However, one thing I couldn’t imagine anyone suggesting is that it was a “rousing financial success”. But that was before I read Jeff Lee’s enthusiastic commentary based on PriceWaterhouse’s most recent report on the economic impacts of the Olympics.

Lee was obviously impressed by PW’s estimate that over the 2003-2010 period, the Games generated $2.5 billion in GDP and 45,000 jobs. The trouble is, those impacts that so impressed Lee are for the most part the result of government spending, and in many respects excessive and wasteful spending at that.

PW points out that the largest source of construction-related economic impact in the 2009-2010 period was due to the City of Vancouver assuming the responsibilities and costs of completing the Olympic Village project. No doubt lots of people worked on that project, and had the cost overrun and City financial loss been greater, so too would have been the economic impact. But one could hardly call that a ‘rousing financial success’.

Another major source of impact was the 2010 security-related spending, in itself almost equal to all of the tourism impacts over the entire 2003-2010 period. Of course spending nearly $1 billion on security will generate jobs. Keynes understood that when he famously commented that digging a hole in the ground, burying a bottle and digging it up again will generate jobs too. It’s just that Keynes would never have called those impacts a success. He recognized that better things could have been done.

The point is, as PW itself states in its report, estimates of economic impact say absolutely nothing about the economic benefits and costs of the Olympics (or anything else). They certainly don’t address whether or not the Olympics could be considered a financial success. That requires careful consideration of how much was spent, what was produced, and what else could have been done.

Generating impacts, especially with multi-million dollar government spending, is easy. Generating value is something else.

British Columbia’s government spent $325 million more on the 2010 Winter Olympics and Paralympics than originally promised. The $925.2 million bill to taxpayers was disclosed in an unaudited Friday report and included a $50 million bailout for the recession-rocked Vancouver Olympic Organizing Committee. … The $925.2 million figure does not include costs borne by Crown corporations or government agencies that were VANOC sponsors or service providers.

… While the federal and B.C. governments contributed $580 million for venue construction, VANOC was supposed to fund its $1.76 billion operations budget primarily from private sources via broadcasting, ticket sales, merchandising and sponsorship. When the recession happened, all four revenue sources shrunk. Two sponsors — General Motors and Nortel — went into bankruptcy protection. VANOC was stuck with $12 million in unsold billboards that it gave to the province for a tourism advertising campaign.

VANOC’s final, audited report is expected in late fall. It stopped issuing quarterly reports last December, despite the 2002 Multi-Party Agreement with governments that said it must.

The Finance Minister, Colin Hansen, repeatedly claimed that the total bill to taxpayers would be $600 million. And it is worth noting that VANOC voted themselves bonuses on the order of $30 million last fall.

Back to the “we told you so” file, and I will quote myself back in 2006:

I should also point out, because the media have completely failed to, that the only cost-benefit analysis of the 2010 games was done by the CCPA. In a February 2003 report by Marvin Shaffer, Alan Greer and Celine Mauboules, the analysis used the 2010 Bid Book and some crafty calculations to estimate the net financial cost to British Columbians at $1.2 billion, and $2 billion if the new transit line to Richmond and the airport was included. The report stands the test of time quite nicely, I would say. And the authors at the time cautioned that “costs could be substantially higher, and are subject to numerous risks. The Province of British Columbia, as the sole guarantor of the Games, is assuming all the financial burden of what is, clearly, a risky business venture.”

And so it was. The 2003 report expressed its amounts in 2002 dollars, so add a bit of inflation and we were pretty close. In addition, the City of Vancouver has estimated that its costs of hosting the Games (additional to the BC government contribution) was $524 million in capital costs and another $30 million in operating costs, although some of this was for non-competition infrastructure that might have been done anyway. Similarly, provincial dollars do not include infrastructure investments like the Canada Line transit expansion and the Sea-to-Sky Highway expansion, both of which were pushed to the top of the queue by the Olympics but arguably might have happened at some point anyway. Nor does the provincial amount include the BC portion of federal government costs (BC has 13% of Canada’s population, so part of the party was financed by the rest of the country).

