Despite many who would never dare believe it, Premier Wab Kinew has come out said he would like to become a transformational economic leader in our province.
Well, not too long ago at an event held at the Manitoba Chamber of Commerce Kinew addressed an issue that even the most ardent conservative premiers in our province’s history have avoided – He dared to say he dreamed Manitoba could become a “have” province.
He is saying this in an environment where the private sector economy is generally stable.
Looking into 2024, Chuck Davidson, the Manitoba Chamber of Commerce head presented a positive forecast for the provincial economy. Looking at good employment numbers and strong sector performance in manufacturing and mining, he felt businesses had reasons to be optimistic.
Framed by this positive narrative, the NDP leader said we need become less dependent on federal transfers and learn how to stand on our fiscal feet within Confederation.
As many Manitobans know, our province is a net beneficiary of large federal transfers, particularly equalization subsidies, which pay for a large portion of Manitoba’s well-funded public services.
If the premier can somehow move his new government towards fiscal self-sufficiency, he would be conquering a highly entrenched status quo.
Allow me to explain.
Equalization incentivizes provinces to pad their public sectors and it is no coincidence that ‘have not’ provinces have the largest bureaucracies per capita. You don’t need to be a political scientist or a think tanker to know public sector unions are the biggest backers of NDP governments. So, such a policy would be pushing back against its own constituency for the sake of Manitoba’s fiscal future.
In the think tank business, we say politics is often the enemy of good policy.
So, aspiring to turn Manitoba into a “have” province would partially involve challenging many vested interests. And they are mostly in the public sector.
Unfortunately, equalization effectively masks deeper economic problems. The topic has been extensively studied by Canadian think tanks, with research clearly showing that equalization also rewards provinces for keeping taxes high. Those higher taxes, ironically, discourage economic growth and investment, which is the key to a competitive, growing economy. Over the years, that slower than average growth and the country’s frequently lowest private investment per capita has left Manitoba with the lowest income per capita in western Canada.
Easy federal transfers support larger government budgets, pushing up the cost of our health care and education systems, which are far more expensive than the Canadian average.
So, if the premier also is to become that transformational economic leader he will need to give more priority to attracting more private sector investment (smarter taxes/spending) and – especially challenging for an NDP government – tacking excessive growth in the provincial bureaucracy. Canadian Taxpayers Federation (CTF) figures shows spending is outpacing government revenues with continuing growth in the number of public servants making over $100,000. Raising government salaries rsonates well with public sector unions, but at the broader economic costs of slower growth.
To make things more difficult the feds always cut transfers when they get serious about balancing their budget. So, expect Manitoba, in a year or two, to be trimming budgets like the Filmon Government had to in the 1990s when the Chretien Government was forced to cut back hard.
All this said, you must admire Kinew for talking ambitiously about making Manitoba a “have” province.
Take a bow Wab, and please get started on this ambitious and difficult task.
Joseph Quesnel is a Senior Research Fellow with the Frontier Centre for Public Policy.
More on equalization click here.