NHL Deal Proves Tourism PEI Should Not Exist

The recent tabling of the underacted NHL deal with Tourism PEI by the Minister for Tourism shows the Province could end up paying upwards of $8.4 million over three years for its partnership with the NHL.

The Opposition is using this deal as it’s main focus of attack on the PC Party this legislative sitting; the charge by the Liberal Party is that Premier Dennis King is out of touch and abusing the privileges of his office. They accuse him of using this agreement as a vanity project in order to rub shoulders with NHL executives at numerous off Island events.

While in the past I have written articles on here defending the PC Party from what I felt were unjust attacks, this NHL deal seems rather indefensible, especially when the Premier admits he can’t remember who paid for some of his NHL tickets.

Spending by the government of PEI has reached such astronomical levels that in the greater scope of things $8.4 million is inconsequential over three years; nevertheless, this deal is a great microcosm for how exorbitant government spending has crippled economic prosperity for Islanders.

Economic Arguments

In defending this deal, King has used the same argument I have heard PEI politicians use since Wes Sheridan to justify their spending; the Keynesian Economic Multiplier. The general argument is that this deal will help attract new tourists, events, and conventions to come to PEI. The money these tourists and attendees will spend in PEI will go into businesses that will in turn invest more in PEI, so as a whole PEI will gain more back in terms of economic growth than the original advertising expense.

The problem of course is that this $8.4 million does not magically manifest itself, the State must forcibly extract this money from PEI residents in order to spend it. Instead, if King were to leave this money to taxpayers, then it would be taxpayers that get to spend their income as they see fit and this would be an economic multiplier of its own.

If we were to really believe in the positive effects of government spending, then implicitly we are subscribing to the idea that bureaucrats and politicians know how to spend the income of taxpayers better than taxpayers themselves. I don’t know about you but watching the legislature unfold I think that appears to be the furthest thing from the truth.

In addition, if we assume the government’s reasoning is sound and that more spending in tourism advertising is a net positive to PEI, why stop at $8.4 million for three years? Why not $15 million or more? Spending in tourism advertising cannot grow indefinitely, that would be absurd, so there is obviously a spending amount that once the government goes past it becomes wasteful.

If the government has done any analysis to figure out exactly what that amount is, it has not presented it in the legislature, which means it’s a good bet that this analysis does not exist. This means that the NHL deal is a gamble at best with no real way to gauge success. King has pointed to an increase in visitors to the O’Leary Potato Museum as proof the deal is working. I honestly can’t tell if he is serious or trolling.

Tourism Sector Response

Tourism minister Zack Bell did a little better and tabled letters from various tourism operators on the Island in support of this deal. He was clearly irritated by the questions from the Opposition and tabled these letters as a sort of coup de grâce to their efforts.

I’ve read those letters, and I don’t understand how Bell came to this conclusion. Much like King, the letters emphasize that spending money in this sector will have long-term benefits and everybody should get behind the project. Let’s be clear, what we have here is a special interest lobby that lobbied the government to spend more money for their benefit, and the government complied. I expect the tourism sector to be happy about this; I don’t need letters to confirm it.

It’s unfair that government should tax some of the poorest people in North America and divert their money to be spent for the benefit of this group of operators. Some of them even stated how well they are doing in part due to this new spending, one in particular wrote “We increased our economic impact by over 50% to 13M Dollars to the PEI economy.” Great! So since tourism operators are well organized via various associations, what would be so wrong with them pooling their own money for advertising?

Tourism PEI now has a budget of $30 million a year, and it can best be described as a perpetual subsidy to the tourism sector. This is the antithesis of a free-market system and it is by it’s very definition diverting production to lines that are sub-optimal. Perform actions like this on a large enough scale and labor productivity diminishes, once this occurs poverty increases, which is exactly the trajectory PEI has been stuck on for a considerable amount of time.

Sell the ski resort, sell the golf courses, and cut the subsidies. This will save tens of millions that can be used for tax relief which is the only way to reverse course and bring about prosperity.