So were the Olympics worth it? It certainly was fun party, and Canada’s hockey gold medal may prove to many Canadians that costs were justified. If we call it $2 billion in net expenditures, that amounts to about 1% of provincial GDP. A fuller examination of the numbers is warranted, but whether you think the cost was worth it or not, you should be troubled by a government that is not honest with the public about the provincial finances.

I would feel better about that benefit-cost assessment if government at any level had been willing to fess up to the costs. But that accounting is yet to be done. I would also find it more compelling if the economic arguments put forward to justify the Games were not so patently false. The Games, much like our own Liberal and U.S. Republican tax cuts, do not pay for themselves. There are positive impacts and enduring infrastructure from the Olympics, but there is no credible evidence that they have a value anywhere what they cost.

I know economics really is a dismal science, and not much of a science at that, but if there is one thing that it teaches us is that there are opportunity costs. A dollar (or several billion as the case may be) invested for one thing cannot be invested elsewhere.

Street parties are great. Crazy booming business even if limited in time and space can be pretty good too. But in the end what do we have. And what could we have had if we committed anywhere near the same resources to something else. That is the question we have yet to seriously address.

It’s too late for us. You can’t undo what has been spent and done. But you certainly can help those in other countries make more informed choices, especially those in poorer countries that can less easily mask their mistakes.

Over the last two years, we’ve seen the province and city make some important moves on the homelessness front. Frances Bula has a good summary of them on her blog (and the comments after her piece are very insightful too).

Most of the activity, however, as been aimed at reducing visible street homelessness (through opening new shelters), and defensive moves aimed at protecting the existing stock of low-income housing (through the provincial government’s purchases of SRO hotels). In contrast, we’ve seen very little and very slow action with respect to actually increasing the supply of new social housing.

Today saw the formal launch of Pivot’s Red Tent campaign, and the establishment of a tent city, both drawing attention to the need for more action on new social housing, and for a federal housing strategy.  We’ll see what the international media makes of all this.

Which still leaves the larger question of whether the Games will produce long-term economic benefits. Much of this hinges on whether the 2010 Olympics will produce a sustained increase in tourism.

Back in 2003, a government-commissioned economic impact report by InterVistas predicted a big boost to tourism leading up to the Games. But as a more recent economic impact study by PriceWaterhouseCoopers found, that did not transpire.

There will likely be a small economic boost during the Games themselves. Of course thousands of tourists, athletes and journalists have arrived, and their spending is an economic benefit. But mitigating this, thousands of local residents have chosen to flee the province, figuring now would be a good time to get out of town, and the departure of their local spending will be an economic loss. Hard to say what the net impact will be, but there will be clear winners and losers (some hotels and restaurants will be winners, while the local grocery store may see a loss).

But will there by a long-term increase in tourism? Hard to say. Depends somewhat on the weather (showing the world what this place looks like in February is always a crapshoot). If someone is a globe-trotting ski tourist, they were already well aware of Whistler long before the bid was won, so it’s unlikely that we’ll see real gains on that front.

The Games may produce a marginal increase in tourism for a few years. But in the longer term, I can’t stop wondering this – in a world wrestling with climate change and peak oil, are people really going to be traveling like this, or will rising oil prices make the cost of air travel prohibitive? I suspect the days of destination ski travel and global tourism as we’ve seen it in recent decades are numbered. Consequently, as a province and country, we need to start putting our economic development eggs in something other than the trade and tourism basket.

But having said that, my home province of BC and Canada as a whole have become a lot meaner in recent years. Sure, the good life is still attainable if you have a good job and bought real estate before prices took off, whether due to that good job or through an early inheritance from the folks (itself a growing source in inequality as the boomers hit retirement). But as the song (and a CCPA report) goes, it’s a bad time to be poor.

As we show our Olympic pride at having a crew of multi-million-dollar-a-year hockey players come to Vancouver to play for the home team, let it be known that BC has the lowest minimum wage in Canada at $8, and that has not changed since 2001. In case you were wondering, for a minimum wage earner to pull in what Sidney Crosby earns in just one year, they would have to work 40 hours a week for 541 years (and I’m not even counting Crosby’s signing bonus and endorsement contracts).

