Quebec Minister of Finance Raymond Bachand handed in his 2011-2012 budget on March 17th. Bachand was pleased to announce quite a few means to stimulate Quebec’s economy. But as you will see, it is unlikely that the latter will be â€œarousedâ€, at least in the long term.
To begin with, government expenses are totally out of control. In last year’s budget, Bachand predicted that they would â€œonlyâ€ grow by 2.8%. Yet, they grew 3.7%, mainly because of the numerous existing special funds. And by looking more closely, one can see that other ministries like Health (3.6%) and Family and the Elderly (6.1%) have gone over the 2.8% barrier. These crazy expenditures, combined with a CPI of 2.2%[ref]http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/cpi-ipc-fra.htm[/ref]â€“which the government says is partly due to the increase in the QST â€“ are making the future glum for La Belle Province. And with a predicted decrease in the active population starting in 2014, both the Health and Family and the Elderly ministries will grow in the next few years.
Despite all this, the Charest government finds consolation in stating that every other province except BC has a rate of increase in expenses superior to Quebec. However, it fails to mention that the other provinces have a lot less debt. According to the Montreal Economic Institute[ref]http://www.iedm.org/files/point012011_fr.pdf[/ref], Quebec’s public sector debt â€“ everything that falls under its control like schools, hospitals and municipalities â€“ will reach $234 billion by March 31st. With a $267.48 billion GDP at market price[ref]http://www.stat.gouv.qc.ca/donstat/econm_finnc/conjn_econm/compt_econm/cea2_3.htm[/ref], this yields an 87.7% debt rate, the fifth worst in the world.
In other words, this looks very bad for Quebec’s credit rating. Already, Moody’s[ref]http://argent.canoe.ca/lca/affaires/quebec/archives/2011/03/20110317-144421.html[/ref] has warned that without a few sacrifices, Quebec’s credit rating will fall, which will make borrowing more costly. Moodyâ€™s has rated Quebec Aa2, two steps below the maximum level of Aaa. Standard and Poor’s is more pessimistic than Moody’s. The former gives a rate of A+ to Quebec, four steps below the maximum and normal level for a government.
Like any other government that prefers increasing expenses rather than decreasing spending, the Charest government has decided to rob a little more of the wealth created by the private sector.
It is clearly stated in the budget: With even profitability, a mining company now has to pay 13% more taxes and royalties in Quebec than the Canadian average, and 40% more than Nevada and Alaska, â€œTwo states with vast mineral resources.â€ Quebec brags about taxing more than other jurisdictions, for crying out loud!
These measures are likely to be the same for the developing shale gas industry. Indeed, a progressive rate of royalties is soon going to be implemented. The more profitable a well is, the more royalties the owner will have to pay â€“ up to 35% for the best ones. But in order to fool people on how counter-productive such measures would be, the government claims that royalties exist â€œso that society as a whole can benefit from this new creation of wealthâ€ and that they â€œinsure that the people will have their fair share of the wealth created while safeguarding an intergenerational equityâ€.
Who cares whether the debt is going to drown us or whether wealth creation always benefits society as a whole? Like a vampire, the government must suck out as much money as it can out of wealth creators. Because everyone knows the latter will happily keep creating wealth even when they know they have to pay more out of it. Oh, and let’s not forget about the mercantile fallacy that â€œsome two billion dollars are spent by Quebec in order to import natural gas from Western Canada… this money would increase Quebec’s GDPâ€.
Because no matter how much money a government can have, it will always run out of it. Even Alberta is following this trend. It has shown a deficit in its budget for three consecutive years despite high oil prices. In short, should governmental bureaucracy one day administer the air we breathe, we will run out of it in only a few months.
Take the People by the Hand
Indeed, governments never run out of money when it comes to spending other people’s hard earned money. Here are just a few senseless measures found in Bachand’s budget:
- The promotion of the use of wood. Because this resource is used less than others, the government took the initiative to promote it. By using our money, the government is promoting a single resource and is excluding the others. It looks like the US embargo on softwood lumber didn’t teach anything…
The promotion of entrepreneurship. Because Quebec doesn’t have enough entrepreneurs, and since most of the existing ones will retire soon, the government, of course, has to do something about that. More than $350 M will be spent, whereas a simple decrease in both the bureaucratic[ref]http://www.cfib-fcei.ca/francais/thematique/69-pour_l_allegement_du_fardeau_reglementaire_qui_pese_sur_les_pme.html[/ref]and the fiscal burden would certainly encourage future entrepreneurs to take risks and start up their own corporation.
- The promotion of culture. In Quebec, this sacred cow is pampered like no other. Since so many artists are incapable of self-promotion in Quebec or elsewhere, they obviously need the government to help them. This year, it is proposed, among others, that independent movies be digitalized and that independent movie theatres receive funds to access digital technologies, since â€œthe government thinks it’s important to keep movie theatres all over the provinceâ€; there will be (yet) another special fund to promote cultural projects internationally â€œgenerating an important spillover in Quebec; and there will be a grant â€œto help with the distribution of work in arts and literatureâ€.
- Finally, what would a modern, Western budget be like without environmental and social measures? There is going to be a push towards solar power â€“ despite the fact that pouring massive public funds into such domain inevitably leads to doom[ref]http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf[/ref]
- and towards more social housing, despite the fact that this tends to breed crime.[ref]http://www.quebecoislibre.org/000415-3.htm[/ref]
Let Quebecers Handle Themselves
I do hope that Quebec will one day elect a political party whose main goal is to empower its constituents. Indeed, a government’s main role is to administer justice and defence. It shouldnâ€™t administer ANYTHING ELSE, at least not as a monopoly (electricity, education, healthcare). Should this day come, then Quebec will go from being a beggar to being an economic superpower. One can always dream…