The politics of the coming crisis
First in a series of expert analysis articles on major issues in the 2010 N.B. election
Savoie has written extensively on regional economic development and public administration for 30 years.
His best-known books include: Visiting Grandchildren: Economic Development in the Maritimes (2006), Pulling Against Gravity: Economic Development in New Brunswick (2001) and Governing from the Centre: The Concentration of Power in Canadian Politics (2000).
Savoie also served on the 2006 transition team for Liberal Leader Shawn Graham. And he was the chairperson of the economic advisory panel for Nova Scotia Premier Darrell Dexter.
Former Progressive Conservative Leader Kim Campbell made a serious political faux pas when she observed during the 1993 national election campaign that election campaigns are not the time to discuss serious public policy issues like employment creation.
Political leaders in the run up to the September 2010 New Brunswick election appear to be following her advice. New Brunswick is confronting a serious fiscal situation but one would hardly know it listening to the province's political leaders.
In many ways, New Brunswick is looking at a perfect storm in the making. The province has a serious demographic challenge: an aging population, a significant out-migration of the province's youth, an inability to attract new Canadians and many rural communities are dying.
The province is losing manufacturing employment at a faster rate than the other provinces and its debt is growing at an alarming rate. Indeed, the provincial government has been running a $750-million deficit two years running and this year alone it will be adding nearly $1 billion to our provincial debt.
Unless we see a tremendous wrench of the wheel, there is every reason to believe that the provincial government may well run $750 million deficit annually for the foreseeable future. But that is not all.
New Brunswick relies to a very large extent on federal transfer payments to finance its own operations and to provide public services from health care, social services and education. Ottawa also needs to repair its fiscal position in the years ahead. What are provincial leaders saying about it? Do not worry about it, at least during the election campaign.
Political promises
Premier Shawn Graham, in a major pre-campaign speech, recently ruled out tax increases to deal with the province's fiscal challenge. He did not stop there. He insisted that the provincial government would not cut services if elected to a new four-year mandate.
His solution: a commitment to create 20,000 jobs. How he arrived at 20,000 jobs is not at all clear. One may ask why not 25,000 or 30,000?
Surely, he must know that as the federal-provincial economic stimulus package comes to a close, the province's employment will be taking a hit. In any event, creating 20,000 jobs would help, but alone it would not solve the province's fiscal problem.
Progressive Conservative Leader David Alward has also said that cutting services and raising taxes would also be a non starter if elected to power. To his credit, however, he has said that he would reduce the size of government by having a smaller cabinet and fewer government departments. This would help but it is hardly enough. He has also made new spending commitments, among others, eliminating fees for ambulance services.
Post-election hangover
There is no question that, come October, New Brunswickers will be waking up to a massive hangover. New Brunswickers will be told that we need to raise at least some taxes and to cut spending with a sense of urgency.
'I see no alternative than raising taxes and introducing far-reaching cuts in public sector activities. I would rank the coming upheaval potentially, at least, on a par with the 1960s when Louis Robichaud brought New Brunswick kicking and screaming into the modern era.' — Donald Savoie
Suddenly, we will be told that revenues will be off the mark and holding growth in spending in health care and other sectors will be the new order of the day. To be sure, politicians will be singing a very different tune in the immediate post-election period.
They will have to come to terms with the simple reality that holding growth in spending to less that one per cent between now and 2014 as projected, will require some painful decisions, given that government spending has grown by about several percentage points. They will then ask, "how come citizens do not trust us?" They need not look far for the answer.
The government's current plan to return to balanced budgets simply does not hold water. For example, it projects revenues to jump from $7.771 billion in 2013-14 to $8.120 billion in 2014-15, while spending would only grow by $42 million or from $8.033 billion to $8.078 billion. More to the point, the government projects revenues to grow from $7.247 billion in 2010-11 to $8.120 billion in 2014-15, while spending will go from $7.996 billion in 2010-11 to only $8.078 billion in 2014-15.
I suspect that there are very few souls in the Centennial Building who actually believe these numbers unless draconian measures are introduced, particularly on the spending side.
For the numbers on the spending side to be accurate, the government would have to eliminate some government departments, a number of programs and the public sector, broadly defined, would have to take a hit like never before.
Tough issues punted
I began pointing to New Brunswick's looming fiscal challenges over one year ago in an op-ed in a New Brunswick daily newspaper. I take some comfort in seeing a number of New Brunswickers and New Brunswick organizations increasingly voicing their concerns over the issue.
Politicians, however, have punted the issue to the sideline. At the risk of sounding repetitive, the day of reckoning is close at hand. Extremely difficult decisions will be required and they hold the potential of dividing New Brunswickers — rich, poor, urban, rural, English and French.
I see no alternative than raising taxes and introducing far-reaching cuts in public sector activities. I would rank the coming upheaval potentially, at least, on a par with the 1960s when Louis Robichaud brought New Brunswick kicking and screaming into the modern era.
There is, however, an important difference. It is a great deal easier to build government programs and grow public services than it is to rationalize the public sector. As we know from past federal government efforts (circa. 1995-97), cuts in public spending are not without pain.
To be sure, there will be some kicking and screaming as the New Brunswick government decides what it can no longer afford and which taxes it will increase. Schools, universities, hospitals, government departments and government programs will be tested like never before.
I see no better time to engage New Brunswickers on these issues than during an election campaign. If we cannot debate them during an election campaign, then we have every right in asking what on earth are election campaigns for?