was before the Wall Street money lenders had called the loans, effectively throwing the province into receivership.

Really, he thinks, what other choice did they have?

In 2024, the provincial government had failed to make the minimum payment on its long-term debt of $42 billion. Sporting an operating budget deficit, in that fiscal year, of $7 billion, it had needed a miracle to cover its financial obligations. And there hadn’t been one of those in this benighted corner of Canada for some time.

Still, Jules recollects the word “miracle” being used when he was a boy and Greater Moncton, for one, was an authentic economic nexus of the Maritimes.

He checks the clock on the wall again.

“Where is that whelp?” he mutters to no one in particular. “The boy is 45 minutes late, and the plane is here, finally.”

As his 16-year-old nephew Jim’s bonded master, Jules is almost looking forward to showing his young apprentice the ropes in Alberta.

Jim, apparently, has made other arrangements.

Dear New Brunswick, here’s what you do when you’re about to go under: Put on your Sunday best, paint a smile on your face, take a walk through all your favorite haunts, count your blessings, and, above all, shout from whichever rooftop you still own.

Shout loudly and shout boldly.

“I am still here.”

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Jan 26 2015
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Economy, Government

Focussing the lenses of two economic telescopes into one

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As the country’s leading economic prognosticator suggests the “the trickle-down effect from plunging oil prices will boost New Brunswick’s economy in the short term,” the province’s Auditor-General Kim MacPherson issues “a stark reminder that” the government, here, “has not listened to much of (her) fiscal advice.”

Both quotes emerged in stories the Telegraph-Journal researched late last week and published on its increasingly crowded front-page acreage (a testament, perhaps, to the surging intrepidity of its economic reportage).

In the first instance, the Conference Board of Canada holds out hope (faint as it may be) that New Brunswick will grow its GDP by as much as 1.8 per cent this year – the beneficial result of a low Canadian dollar, driven down by falling oil and gas prices and the Bank of Canada’s attending interest-rate adjustment of its benchmark rate, from one to 0.75 per cent.

This lending level is almost unheard of in recent times, and its effect will be (at least, for now) to make New Brunswick’s predominantly export-oriented goods and services appear mighty attractive to the U.S. marketplace, where a newly booming and hungry economy will almost certainly want to backstop its inevitable price inflation with comparatively cheap, high-quality wares from its friendly neighbours to the north. (Remember: consumer spending is the Holy Grail of global capitalism).

In the second instance, says A-G MacPherson, the New Brunswick government is spending too much. In fact, the habit has become an addiction. According to the official statement from her office on her her most recent report, “the financial position of the province tabled today (January 22, 2015) in the legislative assembly, the auditor general. . .expressed concerns about the continued increase in net debt of the province. In 2014, New Brunswick reported a deficit of $498.7 million, its sixth annual deficit in a row. To assist in financing these deficits, the province has incurred additional debt. New Brunswick’s net debt has now risen to more than $11.6 billion or $15,400 per New Brunswicker.”

The summary continues: “The report shows a troubling $4.7 billion (69 per cent) increase in net debt since 2006. An increase in net debt of $530.7 million has been budgeted for the fiscal year ending March 31, 2015 suggesting net debt could exceed $12 billion by that time.”

Said Ms. MacPherson: “The new Fiscal Transparency and Accountability Act includes targets to decrease net debt. To achieve these goals, the government will need to demonstrate more fiscal diligence.”

Finally, “In the report, the auditor general also addressed the challenges of the deteriorating state of capital assets such as roads, highways, schools and hospitals.

‘Solving the problem of aging infrastructure is more than a matter of new spending,’ said MacPherson. ‘It is about having a long-term infrastructure plan that will ensure the sustainability and safety of all essential infrastructure, while respecting the fiscal challenges faced by the province.’

“The auditor general stressed that while the government has acted to restrain the growth of expenses, it needs to do more to address New Brunswick’s structural deficit and continued growth of net debt.”

So, here, then, we face the conundrum of New Brunswick’s faltering economy: On the one hand, we can expect short-term growth thanks to forces beyond our control; on the other, we face long-term demise thanks to forces beyond our control.

‘Twas ever thus in these parts.

The question is: Must it forever be?

The answer is not easy, but it is explicable.

