Supply and Demand

Dan Leger writes a worthy column in today's Chronicle Herald. I hope Nova Scotians are paying attention. His message is that we've got to back out of the "private financing" is bad mentality, something that New Brunswick is easing out of and now gives them success.

Leger is right to lampoon this province for having no evident economic growth principle beyond demanding more money from Ottawa. Do we have no shame? Even if it was our money that seeded the growth of the West, where's the pride in taking money off them now with no end in sight?

Increased equalization may give us a fleeting sense of triumph when in the long run it really only solidifies in our souls a "can't do it but for them" mindset. In fact to answer Leger's question, I fear that has become the defining principle of economic growth in our fair province. We must shake it loose.

Where is the spirit of those of our ancestors who founded Canada? They didn't demand money from government, either local or European as if it were an entitlement. Individuals built up the economy on their own in one of the toughest locations on the continent. And now, we've grown so dependent on the state that we've forgotten that.

I take issue with Leger's statement that government should partner with business though, because that's a recipe for corruption and disaster. Government should in fact be a bystander. It should get out of the hair of businesses who are working to create wealth by keeping taxes low and regulations to a minimum.

Enterprise oriented individuals may complain about Rodney MacDonald's equalization pandering and old style business subsidizing, but he will only stake out so much political capital on taking the province where it doesn't want to go. Unless we get more demands like Leger's, the Premier won't free the market.

New Formula or Old, Nothing Will Change

Governments, not people, benefit in the great Canadian equalization scam. That's my take and I believe it's more or less what Charles Cirtwill, acting President of the Atlantic Institute for Market Studies, writes in a Chronicle Herald op-ed today. He concludes:

The federal government met its commitment to bring equalization back to a stable, predictable formula. The problem is that the prediction inflates federal costs and expands provincial demands, with little in the way of evidence that either of those things will deliver the "reasonably comparable levels of service" promised in the constitutional guarantee of equalization.

One thing is certain: Both sides are wrong.

The old approach of special accords and side deals had to go. But non-renewable natural resources will never slingshot a province, any province, off of equalization as long as those resources are included in the equalization formula. Worst of all, the new formula is sufficiently attractive that few provinces will resist it for long; and that means we better get used to "have-not" status around here, just beggars along for the ride.

What does he mean? Well, Nova Scotia doesn't want its resource non-renewable revenues included in equalization. No province would. Fortunately, the province has a good excuse: it's a have-not province that needs to use the revenues to become self sufficient.

Too bad the province has shown weak resolve in moving towards self sufficiency. The 2007-2008 Nova Scotia budget included an unsustainable spending increase of more than +6%. It was balanced only because Nova Scotia had more federal transfers.

If the government really wanted to turn Nova Scotia around, it would use equalization as a buffer for taxes, not spending. We ought to take the trade of a few years of sub comparable services for sub comparable taxes. Give reason for the economy to grow. Give reason for businesses to start or move here.

But Nova Scotians don't want to go the hard way. So who is Premier Rodney MacDonald to lead the other way? Spending more money may help governments stay in power, but it doesn't help the province out of poverty. And so, we trade a few piddling social services for our entire future.

Michael Savage's Coercive Benevolence

Today's Chronicle Herald features a fluff piece about Dartmouth Cole-Harbour MP Michael Savage, whose political philosophy is to "help people who need help and not those who don't."

Reports Sherri Borden Colley at Mr. Savage's nomination meeting:

But today, for perhaps the first time in generations, "we have a federal government who I don’t believe care about helping those who most need help," Mr. Savage said to applause.

"The budget of 2007 confirms this disgraceful lack of concern for Canada’s least fortunate."

Mr. Savage cited the exclusion of Aboriginal Canadians, low-income families, students in need and literacy groups as examples of those forgotten in the Harper government’s federal budget.

At the superficial level, Mr. Savage's rhetoric is reasonable. Helping people in need is unopposable. And it's true enough that Jim Flaherty's budget does not have boosts in funding to many "least fortunate" interest groups.

Going deeper, Liberalism's weaknesses show through. In particular, the claim of helping people in need is questionable because of how that help is funded. Liberals neglect that tax dollars are the result of coerced government actions. Give the state money or the state will put you in prison.

So while, helping people is a noble goal, helping people using the proceeds of force is not. If I gave the pan handler at the intersection $50, you would hardly commend me for being generous if it's because I threatened 50 people with jail unless they gave me $1. When the taxman does it, backed by majoritarian government decree, it doesn't make it right either. This is not to say that no taxation is justified, but it is to say helping people is not quite the description of actions that originate from oppression.

Moreover, while Liberals such as Mr. Savage decry a "disgraceful lack of concern" by the state, individual concern seems to be exempt. If the state does not meet a perceived funding gap, individuals are not precluded from meeting the shortfall. Imagine that every concerned Liberal (or New Democrat) voluntarily donated 5% of his or her income to the groups they allegedly care so much for. They could. But don't. In fact a smaller proportion of Canadians, in all our left leaning compassion, donate to charity than Americans.

