Alec Bruce, columnist for Times & Transcript To understand just how malleable political ideology is becoming in these days of economic crisis, look no further than the New Brunswick Liberal government’s classically Conservative budget, unveiled Tuesday. The centrepiece of this document is a $380-million tax cut, to be phased in over the next four years, benefiting individuals and businesses. Premier Graham says the measure is necessary to help people deal with “challenging times.” His finance minister, Victor Boudreau, says it’s key to attracting others “from around the world.” The degree to which these claims are credible depends entirely on conditions no one can yet foresee. What is clear, however, is that the wall that traditionally separates the right and left wings of fiscal policy is crumbling as government leaders of every stripe scramble to distribute helpful bromides to an anxious public. In fact, there is the slight odour of desperation wafting from the pages of this budget. The $7.8 billion package increases the province’s net debt by nearly $1 billion. This year’s $741 million deficit includes $300 million in offsets to cover public pension plan losses. Meanwhile, the government has taken a sharp axe into its own backyard, cutting 700 civil service jobs and freezing the wages of those who remain. Under the circumstances, what other choice did the province have but to break from type and give taxpayers the relief that conservative pundits and think tanks have always insisted they so richly deserve? Indeed, the relief is broad. According to the new regime — which will eventually replace the four-rate, four-bracket system with a simplified two-rate, two-bracket program — an individual earning $25,000 in 2009-10, will pocket an extra $202. For a single-earner family with an income of $40,000, the savings is nearly $300. What’s more, the plan doubles the province’s allowable tuition rebate for university graduates who work in New Brunswick to $20,000. It raises the Low-Income Senior’s Benefit from $200 to $300. And it promises to reduce the business tax rate to eight per cent, which will be the lowest in the country. Frankly, there is much to admire about this shift to the pragmatic end of the political spectrum. In troubled times, the last thing any government should do is maintain insupportably high tax rates. U.S. President Herbert Hoover tried this back in 1932, only to see government revenues plummet by 50 per cent in one year. To this extent, I agree with Charles Cirtwill of the Atlantic Institute of Market Studies when he says the New Brunswick government has taken a laudable step “in reducing their public service and investing in people.” Still, there is a danger in attributing too much macro-economic value to any single fiscal maneuver. If you want proof, simply follow the sad, sorry tale of AIG in the United States. After receiving billions of dollars in federal bail-out money, it proceeded to pay millions of dollars worth of bonuses to the very employees who landed the company — and much of the financial services industry — in the soup. The U.S. government balked, and the matter is likely to end up before the courts at a cost of millions more to America’s long-suffering main-streeters. All of which speaks to the law of unintended consequences. There is very little evidence that tax relief, alone, is fiscally stimulative in any large, enduring way. For example, I’m not necessarily going to take my windfall and invest in the social and commercial architecture necessary to a recovering economy. In fact, I am more likely to save it, tucked away in a GIC, where it will do no one, but myself, any good at all. And even if I were inclined to reconstruct the provincial economy one meagre dollar at a time, on what would I spend? Just as the art of government should defy ideological extremes, so should the craft of economic stewardship reject monolithic, simplistic solutions to complex, nuanced problems. By all means, bring on the tax cuts, but don’t forget to spend on research and development, arts and culture, information technology and urban infrastructure. That’s neither liberal nor conservative. It’s just common sense. Alec Bruce is a Moncton-based journalist. His column appears in this space every Tuesday and Thursday. He can be reached via: www.thebrucereport.com