The private sector (occasional big-business gerrymandering, notwithstanding) makes money when it believes that the public sector conducts itself fairly, equitably and transparently; when the latter’s regulatory frameworks are straightforward and commonsensical, when its costs do not exceed its value, when its employees do not, in the course of their duties, betray a career-long affection for “nine-to-fiveing” in their boots of clay.

Governments in New Brunswick, meanwhile, would do themselves enormous favors by proposing triumphs of the imagination: Sensible tax structures that emphasize consumption over income; bold policies that encourage immigration from around the world, and not just from northern regions of this province (tantamount to moving deck chairs on a sinking ocean-liner); and investments in early childhood education paid for with, say, tolls on overbuilt, public highways.

This is all within our grasp. And if we do, in our collective wisdom, grasp, the changes in the province might, for a change, prove permanent.

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Jan 23 2015
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Economy, Government, Oil and Gas

Balancing the federal budget or bust

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As the we wake up to the nauseating certainty that the Conservative government of Canada finds itself with its shorts down around its ankles, we might properly wonder what all that official, post-Great Recession palaver about economic stewardship and sound fiscal planning actually produced.

Plummeting oil prices – always considered a possible, if not likely, eventuality a year ago by those who actually pay attention to markets – have sent once-mighty prognosticators in high office scurrying like so many scared bunnies into a brier patch (as the oil patch, don’t you know, has become suddenly inhospitable for political animals of every stripe and species).

In fact, Finance Minister Joe Oliver is so shakent, he’s taking the unusual, if not altogether unprecedented, step of delaying the federal budget until “at least” April – all the better, presumably, to gauge the impact on federal coffers of lower dividends oil producers pay to the people of Canada in return for the economic license we have apparently granted to them.

Given that most experts now predict that volatility in the oil and gas sector will remain the new normal for some time (perhaps, as many as three years), it’s hard to cotton what Mr. Oliver’s finance department mavens are divining as they buy themselves a month to chew what’s left of their nails to the nubs.

Really? Why not make it two or even six, for all the good it will do.

The energy roller coaster now makes balancing the federal budget in any meaningful or sustainable way virtually impossible – so dependent on revenues from fossil-fuel production are government coffers; as are, in fact, increasingly broad swathes of the rest of the economy.

In 2013, according to Natural Resources Canada (NRC), the oil and gas sector generated $133 billion in gross domestic product (about 7.5 per cent of the national total) in his country. It employed 190,000 people, or about 1.1 per cent of the working, adult population, even as it accounted for $83 billion, or 21 per cent, of total capital expenditures in Canada.

Again, says an NRC bulletin, “Federal and provincial/territorial (P/T) governments in Canada receive direct revenues from energy industries related to corporate income taxes, indirect taxes (such as sales and payroll taxes), crown royalties (which are the share of the value of oil and gas extracted that is paid to the Crown as the resource

owner) crown land sales, (which are paid to the Crown in order to acquire the resource rights for specific properties.”

Moreover, “the largest share of government revenues is collected from the oil and gas industry, which averaged $23.3 billion over the last five years, including $20.7 billion from upstream oil and gas extraction and its support activities. Between 2008 and 2012, the energy industries’ share of total taxes paid (11.9 per cent) was in line with their share of total operating revenues (13.6 per cent).

So, when the price of oil takes a hit, so do we all in this country – at least, fiscally. That’s almost as immutable a law of nature as gravity or, more appropriately, the handwringing and teeth-gnashing of high-profile politicians determined to keep their promises – fool-hardy though they may be – come what may.

“The Conservative government is warning for the first time that falling oil prices could trigger new spending cuts in order to deliver on a promised balanced budget,” Bill Curry writes in the Globe and Mail this week. “On the heels of the surprise decision to delay the federal budget until at least April, the government is putting Canadians on notice that it is prepared to cut spending further rather than abandon its goal of balancing the books.”

It’s a challenge that Jason Kenney, federal employment minister, insisted in broadcast interviews last weekend could be met with “additional fiscal restraint.”  After all, he said, balancing the budget is a commitment we made to Canadians in the last election.”

It does, however, seem broadly nonsensical – and even amateurish, from a money manager’s perspective – to manufacture more austerity just to be able to show a book entry in black ink, fleeting though it may be.

Canadians want their government’s books in fine balance, yes – but not at the expense of programs that do more good for the economy than does a technical surplus the durability of which ultimately hinges on volatile forces beyond any one pledge-making politician’s ability to control.

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