N.B. Premier Shawn Graham wants his province to be self-sufficient in 20 years

By Charles Cirtwill

Atlantic Canada is booming. From following the national media, you would not know that. From listening to the debate around the fiscal imbalance and equalization, you would definitely be forgiven for thinking the Atlantic premiers do not know that either.

Average GDP growth in Canada over the last five years has been 2.1%. Prince Edward Island and Nova Scotia have grown slightly faster than that, at 2.2% and 2.3% respectively, and Newfoundland and Labrador has achieved almost double that growth at 4.0%. Unemployment has reached 30-year lows in Nova Scotia, and job creation has outstripped job seekers in PEI to the point where guest workers are being brought in from Russia.

Saint John is poised to become the energy capital of Eastern Canada and the northeastern United States. Voisey’s Bay and a restructured fishery are just two of the drivers of new levels of prosperity in Newfoundland and Labrador. The port of Halifax is ideally situated to take advantage of trends in global shipping. Inter-modal terminals, LNG plants, light and heavy industry and new residential construction are outstripping the supply of skilled workers across the region.

What do sensible fiscal managers do in boom times, when revenues are increasing and profits are high? They clean up their balance sheets, pay down debt, restructure asset allocations, and improve efficiencies while being able to use the cushion of good times to soften the transition for affected workers and suppliers.

What do provincial premiers do?

Well, if you’re New Brunswick premier Shawn Graham, you seize the opportunity. You go before a national television audience at the national Liberal convention and set the goal of having your province be self-sufficient in 20 years. Yes, an Atlantic Canadian Premier announcing to a national gathering of Liberal party faithful, and to all Canadians, that he wants his province to be free of equalization. Sooner, rather than later.

More to the point, Graham has already backed up his words with deeds. On his first day in office two months ago, Graham cut gasoline taxes, committed to transfers to individual post-secondary students (the money follows the student) and reduced the tax burden on seniors. His ministers are talking to everyone about new ideas for health care, education and the economy. They are looking for things the province can do to help itself. In the words of one Minister, they want to find ways to “reward people for being innovative and successful.”

Unfortunately, around the Premiers’ table, Shawn Graham is very much alone, especially in Atlantic Canada. Just one day before Graham set his bold goal for New Brunswick, Nova Scotia’s Premier Rodney MacDonald delivered his first “state of the province” address in Halifax in front of the leading lights of the local business community. His message for Ottawa: “I have two priorities — the fiscal imbalance and the Atlantic Gateway [infrastructure project].” Not so subtle code for, “send the cheque Mr. Flaherty.”

Just a few days before that, almost at the same time that Graham was taking his oath of office, Premier Danny Williams was basically running the Prime Minister out of Newfoundland and Labrador on a rail. Williams wanted a guaranteed continued flow of federal cash. Stephen Harper, quite rightly, was not prepared to give him that. What was the message for Ottawa in that exchange? “Play ball with Danny, or he’ll take your ball and send you home.”

This is how the fiscal game is played in Canada. Provincial cabinet ministers talk to Ottawa and make the case for “fairness” — to be followed, if that doesn’t work, by public finger-pointing and mutual blame. All of this is the natural result of lost accountability. It is what happens when one government collects the taxes and another government spends them.

Yet, despite two recent serious reviews of the federal transfer systems in Canada, one by the provinces and one by the federal government, neither one recommended fundamental change to the system itself.

For too long, the Atlantic Provinces have struggled under the burden of federal transfers: Public cash drives out private capital and keeps labour productivity artificially low.

New Brunswick seems to be focusing on actually solving the problem. Their early efforts are focused at growing the economy by reducing the burdens of government and empowering individuals to make their own choices. Focusing on what the province is going to do and not starting with how the rest of the country can help.

It seems that in New Brunswick, the tin cups of traditional Canadian fiscal federalism are being slowly beaten into plough shares. Let’s hope others follow that laudable example and get to work.

Charles Cirtwill is Acting President of the Atlantic Institute for Market Studies, a public policy think tank based in Halifax.