You know the rest of the story: social assistance rates that are preposterously low and a system that is punitive; a lack of supports for child care; the end of new social housing construction; an over-crowded public transit system; cutbacks at schools and libraries; and so on.

In my work on climate action, it seems inevitable that the price of food, transportation and energy are going up if we are to be successful at reducing emissions. How we go about designing climate actions matters a lot, and this is the focus of my recent work. But most of the affluent people who go to policy meetings are not thinking about how higher prices affect low income people. Across all of these areas, the problem low income people face is, well, their low income, even though they have done the least to contribute to the climate crisis.

So in the absence of “first-best” solutions like raising the earning power of low income workers and setting a floor (basic or guaranteed) income for all, we are left with “second-best” solutions that try to fix regressive impacts on an issue by issue basis. A credit here, a subsidy there and an ugly patchwork everywhere. Which is already a huge problem: after about $20-25,000 per year low-income credits and subsidies phase out for the low-but-not-lowest-income workers, meaning they face marginal tax rates of 60-70% on new income earned. With the carbon tax and now the HST, the same dynamic has been exacerbated with low-income credits that phase out early and quickly.

Still, I think that a more coherent credit system could be the basis for a guaranteed income, but it would have to be designed more like the credits we give to the middle-class, like Old Age Security and the Canada Child Tax Benefit, which have a long tail phase out so that a very high proportion of families get something. A lot of economists agree on this type of redistribution. But they generally think only about redistributing after the fact. I also want to see the labour market do more of the heavy lifting, as it gives workers and taxpayers the sense that they have earned that income, and this makes for better social inclusion and better political sustainability. Doing that means expanding the scope and quality of public services, raising minimum wages and, perhaps more importantly, vastly expanding the unionization of the low-wage service sector.

So Canada, let’s take that generous spirit we discovered when Haiti got trampled by an earthquake and put it to work at home. A campaign of charitable giving is of course helpful and there are lots of great organizations doing the work that governments ought to be doing. But let’s also focus on electing governments that are going to make eradicating poverty a top priority, something no political party (including the NDP) has endorsed.

You can find more resources related to the Olympics from CCPA and other allies here.

In fact, the Olympics are so big, so looming, it is difficult to think of anything else. For years preparations have been underway, as planners have made their plans, and new, gorgeous facilities have been built. It is hard to say how much these activities have increased economic activity in BC. Certainly, given the hot economy in recent years with low, low unemployment, there is a case to be made that most Olympics projects have merely crowded out other public and private sector capital investments. Some measure of Olympic Keynesianism could be cited over the past year as smoothing out the harsh impacts of the recession in Vancouver, but unemployment has still shot up to 8.4% in December, and is now about the same as the national average.

As for the Games themselves, the two-week party that is, there is a lot of money being spent on things like security, and a lot of money from higher-than-normal tourism during that period. I’ve seen some economists attribute a 0.5 percentage point increase in GDP due to the Games. But it seems to me that, like the upfront capital investments, there is a lot of displacement going on — most regular business is being put on the backburner, as projects and offices close down due to concerns about traffic and security perimeters.

My real concern, though, is what happens after the Games. BC will be tabling its 2010 budget shortly after the Games are done, and the big danger is that BC experiences a bad Olympian hangover. The rest of the province is in rough shape: resource industries have been hammered by the decline in US markets; while real estate is showing signs of exuberance, there is not much indication that new construction activity that creates jobs is returning to the highs of 2003-2008; tourism may get an Olympic bump, but a high Canadian dollar and weak income growth is keeping a lot of Americans at home. It is hard to imagine what private sector forces might drive a resurgence of economic growth for the remainder of 2010.

So we need the BC government to step up to the plate in its 2010 budget. Last year, BC brought in very little in the way of stimulus spending, preferring to free ride on federal stimulus dollars. This is at least part of the reason why unemployment rates have doubled in the past 12 months. That situation could get a whole lot worse if the provincial government is as neglectful after the Olympics.

There is a, er, golden opportunity, however. Since the 2008 budget that announced the BC carbon tax and a host of other climate actions, we have seen a whole lot of nada on the climate front. In fact, budget restraint in the past year has closed down some of those actions, like the LiveSmartBC program to retrofit homes to be more energy efficient. Anecdotally, this is drying up business for contractors who do retrofits. So now would be a perfect time, after Copenhagen’s disappointment, to get back on the green file, and make some investments that will create jobs and meet our climate objectives.

