30 November 2007

The only principle is cash

What I said before and I said going in, this is about principles, but it's also about money as well. At the end of the day, the promise and the principle converts to cash for the bottom line for the people of Newfoundland and Labrador.

Premier Danny Williams revealing the core of his political philosophy, November 30, 2007.

It's never really about principle with the current provincial administration.

It's always about money, specifically the "compensation" that can be received for some injury real or invented.

The best example of this approach is the 2005 federal transfer of $2.0 billion to the Government of Newfoundland and Labrador. As Danny Williams said in a scrum at the time, the major issue under discussion at the final, January meeting was the amount of the cash advance.

The principles supposedly underlying the original position taken by the Premier were abandoned in the final deal. As a result, the deal is worth a total of $2.0 billion and will never be worth any more than that.

It is no accident that the Premier used the word "compensation" frequently during his post-meeting scrum and also spoke of specific amounts of cash. One figure he cited several times was $10 billion.

This is an entirely artificial number, incidentally, based not on principles but an estimate prepared by university economist Wade Locke. He used certain assumptions which may prove to be accurate or which may, as in the case of the 2005 federal transfer payment, prove to fall well short of the actual values. This does not denigrate Locke's analysis but rather, people should consider that Williams is not talking principles; he isn't talking about the rules under which a system may operate.

Rather he is looking solely at an amount of cash, despite the fact that in actual performance a properly constructed Equalization regime, like a properly constructed offshore royalty regime could produce more revenue for the provincial treasury in actual performance than a single set of projections, based on certain assumptions, might suggest.

To give some idea of the extent to which Williams is focused entirely on cash, as opposed to principles, consider this response to a reporter's question during the Friday scrum:

At the end of the day, this translate down to the 10, $11 billion gap that the people of Newfoundland and Labrador would have received if he fulfilled his promise up to 2020. If you take 2006 when it was there 14 years and you divide that in to $10 billion, you get about $700 million a year. That's the magnitude of the commitment. If the Government of Newfoundland and Labrador was able to receive similar compensation in some form or another whether through that formula or something else, then we as a people have gotten that monetary benefit. If we disagree on certain principles, then we disagree, and we can't reach agreement, there's nothing we can do about it.

The entire issue is framed in the context of very specific amounts of money. It is most emphatically not based any principles, such as those underlying, for example, an equitable Equalization system or of the fiscal relationship between the federal government and the provinces.

This fixation on specific amounts of money may reflect the current administration's collective difficulty in appreciating the value of the 1985 Atlantic Accord and the principles it contains versus the entirely limited specific amount of cash attained in January 2005. The administration allowed the 1985 Accord to be amended unilaterally by the current federal administration and did not raise a single whimper about the violation of the terms of the 1985 memorandum of understanding. Instead, they focused on the cash irrespective of the dangerous precedent set by the amendment.

The most obvious weakness in this approach is that it gives the federal government an easy target to achieve. Since the provincial administration is concerned only with cash and given that there is a record of Williams settling for much less than originally sought - despite the bluster - Stephen Harper needs only to consider how small an amount he can get Williams to agree to. Williams has said yes to much less before and he is likely to do so again.

if Stephen Harper came to St. John's looking to get rid of the minor annoyance of Danny Williams' personal vendetta, he may just succeed. It certainly won't cost the Government of Canada anything close to $10 billion spread over 20 years to do it.

As Williams said:

What better place to put some green infrastructure in transporting some of that Lower Churchill power to the island of Newfoundland and Labrador in order to replace Seal Cove, Holyrood, generation.

The current estimated cost of that project?

$2.0 billion.