This piece first appeared in the Telegraph-Journal.
As the vaccination campaign progresses, finance departments across the country are starting to shift their focus from mitigating COVID’s economic impacts to playing a role in its recovery.
As things start to get better, governments can expect their revenues to go up and their deficits to shrink.
That’s what we’ve seen happen in Alberta, where the deficit is down two billion dollars from last year. It’s also what we’ve seen happen in Ontario, where it’s down $5 billion. And it’s what has happened in Prince Edward Island, where it’s down $8 million.
But that’s not what what’s happening in New Brunswick. Unfortunately, New Brunswick has changed course from fiscal discipline with its deficit up by $230 million compared to last year.
As much as Finance Minister Ernie Steeves wants to claim that “this is the budget New Brunswick needs,” or that this deficit is about “providing the necessary supports,” this doesn’t square up with the province’s economic performance from the past year when it actually spent significantly less
Last year, New Brunswick posted an estimated $12.7 million deficit, the smallest in the country and by a significant margin. It was actually 10 times smaller than Prince Edward Island’s, despite the government having about five times more in revenue to work with.
New Brunswick’s economy fared pretty well, despite lower government spending.
This doesn’t mean New Brunswick’s economy got off unscathed. The province’s economy shrank by 3.9 per cent in 2020, according to government estimates. Still, it does not come close to economic losses suffered by provinces that spent more, like Ontario, Alberta, or even Newfoundland and Labrador.
It simply means that the government’s previous approach of very targeted measures and fiscal restraint worked significantly better without the additional burden of more debt.
It’s not like the government’s reversal on its policy of fiscal restraint comes at no cost to New Brunswick taxpayers. In fact, the interest payments made on the province’s debt can become a significant burden, not only for today’s taxpayers, but to future generations as well.
By the end of this month, the government of New Brunswick expects to have a total of $13.9 billion in debt. That debt has accumulated from a century and a half of deficit spending that the province hasn’t paid back since confederation.
Interest payments cost taxpayers $650 million last year. To put this in perspective, taxpayers paid $25 million more on interest payments than they spend on post-secondary education. That’s 30 cents out of every dollar the government collects from personal income taxes being sent straight to the pockets of financiers on Bay Street.
The province should have stayed the course with their previous disciplined approach to the pandemic. Instead, it has gone back to its old way of spending more to fix a problem it didn’t really have.
As they say, if it isn’t broken, don’t fix it.