BC has a legislated target of a one-third reduction in emissions by 2020 (relative to 2007 levels), but currently we do not have a plan that gets us there. Now is the time for that plan. Think transportation. Think household energy efficiency. Think green power. But also think about avoiding double-digit unemployment.

Government spending creates jobs. More spending creates more jobs. But whether that is in the public interest raises very different questions. Will the job creation employ people who would otherwise be unemployed, or just bid up wages and attract workers from other activities or regions? What is being produced – how much is it valued? How much of the cost will ultimately fall on taxpayers, and what other activities or expenditures might that consequently displace?

The recently-released PriceWaterhouseCoopers (PWC) report on the economic impacts of the 2010 Games, like the InterVistas report that preceded it, does not ask any of these questions. Notwithstanding all of the government and media attention it is receiving, it therefore provides no insight into the net benefits or costs of hosting the Games.

Illustrating this very clearly is PWC’s explanation of why they conclude the 2010 Games have produced similar impacts to what InterVistas predicted in 2003, despite the fact that virtually none of the tourism impacts forecast in the InterVistas report has materialized. The lack of tourism impacts has been offset by larger than expected spending on the City of Vancouver’s Olympic Village project and Richmond’s speed skating oval. More city spending has meant more employment impact.

The government’s press release accompanying the PWC report states this study confirms that the benefits expected from the 2010 Games are being realized. In effect it is saying the increased city spending has made us better off because of the additional jobs the additional spending has generated.

Of course this analysis and conclusion is fundamentally flawed.  As the famous, conservative economist Milton Friedman liked to point out, there is no free lunch. There certainly is no free Olympic Village housing or speed skating ovals. The cities’ net costs for those projects will mean less spending on other initiatives or higher taxes. Alternative public or private spending will be displaced.

The economic issue for the 2010 Games is whether the Olympic housing, the oval and the other facilities and opportunities created by the Games are valued more than what else could have been produced or done. And that question is something PWC and the government have not begun to address.

Indeed, there has yet to be a full accounting by government of all of the resources that have been allocated to these Games – the expenditures incurred and staff time provided by all levels of government, including crown corporations and agencies; and the costs that have been and will be imposed on residents and business by the construction and  the Games themselves.

No doubt there will be significant benefits from the infrastructure that has been built and from the pride and opportunities hosting the Games will provide. There may even be some employment benefits, not so much during the construction period when the economy was overheated, but now that there is more widespread unemployment.  But the impact estimates seized on by the government shed no light on the magnitude of those benefits, and in the absence of any estimate of the full costs are meaningless in any event.

Governments like focusing on impact studies. Since spending creates impacts and impacts are assumed to be unequivocally good, they can justify virtually any spending or policy initiative – the more spending the better.  However, it is a practice that should be resisted.  It serves only to obscure and often prevent a proper debate over the benefits and costs of what is being proposed or done.

Nonetheless, I do agree we owe it to ourselves and potential bidders on future Games to do a full accounting of the costs and benefits that these Games have entailed. In 2003, CCPA published a preliminary benefit-cost analysis of hosting the Games  that I and others worked on. We concluded that the Games would entail a significant net cost to taxpayers — a net cost that could not be justified by the jobs or infrastructure that would be created. We also noted there could be significant environmental and social costs, despite the commitments and best intentions of Vanoc, in the rush to build the required facilities and meet budgetary constraints.

It wasn’t a startling conclusion, but it did stand in stark contrast to the position the provincial government was taking at that time. Of course, the province didn’t do any benefit-cost analysis then or since. To justify the Games the government relied on an economic impact study that grossly exaggerated the employment benefits that might be generated by the Games and failed even to acknowledge there would be net costs.

Looking back, our 2003 study was far too conservative. We knew there would be cost overruns for security and other requirements, but nowhere near the amount that has actually taken place. We suspected government Ministries, agencies, and crown corporations would divert resources to the Games, as would municipalities in MetroVancouver and elsewhere, but again not to the extent that has occurred. We anticipated the government might force TransLink to proceed with the Canada Line, but didn’t assume those costs (costs well in excess of the government’s own estimate of the line’s travel time and other transportation benefits) would necessarily be incurred, nor did we expect the unbelievably severe neighbourhood and local business impacts the construction entailed.

