18 December 2006

But what did Danny ask for?

Bond Papers has learned that fax machines at Confederation Building have been busily churning out a lengthy diatribe from the Scrappiest Premier in Canada (trademark pending) to each of Newfoundland and Labrador's members of parliament seeking their unequivocal support in the coming holy war between Danny Williams and Ottawa on Equalization.

While Premier Danny Williams likes to talk about Stephen Harper's commitment given in response to a letter Williams wrote to the federal party leaders, Scrappy isn't too keen to discuss his own version of what the Equalization formula should look like.

Well, in the interest of annoying the Premier so much he names Bond Papers next time full debate and discussion on this issue of such public importance, here's the Danny Williams proposal for Equalization reform with notes by your humble e-scribbler.

Get to the end of this post and then see if you can explain why Danny's knickers are in such a knot. Forget the nonsense from the Premier's publicity department. Compare what the Premier proposed the government's official position to what he is now bickering over.
The Government of Newfoundland and Labrador is advocating the following reforms to the equalization program:

(1) return to a formula driven approach to the determination of equalization entitlements, abandoning the "fixed pot" approach introduced in October 2004; [BP: All the first ministers are in agreement with this. The federal proposal and the O'Brien commission report all discuss a return to a formula based on commonly-accepted principles.]

(2) the measurement of fiscal capacity must extend beyond simply revenue raising to include accounting for the impact of debt and debt servicing; [BP: Newfoundland and Labrador is pretty much alone on this one. Debt and debt servicing are a direct result of provincial government fiscal decisions. Taking this approach would commit the federal government to transfer cash to the province but would relieve the province of any obligation to address its own debt problem. After all, if this section were implemented as the Premier intends it, the provincial government could wrack up ever increasing levels of public debt and actually see increases in federal transfers. Don't expect anyone to endorse this or for Williams to admit that what he really wants is the exactly opposite of what he publicly claims to support . His own words say something completely different, though.]

(3) comprehensive revenue coverage (which would include, in full, all renewable and non-renewable resource revenues); [BP: In January 2006, Danny Williams proposed the complete clawback of all resource revenues through Equalization.

Danny Williams is on a new political jihad because the federal government is threatening to include half of all resource revenues in figuring out equalization payments.

Danny Williams now claims he wants the federal government to exclude only non-renewable resource revenues.

Under Williams' original proposal, offshore oil and gas revenues would be protected for a limited period through the offshore agreements (1985 and 2005). All other revenues would be clawed back. The loss to the provincial treasury would be at least as the amount under the current federal proposal.

Under the current proposal the provincial government may lose federal transfers of about $100 to $200 million per year. Oil revenues alone are forecast to grow beyond that amount.


(4) a return to the 10 province national average standard...[BP: This principle is included in the O'Brien report and recent federal proposals.]

Confuddled? I didn't think so.

What Danny Williams says today and what he actually wrote as the official position of the provincial government in January are two completely different things.

On top of that, you should know that Williams isn't only concerned about Equalization. Rather he is also perturbed that the federal government is planning to restrict its spending in areas of exclusive provincial jurisdiction like education.

The big problem for Danny Williams is that he has absolutely no influence in Ottawa at all. This is a problem entirely of his own making.

On top of that, Williams is suffering from the evident hypocrisy of his earlier positions. On the one hand he relentlessly criticized the federal government yet at the same time sought to increase federal transfers to his own administration.

Contrast this with the position taken by Clyde Wells a decade and a half earlier. Wells recognized the need to change the Newfoundland and Labrador economy and reduce the provincial government's dependence on federal transfers. However, Wells also recognized the important role of the federal government as the national government - something Williams' "Dannyland" pretensions rudely ignore - and specifically in developing the province through the transition period to a properly developed economy.

The dependence was something to be acknowledged but worked against. In Williams case, he has actively sought to increase it.

Of course, Wells and then-prime minister Brian Mulroney may not have been fast friends, but at least Mulroney would return Wells' phone calls and answer his letters.

And Mulroney's communications director never cavalierly dismissed Wells as easily as Harper's did with Williams.

Payback is indeed a mother, isn't it Danny?