MacLellan’s last budget
by Fred McMahon


The Moncton Times and Transcript, The Halifax Daily News

New Brunswick may find itself turning increasing towards Quebec and Central Canada, and away from a Nova Scotia-New Brunswick axis in future years. Nova Scotia has lurched down a path likely to create increasing economic stagnation, while New Brunswick and Central Canada move into a world of greater prosperity.

This week’s budget from Nova Scotia’s MacLellan government – with its massive deficit – will do great damage to the Nova Scotian economy and weaken job creation in future years, despite the unprecedented opportunities the province now faces.

Nova Scotia’s fiscal disarray and focus on increasing levels of government spending stand in sharp contrast to the policy regimes developing not only in New Brunswick, but also in Ontario and Quebec.

All the economic evidence in the world shows that bloated, patronage-ridden government, to which Nova Scotia is returning, destroys economic hope and prosperity, creates new levels of dependency and leads to a politicized economy where who you know and which party you support is more important than competence, efficiency, honesty and productivity put together.

This is death to the economy. It stifles growth and job creation; it could well leave Nova Scotia a peninsula of economic backwardness while provinces to our west thrive.

Unfortunately, this statement is not too strong a way to put it. The budget may be the most transparently dishonest ever presented in Canada. At least British Columbia Premier Glen Clark had the courtesy to lie to his voters when he wanted to disguise his government’s deficit spending.

The MacLellan government’s approach is to insult the intelligence of Nova Scotians by laying out a whack of deficit spending and then blithely claiming it isn’t deficit spending. In fact, the government claims it has a surplus of $1.6 million. It has blithely carved out $250 million in spending, called in the Health Investment Fund, and taken it off the province’s books. Counting health fund expenditures, the budget is nearly a quarter of a billion dollars in the red.

The health fund is simply garden-variety health spending by another name, though the government has not provided much information on the fund. It appears the Health Department will administer it, like other health spending, and that it will go to such investments as nurses’ salaries. It is deficit spending, pure and simple.

Governments all over the world – of both left and right – have come to understand the perversity of deficit spending, the mortgaging of the economy to feed today’s political appetites. By piling up greater and greater debt, the government of the day saddles future governments and future generations, with ever higher debt payments and ever less money to spend on social programs.

If there is one place in the world where this should be understood, it is Nova Scotia after the disastrous years of big deficit spending under former Tory Premier John Buchanan.

MacLellan once claimed to understand this. He campaigned and governed on a no-deficit pledge. And now suddenly we have a huge deficit. Even finance minister Don Downe acknowledges this budget isn’t balanced, despite his department’s trickery.

The government claims to be concerned about health care. But, health care is a low priority. Politics trumps everything. Health-care interest groups are already circling around the money like vultures, but they all say one most interesting thing: the new health care money must be spent on health care, not politics like other health care money.

They are tacitly acknowledging the politicization of Nova Scotian health care when they explicitly say they don’t trust the government to spend additional funds. Many call for an independent body – detached from the murky politics of this government – to administer the money.

The MacLellan’s government’s deafness to the lessons of the past – and the possibility MacLellan may be re-elected because of the chaotic Nova Scotia political landscape – create an even greater long-term economic threat. Resource-rich governments can use their wealth to strengthen the economy, but also to undermine it. MacLellan shows every sign of taking the latter approach with off shore resources.

Resource-wealth inflates an economy, and makes it more expensive and difficult for non-resources firms to stay in business. If government soaks up revenues and spends recklessly, the economy further inflates, hitting the rest of the economy with a double whammy.

Government can offset the problem by using resource wealth to provide essential services while keeping taxes low. MacLellan is a tax-and-spend kind-of-guy. He’ll spend every dollar he can to reap political credit. He’s already expecting the offshore to bail him of his wild spending habits through revenues will be minuscule for the next several years.

This is sad when Nova Scotia faces unprecedented opportunity. Free trade, which once made this region strong, is here again. We can sell to the world, and we have the resource wealth to keep Nova Scotia competitive through low taxes. It looks like an opportunity about to be squandered.