We thought that the net economic benefits of the jobs due to the Games — the employment of British Columbians who would otherwise be unemployed or underemployed — would be limited. Now it is clear that they in fact were. Through most of the construction period the Olympics just competed for workers, driving up construction costs for everyone building at that time. It was a windfall for some, but a cost for many others.

All in all, our negative outlook in 2003 was far too rosy. I think that is in the nature of these things. We tend to underestimate the costs and exaggerate the benefits of marquee events that many people clamour for.

So, when the snow settles (I was going to say dust but again, I am hoping for the best)– we do need a full accounting of what has taken place. We need to understand the full extent of the resources we have allocated to these Games in relation to whatever benefits they have offered.  The government really should take the lead. There is no shame in making a mistake that many others would do as well — but there is no excuse for not trying to learn and help ourselves and others make better choices down the road.

From a purely macroeconomic standpoint, any government spending is better than none in the midst of a recession as it will boost the economy in the short term. In the long term, however, the best use of government borrowing is to finance investments that will bridge our current economic needs with long-term social and environmental goals. Think investments that leave us with healthier and better educated citizens, that increase long-term productivity and set us up for the “green” economy of the future, while also increasing the quality of life for all people.

It’s here where the current government policy leaves a lot to be desired. We would be better off running higher deficits and making these public investments now, than running smaller deficits and having to pay them off with a less productive economy in the future. Let’s not forget that public dollars can be invested in initiatives that will have long-lasting benefits for said future generations.

According to a new study by UBC’s Human Early Learning Partnership, just under 30% of BC children entering kindergarten are “developmentally vulnerable” (read, not ready to learn), and the resulting depletion of human capital is estimated to cause BC to forgo about 20% of GDP growth over the next 60 years, a value equivalent to investing $401.5 billion today at a rate of 3.5% interest (for more details, see this Vancouver Sun article).

By failing to make public investments now to eliminate child poverty and ensure that our children grow up healthy and have access to good quality education, we are wasting our children’s potential and leaving them with a less productive economy in the future. Yes, making these investments will cost money and increase the government debt, but at this point leaving debt to our children seems far preferable to the alternative of saddling them with the (often very expensive) consequences of our unresolved social and environmental problems.

There is, however, a type of debt that we should not leave to future generations. It’s the debt incurred from hosting lavish parties for ourselves (Olympics, anyone?) or creating wealth by destroying the environment (through subsidizing natural gas extraction, for example).

Increasing government debt in itself is not as large a problem as some of the recent media coverage would suggest, but both BC and Canada’s governments could and should be making better spending choices.

While being short of money for school athletics — the type of events that marked the beginning of the sports career of many a BC athlete, including Beijing Olympic medalist Carol Huynh — our Ministry of Education apparently had no problem finding $500,000 to fund Olympics promotion in schools through a new Spirit Schools program.

Whether you support the Olympics or you think it’s a giant waste of public money, it’s hard to argue that learning about sports in the classroom and getting to watch them on TV is more valuable than actually having the opportunity to participate in person. Yet this is exactly the message that the Ministry of Education is sending out to school children with their bizarre funding choices.

It seems that many of the cuts we’re seeing are not about tough times and lack of money as much as they are about priorities. And this government’s priorities raise some serious questions.

Yet, on the front page of the Vancouver Sun, Miro Cernetig opines that this is wonderful, and makes a sneering comparison to Gregor Robertson, arguing that the economic policies of the new Vancouver mayor amount to chicken coops in the backyard and organic veggies on the city hall lawn. Cernetig goes on to quote an anonymous provincial bureaucrat saying that “Vancouver has no economic plan”, which is ridiculous given the source – the provincial government is still officially in denial about the deepening economic crisis, and its strategy amounts to building a $5 billion super-bridge across the Fraser (officially, $3.3 million but no one believes that target will be met) and waiting for the Olympics.

