Panelists at the plenary session convened around the state of BC economics. Between the Minister of Finance, two economists and the CEO of the Vancouver airport, the bottom line was that there is no quick way out of this structural financial situation.
This didn’t happen in the last six months, and it didn’t happen because of Donald Trump, said David Williams, VP of Policy for the Business Council of BC. It’s a structural issue stemming from shrinking revenue and expenditures growing way too quickly.
No one fiscal tool will be able to fix the situation, Tamara Vrooman, CEO of the Vancouver airport, emphasized, saying all the strategies need to be exercised in tandem.
“The bigger issue for me is not where we find ourselves today, but how we lean in for the future. The province has a big role to play in setting an agenda that's clear, measurable, transparent, and that communities and businesses can get behind with confidence," Vrooman said.
"Because of course the best answer in business is ‘yes, we can’; the second best answer is ‘no’. The worst answer is ‘we're not sure, come back tomorrow, we'll see’. That can have a devastating effect on our ability to attract and maintain the capital that we're going to need to continue to diversify and stay competitive.”
A critical facet of BC’s financial situation is the choice to run a deficit to fund operations and economic growth. Speakers agreed there’s a good use case for using debt, emphasized it’s a specific strategy that shouldn’t be relied on all the time.
“Debt is a great tool to invest in growth, but it can become an addiction for governments,” UBCM President and panel moderator Trish Mandewo summarized between panelist responses.
“But the reason why you run an operating deficit is to help the economy in tough times. During COVID, we ran a deficit of $5.6 billion. That was about 1.8% of GDP, but that made sense then. Unemployment was 13.5%. We didn't have a vaccine. The economy was partly shut down," said Williams. "Today, we're running a deficit of 2.6% of GDP, nearly $12 billion. But the unemployment rate's 7%. It's fine to run a deficit when the economy's not doing very well, but to be running a deficit like we are now and a $12 billion deficit next year and a $12 billion deficit projected for next year, I think it's hard to justify.”
A cost of using deficit financing is, of course, interest payments which take away from actual services.
“The ‘Ministry of Interest Payments’ would be our fourth largest ministry,” Mandewo said. It’s budget, so to speak, is the equivalent of two or three new hospitals a year.