27 February 2007

Quebec and NL in same economic and political boat

This column by the Globe and Mail's Konrad Yakabuski describes Quebec as a province on the edge of a financial precipice.

The basis for Yakabuski's comments is a document released over a year ago by Lucien Bouchard and several prominent political scientists and economists. They argued, according to Yakabuski, "that Quebeckers were sleepwalking toward self-annihilation by failing to address the ticking time bombs of an ever-expanding provincial debt, sluggish economic growth and a population that is aging faster than anywhere else in the developed world except Japan."

One could easily switch "Newfoundland and Labrador" for "Quebec" and the names of local politicians for the crowd in this province. The tale is the same.

Public debt and the implications of demographic change sit as twin 800 pound gorillas in the middle of the Newfoundland and Labrador House of Assembly. Not a single politician will even acknowledge their presence, let alone deal with them.

Increased dependence on federal transfers is occurring in Quebec; in Newfoundland and Labrador, restoring Newfoundland and Labrador to dependence on the federal government is the core of Danny Williams' policy.

Quebec receives 20% of its revenue from Mon Oncle Ottawa; in Newfoundland and Labrador, the figure is somewhere between 30% - the official government figure - and over 40% - the figure from the Fraser Institute.

In some respects, Newfoundland and Labrador is actually in far worse shape than Quebec.

Yakabuski notes that Quebec runs the risk of having health care eat up 68% of public spending in 2030, compared with 43% today. Newfoundland and Labrador currently spends 31% of its budget on health care, but all social sector spending - health, plus education and social services - makes up 72% of government spending.

Not only is the situation already worse in some ways, the size of the problem is increasing at a greater rate here than in Quebec. Our neighbours to the west may be facing a sluggish economy. Newfoundland and Labrador is staring into an economic slowdown induced as much as anything else by a combination of conscious government policy in the case of the oil sector and, in the case of the fishery, a chronic inability to deal with a manifest disaster.

Quebec may be ignoring a problem. In Newfoundland and Labrador, politicians seem to be working hard at making the problems worse.

The provincial government here is actively pursuing a hydro-electric development that would cost upwards of $9.0 billion to build. Hydro board chairman Dean MacDonald told The Independent recently that government is seriously considering the very expensive option of shipping power around Quebec to other markets based on the belief that the deal would pay off sometime after 2041. If Premier Danny Williams is to be believed, he is prepared to defer revenue on that approach, that is to sell power for little or no profit in the meantime. That's 35 years from now. Quebec will at least make money from its hydro power. In Newfoundland and Labrador, the government may well wind up, in effect, paying people to take our resources away for a very long time.

For both provinces, though, the words of one Quebec economist are equally applicable:
"For now, someone else is paying, and it's other Canadians. But we're going to hit a wall and [the rest of Canada] is going to say: 'You're asking us to pay for programs that we can't even afford for ourselves,' " said Claude Montmarquette, one of the authors of the manifesto and an economics professor at the University of Montreal.
Quebec and Newfoundland and Labrador are in the same economic boat.

Quebec politicians may not be bailing against the rising seas, but at least they aren't opening the seacocks to settle the ship of state lower in the water.