It’s at risk of being lost amid the commotion over cuts to the film tax credit, but last week’s budget, for better or worse, marked a milestone on the icy road to wherever it is we’re going in the rickety wagon of Nova Scotia politics.
That is, after years of working up to it, a government has finally touched the brake on public spending and seriously tried to streamline public services. Backed by major reports advising this, considerable public support, a somewhat improving economy and dry runs by previous governments, the budget, in the main, represents a large consensus. Significantly, I thought, neither the opposition parties nor the public sector unions complained very much.
The broad strokes of this budget would likely have been delivered by any party in power just because the forces are ripe. As for the more Liberal-specific part, this is where the better or worse comes in. How smartly it’s applied and what the follow-up is will be key.
The bust-up over film tax credits indicates how tricky this is. Like Darrell Dexter and the Yarmouth ferry, Premier Stephen McNeil is right to say that the subsidy is way too expensive and something must be done. Like Dexter, his error was one of process — lopping the head off the thing and hoping the logic of cutting an unsustainable subsidy would prevail. Unlike the NDP, however, McNeil seems to be ‘fessing up to his mistake immediately by belatedly meeting with the film industry.
Some kind of publicly saleable solution is required here, otherwise McNeil’s brand takes a bad hit right away. Without it, the question hovering in mid-air will be: Is rude decapitation followed by political mayhem going to be the order of the day as the ongoing review of government operations rolls out? To make the review work, the government needs as little uncertainty as possible from within the public service.
This was an administrative — as opposed to visionary — budget, which aims to repair the boat but doesn’t yet do any fishing, except perhaps in P-12 education.
Big fish issues like health care — can the increase in health funding really be held under one per cent? — an anti-poverty strategy, rural economic development, rejigging the tax system, forest policy, energy and so forth are yet to evolve.
This government, however, is better placed than its predecessors to make all this work. McNeil has a fairly broad consensus on his side, if he can keep it. Economically, he’s also about to cash in, at least in the short term, on the projects Darrell Dexter thought he had set up for himself — the Irving shipyards contract, the Halifax convention centre and the Maritime Link. The political timing is also right. When everything is on track, the pain comes in the early budgets, the goodies in the later ones.
The budget also places the government in the fat centre of the political/economic spectrum. It was preceded by a slanging match of fairly neurotic economic views, notably in these pages, from both the left and the right.
Either we’re on the brink of becoming an “economic Detroit” and we’d better cut taxes and radically slash the civil service lest we perish, or our debt and deficits are no big deal and more public spending is the solution.
Although cutting taxes in a targeted manner is always an option, large-scale tax cutting to stimulate the economy either ends up ruining your public finances, as in New Brunswick, or becomes an instrument of right-wing political manipulation, as with the Harper government.
The argument that deficit spending boosts economic growth is also misguided. It’s true that it works — for large, self-contained economies like the U.S.’s, which has kept its economy afloat by doing so, or the EU, which is following the U.S. lead after its failed experience with austerity.
But these economies mostly produce what they consume. We produce only a minimal amount of what we consume. We may stimulate the consumer into a temporary blip of retail spending, but otherwise we’re mostly stimulating the places where they make the goods. If deficit spending boosted the economy in a small province, we would have boomed during the 1980s instead of courting ruin.
The left’s admonishments that our finances aren’t as bad as they’re made out to be and that there’s no need to obsess about them, however, are correct. Indeed, obsessing about balancing the budget as quickly as possible may have led the McNeil government to its blind spot about the film tax credit, seeing it as an easy grab on the way to the holy grail.
Interestingly, I heard Premier McNeil says this: the finances have to be stabilized in order to ensure that our social programs are affordable. That’s what Dexter said, too, having got it from NDP legend Tommy Douglas. It’s actually the right attitude. As far as making it work — well, the sage of Saskatchewan is still in a class by himself.
Ralph Surette is a freelance journalist in Yarmouth County. This column was first published in the Chronicle Herald.
Photo: bambe1964/flickr
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