Why are several Canadian provinces cutting back at a time when the economy needs stimulus across the board, asks NUPGE's Larry Brown.
By Larry Brown
National Union of Public and General Employees
Canadians know when a car gets stuck in the snow that everyone needs to push in the same direction to get it out. If some push forward while others push back, the
car will remain stuck or even spin its wheels further into the snow.
It's a simple lesson in life, but one our governments would do well to remember at this critical moment in our economic life.
The Canadian economy is badly stuck right now, like most economies around the world. Pretty much every national government has put forward some kind of economic stimulus package — from the huge stimulus programs in the U.S. and the U.K., to the stingy and begrudging package announced by the Harper government after months of denial.
The International Monetary Fund (IMF), the long-time champion of reduced government spending, has called for stimulus packages amounting to 2% of GDP from all major governments.
We didn’t get that from the Canadian government; we got approximately half that, but at least some stimulus was put forward. The Harper government has said its package will create 142,000 jobs, a debatable projecton, but it is nonetheless a small step in the right direction.
Several provinces retreating
Yet we have a second important level of government — the 10 Canadian provinces.
Logically, if the federal government is going to push the stalled economy to create more jobs and generate more economic activity, the provinces should push in the same direction. If the federal government pushes one way and the provinces push the other, the risk will be that they cancel each other out.
Ottawa is spending money now because to cut government spending at a time of economic crisis would be foolish. Cuts in public sector programs, cuts in public sector wages, cuts in public sector jobs, all would add to the economic downturn we’re facing.
More money would be taken out of the economy just when it’s crucial that the economy not bottom out any further. After job losses of record size in Canada in January and February, we can’t afford to fall further.
Yet instead of economic coherence, instead of all governments pushing in the same direction, what do we have? We have provincial governments acting to nullify the effect of the federal stimulus:
- We have the government of New Brunswick finalizing a budget that will freeze wages and eliminate 700 public sector jobs.
- We have the B.C. government talking about no wage increases in 2010, taking $3 billion out of their spending plans for the next three years, and reducing the public service by an astounding 30%.
- We have the Alberta government talking about spending cuts and possibly job cuts.
- We have the premier of Ontario warning people to brace themselves for tough times, saying that he has no plans to follow the federal government by introducing a stimulus package.
Not all are cutting back
Thankfully, not all provinces are following this counterproductive line. The Newfoundland and Labrador government recently announced a stimulus package of its own and several others have declined to join the line-up of those threatening cuts.
Granted, we must acknowledge that the federal government stuck it to the provinces in its recent stimulus budget.
Equalization was cut by $7 billion. The provinces must spend $9 billion in new expenses on infrastructure or the federal government will not actually spend its share.
Municipalities must also kick in large amounts of money or infrastructure programs will not go ahead. And, municipalities, as we all know, are under financial strain and under provincial jurisdiction.
So when cities need financial help it is the provinces that will be on the hook.
Major problem with EI
Moreover, the federal budget completely failed to address the Employment Insurance (EI) crisis, which has left more than 60% of unemployed Canadians unable to qualify for the EI benefits they’ve paid for.
And everyone knows what that means. If unemployed workers can't qualify for EI, they will become the responsibility of the provinces if and when they are driven to welfare rolls to survive.
In total, that’s a huge hit for the provinces.
Yet there can be only one ultimate solution to all these problems. That solution is renewed economic activity, and the overwhelming consensus is that government stimulus is key to this recovery.
So the key question remains - why are several of our provincial governments pushing in the opposite direction?
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE