Monday, April 10, 2000
The Halifax Herald Limited

There may be short-term pain to balance the books but now is the time to do it

By Brian Lee Crowley CASE FOR CUTS

A GOVERNMENT that is broke can help no one. It can build no schools, operate no hospitals, pay no judges and policemen, keep open no universities.

For those who believe that government has a vital role in society, the disastrous overspending of the last two decades has been the height of irresponsibility. Debt costs are steadily chiseling away at our ability to sustain needed public programs, and to reduce our burdensome tax load.

Take only the fiscal year just ended. The province added approximately $770 million to its debt. That means that this year we’ll have to find around $60 million to pay the interest on that new debt. That $60 million must come in the form of higher revenues, new taxes or reduced services.

Our voracious $11.5-billion total debt guzzles $800 million annually (or $92,250 an hour) in interest payments. That’s $800 million that buys us nothing, that goes straight out the door to enrich investors in places like New York and Toronto, all because of our decades-long debt binge.

The opponents of cutting spending pretend that it is an attack on social equity, but the reverse is the case. New Brunswick, which got its fiscal house in order several years ago, is now regularly able to cut taxes and increase spending on health and education, while still showing a small surplus and manageable debt levels. If we had the same relative level of interest payments as our neighbours, we’d have nearly $300 million more to spend on public services or tax cuts every year. You can buy a lot with $300 million.

Nor is it true that spending only goes now on socially necessary items. We subsidize golf courses and inns for wealthy tourists, steel that cannot be sold at a profit, and forays into the oil and gas business that have saddled us with an extra $600-million debt. We give away around $40 million a year in subsidies to businesses, and it costs the government over $50 million each year to run its liquor monopoly.

And our health-care costs are rising dangerously. We already spend much more of our budget on health than any of the other Atlantic provinces, but our health care’s no better than theirs. Health spending has risen by nearly nine per cent annually in recent years, while population growth is negligible and provincial tax revenues are rising only 1.7 per cent a year.

Raising taxes isn’t the solution because our problem isn’t too little revenue; it’s too much spending relative to our means. And too much of that spending is of dubious value. Nova Scotia’s current revenues, if other governments are any guide, is quite enough to provide needed services. If we want to enrich those services, or provide new ones, then we must help the economy to grow. That means, among other things, balancing the books while getting taxes down.

Yes, there may be some short term pain to achieve that balance, but there will never be a better time to do it, with the economy working reasonably well, and good employment growth in many parts of the province.

We’ve dallied, while other provinces have taken the hit and are the stronger for it today. The sooner we follow their lead, the sooner we will reap the benefits of more growth, more jobs, lower taxes, and sustainable public spending.

Brian Lee Crowley is president of the Atlantic Institute for Market Studies, a public policy think-tank in Halifax.
Email:BrianLeeCrowley@aims.ca