Besides, the City of Vancouver has been preoccupied getting the house ready for those very Olympics, and athletes’ rooms are in a shambles. And what about eliminating homelessness? That is good for business, is it not? Cernetig’s comments are more than a cheap shot – he endorses a race to the bottom that will have the impact of further reducing municipal services so that businesses can get more tax cuts.

Cernetig points to a Microsoft office that ended up in Richmond not Vancouver (this was in 2007) as further evidence for his thesis. But does this really matter? From Microsoft’s perspective they see Vancouver as Metro not the City. And why shouldn’t Richmond get more corporate offices, as it needs greater economic diversity?

This us-versus-them frame is unfortunate. With an election coming in just two months, the real topic of discussion should be about the future of Metro Vancouver and what can be done to create greater harmony among cities, not more division. For example, most cities in Metro have “economic development” offices, such as the Vancouver Economic Development Commission, specifically tasked with finding locations for businesses that want to set up shop here (this is a very narrow conception of “economic development” but that is another blog post). What we need is a Metro-wide organization that does this function, so that individual cities are not spending our tax dollars competing against each other.

Moreover, citizens of Metro Vancouver need more say over what happens in their individual cities and in the region. The trend has been in the opposite direction, with the somewhat-democratic Translink turned into a totally undemocratic board of directors by the provincial government. Cities, and perhaps the region as a whole, need more powers of taxation so that they can address pressing issues without being reliant on property taxes. And they are very limited in terms of how they act to fight the recession.

We need some public debate, even if just among the Liberals and NDP, about a vision for the region. If we are left with beggar-thy-neighbour politics, our reputation as one of the world’s most liveable cities will be tarnished before long.

The UN Special Rapporteur, Miloon Kothari, visited Canada for a few weeks in October 2007, as part of the UN’s efforts to ensure countries are living up to their international obligations to respect economic and social rights. Mr. Kothari’s mission focused on four areas: homelessness, women and their right to adequate housing, Aboriginal populations, and notably, the possible impact of the 2010 Olympic Games on the right to adequate housing in Vancouver.

The Special Rapporteur’s report is a very worthwhile read (and very concise). He emerged from his mission with very keen insights and an excellent historical understanding of Canada’s housing record. And he makes very astute observations about the jurisdictional buck-passing in Canada that blocks progress on housing.

He lauds Canada’s strong run of building new social housing between 1973 and 1993, but laments how little progress has been made since. Consequently, “While 40 per cent of all housing in the Netherlands is social housing, 22 per cent in the United Kingdom and Sweden, 14 per cent in Germany France and Ireland, and 10 per cent in Finland, Canada has only 5 per cent of its overall housing stock as social housing.” He was clearly particularly taken aback by Vancouver’s Downtown Eastside, and alarmed by the state of Aboriginal housing.

His recommendations include: that all levels of government recognize and legislate the right to adequate housing; that Canada commit to a comprehensive and coordinated national housing strategy with long-term and stable funding; re-embark on large scale building of social housing; and this:

Reducing homelessness and the number of people living in inadequate housing requires Canada to adopt a comprehensive and coordinated national poverty reduction strategy. Whilst three provinces have already taken important steps in this direction, the federal government should also be active in this area. This must include a review of the income available through social assistance and minimum wage in light of actual housing costs and a timeline for ensuring an adequate income to cover housing costs. (p. 26)

That recommendation clearly lends support to the campaign currently underway in BC, calling on provincial political parties to commit to a poverty reduction plan with legislated targets and timelines to reduce poverty and homelessness. For more on that (and to add your name to the call), see here.

“I want you to think about one thing. Think about the opening ceremonies of the Games next Feb. 12th. There will be lots of government officials. I expect the prime minister will be there. I expect the mayor of Vancouver will be there. I expect the premier of British Columbia will be there. Visualize those opening ceremonies with Premier Carole James.”

This riff only makes sense in the context of a long-running refrain that NDP government can only play the economic blues. In the weeks to come, we will be reminded about the bad old days when the NDP were last in power. But now that we can roughly compare two terms of the NDP with two terms of the Liberals, we find that there is little truth to the smear that the NDP have the cooties.

