Four words marked the first two years of the Graham Government: “self-sufficiency” (and) “transformational change”.

The self-sufficiency objective was noble in intent but a number of mechanical problems appear to have slowed the train.

“Self-sufficiency” was originally defined as the point at which the province would no longer require equalization payments from the federal government. The off-equalization objective failed to excite because it had little or no meaning for most people. They could not see the personal benefit in a fiscally healthier government.

Equal opportunity (in the 1960s) on the other hand had great traction (and granted, much opposition in the early days) because it was about people and the offer of hope that their lives could be improved.

The second challenge to early adoption of self-sufficiency was government decisions to bail out the Caisse Populaire and to increase taxes. Those decisions were counter-intuitive to the idea of self-sufficiency.

The third hurdle was a twenty year time-line. People know intuitively that twenty years is beyond the term of this or virtually any government in a developed society, so there is no accountability in the promise.

Another difficulty with the notion of self-sufficiency is that we live in an interdependent world.

Anyone who doubts this need only consider the domino effects of collapsing oil prices, the near collapse of the U.S. financial system and the subsequent global recession that impacts virtually everyone. As the Governor General said recently a “fend for yourself” mentality has no place in an interdependent world.

The second two words in the equation were “transformational change”. It started with early French immersion. That ran into a brick wall and ended in compromise. Then there was the rationalization of post-secondary education. That also ran into a wall and ended in compromise.

The energy hub in Saint John was supposed to generate transformational change. It may yet do so but recession, tight credit and a downward spiral in oil prices will almost certainly delay this realization for a year or more. Tax reform was a well-intentioned and needed change that will likely be side-swiped by recession.

That brings me to the question of how we deal with recession. There has been much talk about fiscal stimulus. Some suggest tax-cuts to stimulate the economy. Others suggest infrastructure investments and investments in people through Employment Insurance and funding credits for seniors.

Opposition parties say the federal budget must expand employment insurance to put more money into the hands of workers left jobless by the recession. Canada’s auto industry is shedding jobs. Our forest industry is shedding jobs. People without jobs benefit more from Employment Insurance payments than tax cuts. They would also benefit more from the jobs that could be created by an infrastructure program.

While the need for fiscal stimulus has been widely accepted, its exact form remains a subject for debate. For a fiscal stimulus to increase growth quickly, it needs to focus on spending increases and temporary tax rebates for low and moderate-income families who are more likely to spend the money than save it.

An argument put forth in favor of corporate tax cuts is that they will lower the cost of capital and thus provide an incentive to invest. Theoretically, businesses respond to lower costs of capital by increasing their investment outlays.

However, economists have determined that the cost of capital plays a small role in determining investment. The more important factor is projected sales growth. Without real prospects for growth, businesses have little reason to undertake what could be risky investments, regardless of the cost of doing business.

Finance Minister Flaherty has floated the idea of personal income tax cuts as a stimulus. He may be missing the point. Consumers, post-Christmas are beginning to show less interest in spending than in keeping money in their pockets to pay down household debt and save for harder times.

The value of infrastructure spending is that even before shovels hit the ground, the announcement prompts borrowing and lending, a particularly useful result in a credit crunch.
Finance Minister Boudreau, like Mr. Flaherty is facing some tough decisions in the weeks ahead.

He’s already acknowledged the budget will read deficit as a result of stimulus that will be added to the New Brunswick economy. Wise investment in essential infrastructure and business expansion that creates long-term sustainable jobs will go a long way towards reinforcement of the road to a more self-sufficient provincial government but more importantly it will help to create a more sustainable economy.

Barack Obama will lead the parade after January 20th. Mr. Flaherty will show his hand on January 27th. Mr. Boudreau will follow in March. May they all move responsibly towards better times.

W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at mailto:bill.bellstrategic@nb.aibn.com