New Brunswick on a path to debt freedom
This column was published in the New Brunswick Telegraph-Journal on April 18, 2019.
Debt matters. Anyone with bills to pay knows that debt can have you drowning quicker than you expect. Governments are no exception. So let’s celebrate the fact that the New Brunswick debt clock is now officially rolling backwards.
For the first time in 13 years, the New Brunswick government is beginning to reduce the province’s $14.1 billion debt.
In the short term, taxpayers will benefit because less debt means lower debt interest payments. And New Brunswick can’t afford higher interest costs. Interest charges on the existing debt is nearly $700 million this year alone.
That’s money that isn’t being spent on anything useful such as staffing ambulances or filling potholes. Instead, it’s being sent directly to the big banks. It’s an incredible waste of money.
You might as well dig a large hole, throw the cash in and light it on fire. At least then New Brunswickers could get some warmth and entertainment value out of it.
The Canadian Taxpayers Federation launched the New Brunswick debt clock in 2014, urging then-finance minister Blaine Higgs to stop the debt clock. The debt has got up a lot since then. But now New Brunswickers can watch the debt roll back in real time at www.nbdebtclock.ca.
After significant warnings from bond rating agencies that determine New Brunswick’s credit rating (affecting the amount of money taxpayers are forced to pay in debt interest costs), the government is finally taking the issue seriously.
That matters a lot because the debt picture in New Brunswick isn’t pretty. Aside from saving serious cash on debt interest payments, reducing the debt is the first tap on the brakes to get the province’s finances under control before it goes over the fiscal cliff.
Carleton University professor Ian Lee predicted in 2017 that, within 10 years, New Brunswick would require a bail-out from Ottawa (i.e. other provinces) – meaning the province would become fiscally insolvent. That’s a bit of a sugar-coated term for bankrupt.
That could mean severe policy changes forced upon the province. By taking control of the situation now, the province can control its own policy decisions.
Now that the province is on the right track, it’s crucial for Premier Higgs and Finance Minister Ernie Steeves to stay on a steady course of debt reduction.
This isn’t the first time a New Brunswick premier has begun reducing the debt. But premiers past have failed to stick the landing.
Here’s a brief look back at recent history:
Liberal premier Frank McKenna paid down debt, but let it go up again. Then he got the net debt going back down, only to let it go up yet again.
Taxpayers were again taken on a bit of a debt rollercoaster ride by the next premier. Between 1999-00 and 2001-02, New Brunswick went on a two-year stint of debt dieting under PC premier Bernard Lord, with the net debt declining both years. Alas, it shot back up the next year.
Fast forward a couple years to 2004-05 and Lord had things under control again and the net debt dropped three years in a row.
The net debt rose again in 2007-08 under Liberal premier Shawn Graham, and under successive PC and Liberal governments, it’s been rising ever since.
So Higgs and Steeves won’t be the first elected officials to start reducing New Brunswick’s net debt. But they can be the first to stick to it.
Who among us doesn’t dream of being debt free? It’s an important goal. If this government stays the course on debt reduction, this could be the first time in New Brunswick’s recent history that taxpayers can watch their debt roll down to zero.
Paige MacPherson is Atlantic Director of the Canadian Taxpayers Federation.