The average rate of economic (real GDP) growth under the Liberals has been 3.1%, whereas the so-called “lost decade” under the NDP saw average growth that was only slightly lower, at 2.8 %. But if we add in estimates for 2008 and 2009 (using latest projections from the private sector, which are too rosy in my opinion, and better than what the government itself is projecting in the budget), the average growth rate under Liberal rule falls to 2.6%, LESS than under the NDP.

In terms of family incomes, average after-tax income in BC (constant dollars) was $46,340 in 1991. By 2001 it rose to $50,248, an increase of 8.4%. And by 2006 (last year for which we have data) it grew to $55,583, an increase of 10.6%. This masks some important differences in distribution, with average incomes further down the income distribution lower than they were in the early 1990s, while incomes up higher soared much more than average.

How about employment? During the “lost decade” of 1991 and 2001, BC employment grew by 344,100, an increase of 22%. Between 2001 and 2008, BC employment grew by 392,700, an increase of 20%. However, BC also just lost 35,000 jobs in January, and the prospects for rising unemployment in 2009 are severe. By the time the election occurs, it could well be the case that more jobs were created under the watch of the NDP than under the Liberals.

In terms of the unemployment rate, it was about 10% when the NDP came to power, and fell to 6.9% in May 2001. In the following boom years, the unemployment rate fell to record lows of around 4%, but at last glance (January) it was 6.1% and rising. By the time of the election I would not be surprised if the unemployment rate was higher than when the Liberals first came to power.

My point here is not a partisan one – the NDP were far from perfect in office; they benefited from immigration to BC in record numbers; but also got sideswiped by the Asian crisis of 1998-99. Rather, it is to remind people that BC’s economic fortunes generally swing on decisions made outside our borders. Politicians will inevitably try to take claim credit when times are good, and just as quickly will shift blame onto others when times get bad. The BC Liberals have rode as astonishing wave of luck by coming to power in 2001, just as BC’s real estate boom got underway in the cities, and just as exports surged and commodity prices soared, taking with them the rest of the province.

The Thone Speech may claim that all new jobs in BC have arisen due to tax cuts implemented in 2001 and 2002, but the reality is that BC benefited from: low interest rates as determined by the Bank of Canada that launched a housing boom; an extra $3 billion per year in transfers from the federal government; huge growth in export demand from the US and Asia. At best the government can claim that the downturn of 2001 and 2002 was softened by its deficit-financed tax cuts, although even there so much of the gains went to the top earners in the province that it was a weak stimulus.

That the housing and commodity booms are now over, and BC is in a recession that is getting worse each week, points to structural weaknesses in BC’s economy that were not cured with a tax cut. Alas, the Premier is once again getting bit in the backside by his own penchant for populism, as BC’s fixed election date guarantees two and a half more months of bad economic news in the press in the lead-up to the next election. Given the choice, most politicians would have held a snap election last fall when plausible denial about the state of the economy was still possible (our Prime Minister even broke with his own fixed election date for this very reason).

But since that was not the call, expect a rugged and ugly election season, with a lot of finger-pointing and name-calling. That is a shame because now more than ever British Columbians need a real democratic debate about where the province is headed.

If you were worried that the extra $165 million will cause our projected budget deficit to balloon, you can now relax knowing that our Finance Minister has taken care of this. As Rod Mickleburgh explains in today’s Globe:

… in an unusual, complicated arrangement, the province will not pay its portion of the added security costs directly to Ottawa. Instead, B.C. will satisfy its $165-million obligation by increasing its share of federal-provincial infrastructure projects to that amount over the next three years.

That way, the money may be accounted for as capital spending and left out of the province’s operating budget, keeping the projected deficit for the next year at $495-million.

Such accounting shenanigans border on dishonesty as they make it very difficult for British Columbians to keep track of the true state of provincial finances. They also uncover an important problem with Colin Hansen’s favourite analogy of the government’s budget being the equivalent to family finances and both having to “live within [their] means.” I don’t know about your family budget, but mine doesn’t have a separate “capital” account where debts can be stashed without otherwise tarnishing the balance sheet.

What really matters for the long-term health of provincial finances is the public debt and its size relative to GDP. It’s a shame that so much of the media coverage and public discourse is devoted to the “balance” in the operating budgets.