Which Future Will Nova Scotians Choose?
How we deal with program review will tell us a great deal about
the kind of future we are building for ourselves
by Brian Lee Crowley
The government of Nova Scotia uses nearly a quarter of the wealth created by Nova Scotians. If those resources are not used efficiently and effectively, the result is a burden on wage earners, industry, and exporters. That burden is as debilitating, and saps our productivity, just as much as telephones that don’t work, electricity that is unreliable, or computers that break down on a regular basis. If Nova Scotia is to be successful as a society, if it is to pay its own way in the world, and provide a decent standard of living for all its people, it has to look to the hard work, resourcefulness, enterprise and self-confidence of its own people. We cannot allow our resources to be consumed by efforts that produce little benefit to society.
That’s really the challenge that the program review now underway in Nova Scotia represents. Will we have the discipline and the foresight to look calmly and rationally at our public spending, and ask ourselves which public spending programs contribute little or nothing to the common welfare, yet cost us dearly by driving us into debt and keeping our taxes higher than they need to be?
The $1-billion we spend in gross interest costs on our existing debt buys us absolutely nothing in terms of public services today. Each time we run a deficit, that means higher interest charges next year, and a rapidly dwindling share of tax dollars available for needed public spending. New Brunswick, which has been far better at controlling public spending than Nova Scotia, shows the benefits of discipline. If this province had the same level of per capita interest costs, we’d have nearly $300-million more to spend on programs like education and health, or on tax cuts, or both. That’s why the real friends of public spending welcome an intelligent program review, one that will eliminate needless expenditures, and allow us to match our means to our most important public needs.
THOSE WHO OPPOSE program review usually cloak that opposition behind a facade of virtue. Every suggestion to rein in public spending is presented as an attack on the poor, or on some vital public service whose absence would impoverish every Nova Scotian. Fortunately for all of us, this view is simply nonsensical; the scantiest familiarity with public spending reveals literally millions of dollars of annual spending that serves little purpose.
Does it really make sense, for example, to spend $65-million a year on Nova Scotia Resources, which is exposing us to huge risks with too little upside potential? Have we really closed the door on the $55-million per year we’ve been spending keeping Sydney Steel going, and is the government’s commitment to getting out of the steel business really ironclad? Does it make sense to keep government-owned golf courses and fancy resorts for the select few who can afford them when they compete directly with their private sector counterparts and cost taxpayers hundreds of thousands of dollars a year to operate? Why are many groups that can easily bear the full cost of their activities subsidized from the public coffers, such as those poor members of the Nova Scotia Yachting Association who got over $56,000 last year?
Why does the Department of Economic Development and Tourism continue to give over $33-million in grants and assistance year in and year out, when the evidence is clear that you cannot buy sustainable economic growth by throwing money at companies? Why are taxes kept too high while offering selective tax breaks to individual businesses when it is far more effective to keep tax rates low for everyone? Why provide long term care beds in high-cost hospitals in Halifax when the Sisters of Charity are willing to provide them at half the cost? Why do government offices pay $10 per square foot over market rates to rent space at the World Trade and Convention Centre? Why does the government hold on to buildings, land and other assets for which it has little use, when selling some of them and paying down the debt would provide a far greater benefit to Nova Scotians? Why does Nova Scotia need hundreds of boards and commissions, when Ontario can get by nicely with a number in the dozens?
Sometimes it is argued that no cuts should be made to public spending unless others make big sacrifices. Who exactly should make sacrifices in order to continue producing steel no one wants to buy? What sacrifices should the average Nova Scotian (earning $20,000 a year) make to preserve the average public sector job (that pays about twice that), unless that job provides a vital public service, and does so efficiently? Why should people who work in stores in the private sector pay more for alcohol so that employees of the government liquor monopoly doing similar work can earn significantly higher wages? Why should local automobile dealerships sacrifice more of their income to subsidize inefficient fleet management by the province, when those companies could provide the same service more cheaply and earn a well-deserved profit along the way?
IT DOESN’T TAKE many questions like these to establish that it would not be difficult for Nova Scotians to fix their deficit problem, to balance the budget, and to cut taxes to boot. This is especially true if we look at the positive effects on economic growth and job creation that sensible policies would create.
But sensible policy requires us to confront an old anti-growth mentality. That mentality, still too prevalent, believes that when a job disappears it is never replaced, that economic change always leaves us worse off, never better. Our reflex is thus always a defensive one: organize politically and pressure governments to “preserve jobs”. And every such job created or subsidized by government is regarded as a social benefit, a contribution to the welfare of all of us.
But in fact the evidence is just the reverse. On the whole, it is those economies that let old, outmoded and inefficient jobs disappear that are rewarded with the emergence of new ones. Just think about places that were savaged in the last recession, like California, Ontario and Massachusetts. This turned out to be an example of what economists call “creative destruction”. In order to make way for the new, things like biotechnology, software development, telecoms, e-commerce and all the rest, the old industries – automobiles, mining, steel – had to be scaled back. And those economies that completely obstructed economic change for decades behind the Iron Curtain fell hugely behind those free economies in the West that have embraced and then discarded whole generations of industries and technologies since the second world war.
Governments are no exception to this rule. If we take more in taxes and employ more people than we need to provide essential public services, then that is a drag on the whole society. More productive economic activity is discouraged because our taxes are too burdensome, and valuable employees are kept working at redundant tasks while new jobs go unfilled.
IF YOU THINK that this is true of far away places, but not of Nova Scotia, think again. We are on the cusp of serious economic growth, thanks to factors like natural gas, the Stora plant expansion, ocean industries, information technology, a bright and well-educated work force and national and world economies that continue to hum. And if we play our cards right, developments like these can be leveraged into even greater growth in the future, through the emergence of a local offshore oil and gas expertise, for example.
Several regions around the province have unemployment rates below the national average, including metropolitan Halifax and the Annapolis Valley. Federal cutbacks, instead of crippling the metro economy, have quickly been more than made up by private sector job creation. We have not even begun to explore the potential this province has to attract investment and create wealth and sustainable, unsubsidized jobs.
Even if we look solely at what a real focused and intelligent program review would cost Nova Scotians, it is still worth doing. After all, the cost of doing nothing is the continuing threat of the collapse of many spending programs as interest costs eat up the province’s revenues. But if we do the smart thing and ask what the benefits are that would flow from making our public sector less costly and more effective, it will be clear that this province has little to lose and a very great deal to gain from seeing program review through.
This article was originally published in The Sunday Herald on January 16th 2000, under the title: “Debt drags us all down”, p. C2.