Encouraging the state to rob Peter to help Paul is like cheering for totalitarianism. Keep the state out of our lives and let individuals who are interested in helping help out of their own free wills.

TrentonWorks Closes Due to Losses

The closing of the TrentonWorks railcar plant in Pictou County will cost 330 jobs, but given the losses the plant was throwing up, who can really blame the management?

The plant lost $2.2 million dollars in after tax dollars this second quarter (ending Feb. 28) according to the Chronicle Herald, but that's just one way of putting how bad it was. Writes the Greenbrier Companies:

The net loss for the current period includes a special charge of $16.5 million associated with the impairment of assets at the Company's Canadian manufacturing operation, and an $8.6 million tax benefit associated with the write-off of the Canadian investment for tax purposes, for a combined loss of $7.9 million, or $.49 per diluted share. In addition, the net loss for the period includes operating losses of the Company's Canadian facility of $2.2 million, or $.14 per share.

Big figures. Late nights with accountants and tax lawyers. And if not for the plant in Nova Scotia?

Exclusive of the Canadian facility's operating losses, the impairment charge, and the tax benefit, Greenbrier's earnings for the quarter were $4.0 million, or $.25 per diluted share.

Corporations are favourite targets of populist attack because they are big, yet as big as they are, they are weak. When consumers stop purchasing, they lose money and quickly retreat.

In this case, criticizing Greenbrier won't get the plant back. Perhaps government "help" could have changed things, but at what cost? Giving the plant $2.3 million a quarter still won't be able to make it beat a Mexican site.

So what's Nova Scotia to do? Well, plant closures are a fact of economic life. This goes back to industrial revolution times. The key is to create an environment where new plants are encouraged to spring to life. The NDP certainly won't help do that, so it's all on Progressive Conservative Premier Rodney MacDonald.

Getting Over Equalization

The Chronicle Herald reports today that, "Foreign Affairs Minister Peter MacKay says it’s time for Nova Scotia’s premier to move beyond the rhetoric and recognize that the federal budget and new equalization deal were good for the province." That is not unreasonable.

The Nova Scotia government was recently given the choice to either get more money now and lose the Atlantic Accord, or to keep the Atlantic Accord but to get less equalization money. For the time being, the government has chose the former.

Premier Rodney MacDonald however, claims Ottawa forced Nova Scotia to tear up the Accord in order to get more federal money now. Nova Scotia was certainly given a tough choice, but it is exaggerated to say the choice was "forced".

Perhaps forced is correct if Nova Scotia was going to balance its budget again and still spend at an unsustainable rate. Nobody says the province has to spend so much. Certainly not at a higher rate than inflation as in this year's budget. Then the province could could keep the Atlantic Accord.

It's time to stop crying for federal money. Sure, equalization is a constitutional right, but it's a drug that only makes the province worse off. While we're hooked, it's hard to see that our economy will actually improve.

What is There to Come Back to?

The front page story of the Halifax Chronicle Herald chronicles some of the difficulties of attracting Nova Scotians back from Alberta.

It's always a worry how politicians will react when they see stories like this. More expensive websites? More PR campaigns? More sponsorship programs? More subsidies?

You never know. But what about concentrating on making Nova Scotia a better business environment? If you build it, they will come. Alberta doesn't run ad campaigns. People just know that's where opportunity is.

Now there are those out there who say it's because Alberta has oil and that's true. The question is why we sabotage ourselves by not matching their other advantages.

For example, Alberta scores 2nd out of the 50 US states and 10 Canadian provinces for economic freedom. Nova Scotia scores 56th. Businesses (and jobs) aren't going locate to poor economic environments. Or if they do, they'll quickly go out of business.

It's time politicians worked on the roots of the problem. And as citizens, let's stop whining for social programs for 10 years. Then, when the economic pie is big enough, go back at it.

2007-08 Nova Scotia Budget

The Nova Scotia Budget is out. "Balanced" though it's supposed to be, spending will out pace economic growth.

Schedule 15 shows that the programs expenditures forecast for 2006-2007 is $6.495 billion. The 2007-2008 programs expenditures estimate is $6.917 billion. That's an increase of 6.5%. Meanwhile, the Nova Scotia Real GDP Growth rate is forecast to be 2.2% for both 2007 and 2008 (on p. B8).

Yesterday, the Province embarked on a "sustainability" campaign. Given that Nova Scotia's population rate is stagnant and that retirees rate is increasing, one just has to wonder about the commitment to economic sustainability.

I guess sustainable means using money from Alberta and Ontario. Sustainable off the backs of others.

Nevertheless, budgets are political documents. The Tories are in a minority position (propped up by a Liberal shell) and this might just be all they could do. It's no doubt better than what the NDP would have done.