Financial health is worth the strain
OK Manitoba – take a deep breath.
There are two points at which getting healthy feels great – the day the decision is made get off the couch and the day the results start showing. But there are tough moments in between: the feeling of impending cardiac arrest on the treadmill; the embarrassment of checking calorie counts before ordering a burger; and, the heated internal debates about whether to have one last cigarette.
Restoring Manitoba’s financial health was the defining issue of the last election and everyone recognizes the obvious benefits of reducing a debt that already costs $873 million in interest payments every year. But doing the right thing isn’t easy.
There may be wage freezes and unpaid days off for government employees and labour leaders are wary.
“I hope that there can be some reasonable and real discussions,” said Kevin Rebeck, president of the Manitoba Federation of Labour. “But if workers’ rights are under attack, I don’t see how we don’t challenge that every way we need to.”
It seems labour will resist wage freezes and unpaid days off. Such necessities are unusual in the well ordered world of bimonthly public sector paycheques, but they’re utterly ordinary for everyone else. Every newspaper reporter lives with the omnipresent potential of a wage freeze. Farmers have unpaid days off whenever fields are too wet for seeding. Government employees can survive these things too.
Union leaders aren’t the only ones out of breath.
The provincial government announced a billion dollars’ worth of capital spending for healthcare projects are now on hold. The previous government promised the projects without a plan to pay for them. So, rather than blindly going forward, the new government hit the pause button to hammer out financial questions and re-examine priorities.
This left some business leaders a little light headed.
“If you starve your system of capital for even a few years, you see a deterioration,” said Don Leitch, president of the Business Council of Manitoba.
In reality, some of these projects may well go forward in some form in the future, but the financial planning needs to be done first. In the meantime, the province remains committed to a billion dollars a year in infrastructure spending. If a financial diet includes annual investments of a billion dollars in infrastructure, starvation seems unlikely.
Some economists are also worrying about the impact of weaning the economy off borrowed government money. They suggest that debt-fueled government spending spurs economic growth.
Let’s see how that plan’s been working lately:
- 2012-13’s deficit was $560 million and real GDP growth was 2.7 per cent;
- 2013-14’s deficit was $549 million and real GDP growth was 2.6 per cent;
- 2014-15’s deficit was $430 million and real GDP growth was 2.2 per cent;
- 2015-16’s deficit was $846 million and real GDP growth was 1.6 per cent; and,
- 2016-17’s deficit is forecast to be $1 billion with projected real GDP growth of 1.3 per cent.
Those opposed to trimming spending also need to be honest about possible side effects of bloated borrowing. What if their promised economic growth is derailed by unforeseen flooding, interest rate hikes or global economic issues? All of these risks will be more dangerous if the province’s finances are weakened because it has to pay millions more in new interest payments on billions more in new debt.
Everyone knows the government can’t keep borrowing forever and the province needs to restore its financial health. The real question is whether to start that difficult work now or continue to procrastinate. And delay hasn’t worked in the past.
Manitobans have made it clear they want to strengthen the province’s finances. There will be some tough decisions, but that’s normal and it’ll be OK. Most importantly, getting back to balanced budgets will be worth it.