New Brunswick’s 2010 budget is based on three strategic initiatives – spending a record $896 million on infrastructure to add strength to the economy; reducing taxes to create a more competitive business environment; and investing in new measures to help low-income New Brunswickers out of poverty.
In effect, the government is taking a calculated risk – spending more now, to put New Brunswickers in a better economic position in the future. To minimize the extent of this risk, legislators also must make a commitment to reduce expenditures and set benchmarks to measure New Brunswick’s fiscal progress.
The idea is to bring the cost of governance down as economic development drives revenues up, until government spending is in a state of sustainable balance. The longer legislators delay fiscal reforms, the more unbalanced the ledger becomes and the greater the risk taxpayers must bear.
MLAs can restore balance to the provincial budget through policies that yield greater value for every tax dollar invested. By spending strategically in some areas and reducing costs overall, this province should be able to achieve a state of economic self-sufficiency.
Despite its rising debt, New Brunswick is in a privileged economic position among the Atlantic provinces. While over-dependence on federal equalization payments has made public services vulnerable across the region, legislators are already taking important steps to change New Brunswick’s economic output.
According to analysts at RBC, New Brunswick’s two-year, $1.6-billion infrastructure program and $380 million in scheduled tax cuts helped the province escape the worst of last year’s recession. The Atlantic Provinces Economic Council and Atlantic Institute for Market Studies have also praised the direction in which New Brunswick has been moving, noting that some of this year’s big-ticket budget expenditures are calculated to yield an economic return.
Tax cuts will improve New Brunswick’s reputation as a competitive business environment, returning revenue to the government over the long term. So will reducing power rates – a benefit that will be accompanied by the elimination of $3.2 billion in government-backed debt if the legislature approves the tentative agreement to sell some NB Power assets to Hydro-Québec.
Running a $749-million deficit in a single budget year isn’t ideal. It isn’t the end of the world, either. MLAs of both parties need to take stock of the advantages that this deficit spending will provide, then devise a responsible plan to return the province to balanced budgets as the economy revives.