Handy guide to the ‘atcon’

For the average NBer, getting a grasp on the size of some of the province’s fiscal issues and financial shenanigans can be difficult. So I am proposing that New Brunswick develop its own unique monetary denomination in order to help interpret the relative importance (in dollar terms anyways) of some of these predicaments. I’ll call this new denomination the ‘atcon’, named after a recent political and financial scandal, and I will set the value of the ‘atcon’ at $50 million dollars. Here’s a handy guide as to how the atcon can be used as a shorthand to denote the magnitude of these issues. All values are approximate.

1. Provincial debt – 140 atcons
2. NB Power debt – 100 atcons
3. Atcon scandal – 1.4 atcons
4. Atlantic Yarns – 1.6 atcons
5. Median NB family income (2010) – 0.001 atcons

Please feel free to add to this list. Send me a tweet (@nbdatapoints) or an email (nbdatapoints@gmail.com) and I will add your contribution.

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Fredericton’s Vision 2020. Now what?

Although I am part-owner of a small business, I am not sure that I would regard myself as an ‘entrepreneur’, and I certainly am not a venture capitalist or an innovator. Nonetheless, as a business-owner, I have a great deal of interest in economic growth, as that growth provides the fuel for my business. Recent downturns in the economy of the Fredericton region have limited the opportunities for growth of many local service businesses, so I was quite interested to see Fredericton release its new economic development strategy, Vision 2020.

Given the economic downturn that has pushed employment downwards in the Fredericton/Oromocto region over the past three years, it is a good sign that local politicians and business leaders are trying to get things back on track. I am encouraged that the City has worked with Oromocto and other outlying municipalities on this. There are some good points in the document, but let me start off with a common misconception that appears on page 10 in the document released by Vision 2020:

“If we can do more to foster a vibrant arts and cultural scene, we will only increase the community’s quality of life and expand tourism possibilities. If the economist Richard Florida is right, it will also foster more creativity across the local economy.”

Problem is, Richard Florida is wrong. The vibrant arts and cultural scene that Fredericton enjoys is a consequence, not a cause, of the bouyant economy Fredericton has enjoyed over the past few decades (up to 2010, anyway). I am not trying to diminish the value of arts and culture, but as a vehicle for the kind of growth the region needs? Sorry, I don’t see it.

[update – Florida has now conceded his approach has failed: http://www.thedailybeast.com/articles/2013/03/20/richard-florida-concedes-the-limits-of-the-creative-class.html. So let’s not hear anymore from him, artistes, OK?]

Growth in government and government-funded institutions during that time has pushed Fredericton’s mean wage upwards much faster than in the province as a whole. High-wage jobs mean greater tax revenue, more valuable properties, and more discretionary spending. That spending stimulates the arts and cultural sectors. Fredericton’s problem now is that new high-wage public sector and para-public jobs are not being created at the rate they once were; the region needs to wean itself off of a reliance on government spending. In my view, that means concentrating on those sectors that can produce high-wage jobs, and, in particular, those sectors that create those jobs via the exporting of goods and services. Since the cultural and tourism industries don’t do either of those things to any great degree, we should not invest scarce development funds in those areas as they are unlikely to produce high-wage jobs. Reading through the document certainly gave me the impression that the authors recognize the need to focus on those high-wage sectors.

One obvious stumbling block in encouraging startups is locating the entrepreneurs capable of getting the job done. Vision 2020 deals with this and related problems in some detail. If we look at some of the existing local startup companies in the ICT/software/hi-tech areas, a number of them are either developing products that resulted from research at UNB, or they were ‘fostered’ by the university research community. There was a mix of innovation and entrepeneurship that led to the creation of the startup. Those factors plus investment capital got the balls rolling. An obvious direction in which to move is thus to increase the amount of R&D being done in the region while fostering entrepreneurial skills amongst those innovators. How can we increase the R&D effort? New money is in scarce supply; UNB is facing budget cuts and likely staffing cuts. It is time for a re-think of how we spend our university dollars. Is it time to change the mission of our universities from one focussed on training/education (where the ‘output’ is a skilled, educated, individual who must then relocate to another part of the country in order to find meaningful work), to a mission that focusses on the university as an innovation engine? I say, yes, that is exactly what we should be doing. Regions in North America that have research-oriented university clusters seem to have dynamic high-wage economies.

Re-aligning our universities will be challenging and politicians will be reluctant to take up the task. NB has some structural problems and one of those is the way we run our universities. Without changing the focus of the universities located ‘Up the Hill’, Vision 2020 will not have the raw material it needs to move forward.

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Can we fix the revenue generation problem?

“We will find efficiences and cut waste”

During election campaigns, political parties make various promises to the electorate. They seldom tell us where the money to fund the programs will come from, and, to be fair, when economies are growing quickly and tax revenue is flowing in, money might very well be available. These days, however, regional economies are not so robust and new dollars to fund new promises are hard to come by. Federal and provincial tax cuts in recent years have further reduced available revenue. Consequently, the new mantra is to make the promises and then state that funding will come from ‘finding efficiencies’ or cutting ‘waste’. It is rare for politicians to admit that certain taxes might have to be raised in order to fund their campaign promises.

Canadians expect to receive similar services from governments, regardless of which province they live in. Provincial governments have to find the revenue to meet those voter expectations. There is not much point in claiming we can eliminate a large number of those services and thus make large expenditure cuts – if you feel that way, you might find it more productive to go bark at the moon. As I showed in a previous post, when we adjust spending for inflation, non-healthcare government spending in New Brunswick has been fairly flat since the early 90s. Since then, the major contributor to rising spending has been growth in health care costs. That does not mean that new non-health programs have not been launched – it just means that they have been funded either by taking money from other programs or via debt financing. So it comes as no surprise that when Messrs Alward and Higgs promise to make spending cuts but not service cuts, they have a hard time doing so. Most of the ‘efficiencies’ have already been found over the past decade. That does not mean more can’t be found, but it can become increasingly difficult to do so.

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