Public service cuts and unfair tax regimes will not solve New Brunswick’s economic challenges

The coronavirus pandemic has thrown up major public policy challenges that political classes in New Brunswick will have to deal with for the next decade and maybe more.

In addition to public and private debt, the economic crisis we are now in, climate change is an increasingly urgent problem requiring public policies to correct the market’s inability to divest from fossil fuels.

Faced with our current challenges, public debate in New Brunswick requires an injection of progressive and radical new ideas, ones grounded in goals of greater economic equality, inclusion and social justice.

Currently, there has been a sad lack of such ideas, as the province’s establishment consistently rallies around right-wing think-tanks, which present public policy in ways that distort our challenges.

The province’s right wing intellectuals, with much fanfare from the province’s economic elites, routinely promote the idea that the province’s fiscal situation is dire, and that we must make major public service cuts if it doesn’t want to drown in debt and population decline.

Ironically, it is precisely this advice that got us in a pickle over debt. The debt problem referenced by economists such as Herb Emery and Richard Saillant was created under Shawn Graham’s Liberal government (2006-2010). It was the direct result of needless income tax cuts, which blew open a $360 million deficit in the province’s then $7 billion/yr budget – about 5 per cent of its budget. His Conservative successor, Mr. Alward (2010-2014) dragged his feet for most of four-year term before cancelling them. Those unaffordable tax cuts made the province one of Canada’s most indebted provinces.

Any public official in the finance department could have advised Mr. Graham against this course of action and maybe some did. In Mr. Graham’s defense, he inherited a bad hand dating back to the McKenna years. After 30 years of austerity and attrition, New Brunswick has very little public sector research capacity to help direct public policy.

So the province relies largely on outside consultants, many of them with business-friendly firms whose advice is more ideological than in the public interest. In 2009, Mr. Graham, fashioning himself a reformer, relied for tax policy advice on the Atlantic Institute for Market Studies (AIMS, then chaired by John F. Irving of Commercial Properties Ltd, the province’s most important urban landowner).

Now folded into the Fraser Institute, AIMS was set up in the 1990s by American conservatives, who wanted to reduce the tax liabilities of high income groups for social spending that mostly benefited workers.

It is not surprising therefore, that the Graham tax cuts benefitted wealthy families far more than anyone else: 60 per cent of the tax cut went to the 20 per cent of individuals earning more than $80,000; about 18 per cent of it went to the top 1 per cent of income earners. This massive spending on the rich is responsible for the province’s fiscal woes.

Paying it back with cuts to post-secondary education, social assistance, public service spending, etc. has meant that some individuals have had to work a lot longer, harder, for less pay, often in the service of the same wealthy families who most benefited from the tax cut.

And when taxes aren’t cut for the wealthiest families, our province’s provincial property tax assessments low-ball the properties they own.

As the CBC’s Robert Jones has reported, Irving’s new headquarters was assessed well below cost—something homeowners in our small towns and villages can only dream of. The reason? According to one expert cited by Jones, because the provincial assessment office is understaffed and lacks expertise to take on a big landowner (Irving’s Commercial Properties Ltd is the province’s largest urban landowner).

On just this one property, the public loses about $1.5 million per year in revenue as a result.

New Brunswick has rising debt liabilities, but this is not because of government largesse, or New Brunswickers’ inability to cut spending. Rather, the problem is that the province’s establishment is completely out of step with the realities of the province.

These realities include miserly social assistance rates that have created a homelessness crisis, the lack of affordable day care, hospitals with PPE shortages, privatized and inadequate long-term care for our elderly, lack of public transit, inadequate protections for service sector workers kept permanently on part-time hours to avoid being paid benefits, and an outdated Crown Lands and Forest Act that precludes community forestry and value-added industries, which force workers to search for employment outside our region.

The future of New Brunswick rests on embracing more progressive ideas. If we want to avoid a Great Depression and limit the impact of climate change, we will have to rebuild our communities, and capacity in our public sector—especially independent policy research capacity in our civil service.

Thus far, the establishment has failed to pivot the province towards a more realistic, equitable and just future. Moreover, it deliberately forgets its own role in creating many of the problems we now face.

A version of this commentary was published in the Telegraph-Journal and The Daily Gleaner.

Matthew Hayes is a sociologist and Canada Research Chair in Global and International studies at St. Thomas University. His book, Gringolandia: Lifestyle Migration under Late Capitalism (University of Minnesota Press) explores global inequality in the lives of North American migrants to Ecuador.