by Ian Munro

Former American President Harry S. Truman once famously longed for a one-handed economist. Nova Scotians now may find themselves hankering for a one-handed budget-maker.

On the one hand, the government has named debt reduction as a priority, the debt to gross domestic product (GDP) ratio is forecast to decline, and the amount that we’re shelling out in interest payments each year is on the way down. All of this is good news. Getting debt levels and interest payments down frees up more room for tax reductions in the future, which in turn will make the province more competitive in encouraging investment and job creation. This is the kind of virtuous cycle in which we want to find ourselves in the years ahead.

On the other hand, the ability to make these positive moves is largely dependent this year on the extra equalization cash generated by picking Door #1 in the federal government’s version of Let’s Make a Deal.

On the tax front, Nova Scotians will see increases in the basic personal amount that is exempt from income taxes and the capital tax will decline. But on the other hand, these measures were announced in previous budgets and amounts in question are small. The personal income tax savings this year for a two-adult, single-income family will total a whopping $41. So maybe you get an extra family night at the movies, but the kids will have to forgo the butter on the popcorn.

There’s also a third hand to keep your eyes on as it attempts to reach into your wallet because other charges like user fees for provincial services and liquor prices are going up.

Also, what you don’t see in the budget while your eyes are diverted is a reminder that Nova Scotia still is tied (with Prince Edward Island) for the highest general corporate income tax rate in the country and we rate middle of the pack at best in terms of the small business income tax rate. So there’s another hand, the one waving good-bye as business chooses to locate elsewhere.

In terms of spending, the government at least is trying to rein in the rate of spending growth on big-ticket items like health care; this year’s increase is down to 5.3 percent, in comparison to the eight percent annual increases we’ve seen over the past decade. On the other hand (the weak one, apparently, as the reins aren’t being held very tightly), 5.3 percent is more than double the growth rate forecast for the Nova Scotia economy as a whole. Even more worrying is that net program spending overall will rise by 6.5 percent, almost three times the expected 2.3 growth rate for the provincial GDP.

So, on the one hand, at least the province did not repeat New Brunswick’s performance of rescinding previously announced tax cuts, a budget surplus is forecast, and interest payments on the debt are moving in the right direction.

On the other hand, with greater discipline on the spending side – limit spending growth even to twice the projected growth rate for GDP and you get yourself more than an extra one-hundred million dollars; keep pace with the overall economy and you’ve saved a quarter-billion – we could have gone even further in terms of getting the debt (and future interest payments) down, or exceeded previously set goals for tax reductions.

So in the end the budget does move the yardsticks in the right direction on some measures; regrettably, it could have been so much better.

Ian Munro is the Director of Research for the Atlantic Institute for Market Studies, a non-partisan public policy think tank in Halifax.