Weak economic outlook could lead to broken NDP campaign promises – Winnipeg Free Press

Opinion

Manitoba's NDP government is bracing for an economically difficult year to present its first budget, expected early next month.

Dawn Desjarlais, chief economist at Deloitte Canada, told a Manitoba Chamber of Commerce crowd last week that the province's economy expects “sub-bar growth” in 2024.

Deloitte recently pegged Manitoba's economic growth at 0.4 percent this year. This isn't recession territory, which is usually defined as two consecutive quarters of negative growth, but it's pretty close.

That's bad news for a government that relies on a growing economy to fill its coffers with tax revenue to pay for expensive public services, including health, education, social services and infrastructure. It's a tough challenge for the NDP, which won last year's election largely on a platform full of expensive promises.

The new government may not have the revenue to deliver on everything it promised voters last fall.

In its forecast report released in January, Deloitte predicted that Manitoba's manufacturing sector will face a “very difficult path” this year due to a worsening global economy. Weak output in Manitoba's largest economic sector means less tax revenue for the government. Deloitte predicts that Manitoba's economic growth will “decelerate relatively” to 0.4 per cent in 2024, along with an expected decline in household spending.

That's half the 0.8 per cent growth forecast by Manitoba Finance in its second-quarter financial report released in December. That's just over a third of the 1.1 per cent forecast in last year's provincial budget.

If this is true, it will be difficult, if not impossible, for the NDP to come up with the cash to pay for all the goodies Manitobans have been promised.

It will not have the budgetary capacity to significantly increase spending in key areas such as health, education and social services, for example, at least not while cutting taxes and reducing the deficit.

The NDP may do little in all areas to meet its campaign commitments, but it will fall short of the abundance it promised.

This is the problem when a political party over-promises during elections. Even a moderate downturn in the economy can have a significant impact on the government's own revenue.

The only bright spot in the fiscal landscape for the NDP is the significant increase in equalization payments expected from Ottawa this year. It won't be enough to fully offset declining tax revenues from a flat economy, but it will help.

Some of the challenges facing the PDP are self-evident. By incorporating the previous Tory government's unannounced tax cuts into its fiscal framework (when the government ran a huge deficit of more than $1 billion) and adding its own tax breaks, including the temporary scrapping of the 14 cent tax. per liter fuel tax — the NDP will further reduce its revenue.

It prioritizes tax cuts, including for high-income Manitobans, over much-needed resources for front-line services. This is bad policy that will not serve Manitoba well. It does not increase the competitiveness of the province and does not improve the overall quality of life in the province.

Government cannot be all things to all people. They cannot satisfy the wishes of every interest group and every sector of the economy. They have to choose where to direct their taxpayer dollars. One of the weaknesses of Prime Minister Wab Kinyu is that he tries to be all things to all people. It spreads itself too thin.

To be an effective premier, Kineu must learn to say no to business groups demanding tax cuts (business groups demanding the province also invest in health care, anti-poverty measures and infrastructure). to other interest groups demanding more money in their sectors.

Governments have a limited amount of tax. They need to prioritize where and how to spend that money. They cannot satisfy everyone.

A soft economy in 2024 will force the NDP government to make those decisions. If it doesn't want to deal with growing deficits over the next few years, it won't have a choice.

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Tom Brodbeck
Appraiser

Tom has been covering Manitoba politics since the early 1990s and joined the Winnipeg Free Press news team in 2019.

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