Building a better budget
What gets measured matters
The provincial government is preparing the spring budget and has been getting an earful from the usual suspects, like the Newfoundland and Labrador Employers’ Council (NLEC), demanding the usual cuts.
Government, of course, will be balancing the budget over the multi-year business cycle as economists recommend. As Commonfront NL pointed out earlier this year, the government also needs to work on what matters to the voting public: a healthy economy that is jobs-rich, fair and sustainable.
Getting closer to that vision means both short and longterm budget changes. It also means tracking the right indicators, and reporting those to the public.
When the discussion focuses solely on indicators like gross domestic product, government spending and deficits, the government is less inclined to consider important values like fairness and long-term quality jobs. When the conversation includes indicators of broader values, the government will do a better job on budgets and policies that serve those values. What gets measured matters.
And it matters a whole lot for the next budget. The health of the economy is best served by maintaining a steady fiscal climate and bolstering local demand. Massive spending cuts, like those proposed by the NLEC, would devastate the economy. As Premier Dwight Ball observed, employers would be poorly served by massive cuts; they would reduce demand and purchases in the private sector, likely pushing some firms out of business.
Key for boosting the health of the economy is addressing unemployment, which is at a disgraceful level, and could be dangerous if it rises further. The “official” unemployment rate is 14.5 per cent, more than twice the Canadian average. However, when you include people who are involuntarily working part-time, are waiting for jobs, or have given up looking for work, the real rate is above 18 per cent — almost one in five.
When preparing the budget, government needs to be in “jobcreation” mode, not in “slashing” mode. The budget should build the foundation for quality jobs by investing in quality public services, education, diversification and local procurement. The government needs to report to the public, on the full picture of unemployment (not just the “official” level), including how many new jobs are fulltime, not temporary, part-time precarious work.
We know that poverty harms the economy. However, income inequality — apart from poverty — is also an economic drag. Inequality is also associated with significantly worse outcomes for physical and mental health, drug abuse, educational attainment, imprisonment levels, obesity, social mobility, trust and community life, violence, teenage pregnancies and child well-being.
After-tax income inequality has been rising in Newfoundland and Labrador since the 1980s. We are now the third most unequal province and have the third-worst gender wage gap in Canada. Fair taxation and spending by governments significantly reduces inequality. The provincial government should pay close attention to inequality measures when designing budgets, and when reporting to its citizens.
On environmental sustainability, government’s low-interest loans for energy efficiency improvements will help reduce energy consumption, while easing the cost of living and creating jobs. Premier Ball also announced that the province will work co-operatively with the federal government, to bring in carbon pricing by spring.
These are good starts. Government must continue to adopt policies to reduce greenhouse gas emissions. It also needs to obtain and publicly share independent forecasts of future emission levels, based on the policies it adopts. Investing in renewable energy and green jobs is an important opportunity. Government should be tracking and reporting on that sector.
The budget is not only a financial plan for government, but also an important economic document. It can take the road to austerity, which we know from other jurisdictions and past experiences will result in further economic losses. Or it can take the road to a better future — one that is jobs-rich, fair and sustainable.
Recent budgets have been controversial, to say the least, and the voting public is now watching closely. They will be looking for signs along the way that tell us we’re heading in the right direction.
Mary Shortall, president Newfoundland and Labrador Federation of Labour