Thursday, August 28, 2014


So, the Liberals' plan to borrow $900million plus interest, for unnamed "infrastructure" projects, isn't going over well among concerned citizens and, really, anyone.  Two days after the growing chorus of worry about the fitness for office of the Liberal team, one worthy foot soldier, the bright and loyal John Case, has stepped up to try to defend the Gallant borrowing plan.

Let's take these two points that the Liberals now say were tragically "left out" of my original blog post.


Even though the Liberal release notes that not a single actual infrastructure project will be specified now, they now tell us "Bridges! We meant bridges! Won't somebody think of the bridges?!".  And they urge us to read the 2013 Auditor General's Report, where her warnings state that 293 bridges are in poor condition.

That is, of course, an important issue of public policy. Is that the $900million problem?

You see a bridge. Liberals see a $900million problem.

You know me....I'd like to do the math.

If you read the same report, the Auditor-general tells you the size of our overall bridge fleet.  We have 2,608 bridges worth a total of $895million.  She also notes at area graph 3.4 that the 293 bridges the Liberals now cite are "not unsafe, but will require maintenance in the near future". 

So, fair enough, we have bridge maintenance to do. But is that $900million of borrowing accounted for?  Well, no.  

If you have 293 bridges that need work, and you have 2,608 bridges, or 11.2% of your bridges. If the TOTAL VALUE of your bridges is $895million, the total value of those bridges is just over $100millilon.  

(And that would be assuming the bridges are all near the average of value of the fleet, which is likely generous to the Liberals.  After all, the biggest, most expensive bridges get the most regular maintenance, and there have been major projects on bridges such as the Harbour or Princess Margaret bridges. The bridges in question would be smaller and cheaper and used less often.)

So if we spent 25% of the value of those bridges on maintenance, that's a $25million problem even under the most generous assumptions.  And it is worth remembering that that the existing annual capital budget is $555million.  Even if the Liberals just use existing budget plans, they would have $3billion of repair budget in which to find room for $25million worth of bridge repair if that's a priority.

So, why would they need to borrow ANOTHER $900million? Well, maybe the Auditor-General tells us when she suggests at the end of the section in bridges that someone should borrow $900million and fix this problem.  Except that she doesn't suggest anything like this.  She suggests a non-political monitoring and reporting problem.  Because if anyone had read the prologue to her report, with the warnings about critical debt and falling credit ratings, they'd know that's crazy.


Well, of course it does.  If you borrow money and spend it, the GDP goes up.  And their consultant's report tells them that if they spend $150 million more per year, you get $113 more in GDP. Of course, the report doesn't say that's a good idea, because the Liberals didn't ask him that question.

But we can do the math.

Generally, stimulus spending is designed to attract more private money into the economy to get things working. This is common sense.  If the only people spending money are the government, and they're borrowing that, an economy will crater.  So a good stimulus program will spur enough private investment that the GDP goes up even more than what government spends.

You already see the problem, right?  If you're spending $150million and the GDP only goes up by $113million, you're actually getting less than you paid for. 

To compare normal interaction between government spending and GDP, look at the status quo. New Brunswick's GDP is now about $32billion, or about four times higher than what government spends each year on programs and capital.  And our economy, as Liberals correctly note, is one of the more fragile ones.

So if we have a GDP at 400% of government spending now, and that's not good, what serious party would borrow millions to get a 75% return on GDP?  Only a party that sees the patronage and short-term political benefits of roadwork as more urgent than health or education spending.

As for the claim that "New Brunswickers will have $80million more to spend"?  Let's all use our brains on this, folks. Here's a benchmark. If you borrowed $150million and threw it off one of those $900million Liberal bridges to be caught by passersby, then New Brunswickers would have $150million more to spend. Except they wouldn't, because it eventually has to be paid back.  If it spurs private investment, then maybe that helps --but again, their own numbers show that doesn't happen.

Put another way, you could increase labour market income by $150million if you said "we are going to borrow $150million and hire 3000 teachers. As great as that would be, no one would seriously think you could justify that borrowing. So why borrow it for road work that you can't even specify now?

In the end, if the only money in your economy is borrowed government money, you'll eventually go broke. The scary part isn't just how weak these two arguments are, or that they still rent doing the math now --it's that the Liberals clearly released this plan without having done the math at all. 

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