April 26, 2002 Halifax Herald

When financial reality hits, it hurts

SINCE FINANCE Minister Neil LeBlanc presented his government's budget to the legislature, much of the ensuing commentary, including opposition bluster and that of special-interest groups, has bordered on the unbelievable. Do these people need to be hit over the head with a sledgehammer before they can grasp the fact that the province is broke and poor, or are they motivated by a deep-rooted belief that the proverbial money tree really exists and that governments can tap into it?

Let me explain the province's financial plight using this easy example: A mythical family of four, with home, furnishings, cars, etc., fully paid for, have ample income to fund a comfortable lifestyle. Not happy with this idyllic state of affairs, they want for non-essential exotic vacations, etc. To sate their lust for these luxuries, using assets as collateral, they begin to borrow. Then one day, house and other assets mortgaged to the hilt, they go to the bank for more and are refused. In fact, the bank will only advance them money enough to keep them afloat if they agree to a responsible budget-management program. The party's over and harsh reality needs to be dealt with. Nova Scotia has reached this stage.

Much of the province's financial problems, besides past mismanagement, stems from the reduction of federal equalization payments. These payments, at their height, saddled it with a highly paid bureaucracy and many non-essential programs that it now can't afford to maintain. The pain has trickled down; reduced provincial equalization payments to municipalities have saddled poor municipalities with bureaucrats and services they can't afford. And aggravating the problem, the bureaucrats are crying for more. Unfortunately, in particular for the poor, my guess is that they will get it.

As there is no other viable way left to finance increases, more bureaucrats will have to be laid off and essential services reduced further. The federal government is not a saviour; although it has surpluses, it has them only by cutting federal services, including the Armed Forces, to bare existence levels. In fact, unless Nova Scotia's politicians find the courage to draw the line in the sand and bring responsibility into play in these matters, the cycle will continue until nothing is left.

There is no easy fix for the province's dilemma. Increased taxes and user fees will help temporarily, but in the long run will cause more harm than good. Businesses don't normally locate in places where they and their people are taxed to death. In fact, such increases will eventually cause existing units to relocate or halt expansion. This is assured by the fact that the competition among North American countries, states, provinces and municipalities, to attract and keep enterprise, is cut-throat and hard-nosed. If a government is not successful in attracting and keeping taxable units, the tax base shrinks or becomes stagnant - not conducive to maintaining essential services at an acceptable, humane level.

Overall, what irks me most at this time of crisis is the negative budget commentary coming from the opposition. Instead of encouraging the government to carry on with its efforts to bring sanity and responsibility to the province's fiscal situation, and suggesting ways that might help, it resorts to issuing vote-getting statements that make matters worse. This is responsibility?

The role of a responsible opposition is more than being negative. It has to prove it is proactive and positive by making realistic recommendations for improvement. In the present case, it must recognize the dilemma the province is in and work constructively with the government to bring it under control. Without such co-operation, future partisan governments will have turns presiding over the affairs of a steadily declining Nova Scotia.

Drastic measures are needed for a cure. I believe that the gravity of the situation, which is causing population decline and economic stagnation, dictates it's time for politicians of all stripes to consider the creation of a debt-recovery government. It should have a mandate of 10 or more years, which will enable it to make and implement the hard decisions needed for recovery. This would also spare us the spectacle of watching parties campaigning every four or five years with promises of doing more with nothing. It smacks of the unreal; they can't - we know it, they know it. All we get are new faces at the table bemoaning the same issues as the last government, and an unproductive opposition throwing snowballs.

To assure long-term recovery, we need legislation in place that forbids deficits, except, of course, in situations that can be labelled dire human emergencies. Also, the wages of the highest-paid civil servants must be frozen and many non-essential programs must be curtailed or ended. Only a non-partisan debt-recovery government is capable of accomplishing such - it doesn't have to act with an eye to positioning itself for the next election.

Nova Scotia can be prosperous again because it has many of the ingredients needed for such. It is strategically located in North America, it has a great moderate climate, does not suffer cold or heat extremes, etc. Its poor status today defies reality.

The time has arrived for us to find the resolve to overcome the debt and the politics of Confederation, which caters to the needs of Central Canada, and undertake a long-term recovery strategy designed to right a sinking ship. It can be done, but not by wringing our hands and waiting for others to do it for us. Hard financial recovery decisions need to be made and implemented, now!

Daniel N. Paul


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