Image source: Susan Holt / Facebook via The Walrus

When Premier Susan Holt swept to power in 2024, she promised a fresh approach focused on health care and affordability. You remember her pledge to balance the books every year of her mandate. Now, her government projects a record breaking $1.39 billion deficit for this year alone.

This massive spending shift grows New Brunswick’s debt to historic levels. It also caused a major credit agency to downgrade the province’s financial outlook. As reported by The Walrus, this strategy raises serious questions about the financial future of our province.

Choosing Deficits Over Cuts

Provincial leaders across Canada face exploding health care costs and growing demands for social services. Instead of cutting programs, many choose to run deficits. They hope economic conditions improve enough to cover the ballooning debts later.

Holt’s March budget reflects this exact approach. New Brunswickers see huge investments in health care and avoid major spending cuts. You get the services you need right now, but experts state this strategy carries significant risks for your future tax burden.

Mario Levesque, a political scientist at Mount Allison University, notes the government relies heavily on future growth in sectors like mining and federal defence spending.

“There’s a thinking that perhaps the economy will change,” Levesque tells The Walrus. “But it’s a huge gamble.”

The Danger of Normalizing Debt

Herb Emery, an economist at the University of New Brunswick, points out that governments now use higher spending to cushion citizens from economic shocks. This includes everything from pandemic benefits to electricity rebates. The problem arises when the spending never stops.

“One of the big questions we’ve had for a long time is, ‘Can governments behave responsibly in the absence of a crisis?'” Emery says.

History shows that years of high deficits usually lead to severe austerity measures. In the 1990s, debt laden provinces slashed social programs, raised taxes, and closed hospitals to avoid bankruptcy. New Brunswick faced a similar threat in 2014.

Today, New Brunswick relies heavily on federal equalization payments, which make up over 23 percent of the provincial budget. Emery warns that baking temporary revenue into long term budget projections leaves the province vulnerable.

Maintaining Political Popularity

Despite the financial warnings, Holt remains one of Canada’s most popular premiers. She built strong political capital through transparency and empathy. During her State of the Province address, she openly admitted where her government fell short, such as failing to increase access to primary health care.

Levesque explains that budgets feel abstract to most people. Citizens generally prefer investments in services over cuts.

“What’s impacting them directly? And so, if you can say to them, ‘We’re going run a deficit, but we’re going to give you more health care,’ people will say, ‘That’s okay,'” Levesque says.

Looming Financial Threats

Holt’s political capital faces a severe test if the economy falters. Several threats loom on the horizon. New tariffs, reduced federal transfers, and a clampdown from bond markets eliminate the province’s financial wiggle room. Higher borrowing costs force difficult decisions.

Emery remains deeply concerned about New Brunswick’s financial trajectory.

“Is it fiscally sustainable and likely to end well? My prediction would be no,” Emery says. “But I don’t deny that the government has a right to place a bad bet and hope for the best.”

Frequently Asked Questions

Why is New Brunswick running a $1.39 billion deficit?

The provincial government chose to invest heavily in health care and social services rather than making spending cuts. They hope future economic growth offsets the historic debt.

Did Premier Susan Holt promise to balance the budget?

Yes. During her 2024 election campaign, Holt pledged to balance the books in each year of her mandate. The recent March budget backtracks on that promise.

What are the risks of this high spending strategy?

Experts state that relying on future economic growth is a gamble. If the province faces new tariffs, reduced federal transfers, or higher borrowing costs, the government must make severe cuts to essential services.

How does this deficit impact New Brunswick’s credit rating?

The record breaking deficit and growing debt caused a major credit agency to downgrade the province’s financial outlook.