18 January 2009

Money Talk

1.  From labradore, a post titled “Responsible Government”.

2.  From the Telegram, the editorial follows up on a story from the Saturday edition noting the difference between Jerome Kennedy’s take on the pensions business and that of his immediate predecessor.

It asks a question - So, why the huge difference between ministerial attitudes? – that is worth answering, or at least attempting to answer.

The difference has to do, in part, with the length of time in the job and the amount that one knows about the fundamentals of the job. 

Tom Marshall gave the answer any finance minister might give who understood his job and felt comfortable in the roll. 

The long-term effect of a drop in asset valuation is to force the government and maybe the unions to drop more cash into the fund.  As Marshall noted, over the long haul, the pension fund’s asset valuation has gone up and down yearly but has average over 10% growth since it was created in 1981 [See chart at left].

No big sweat in other words.

Jerome, on the other hand, left the impression huge mounds of cash might have to be dropped into the fund in the next “number of years”.

Big sweat, in other words, since most people would take the tone of his comments to mean more cash was needed in a hurry.

Kennedy’s shown this sort of thing before, this lack of understanding.  His answers to simple questions in the legislature last session – his first as finance minister – were overly aggressive, snarky and condescending.

What else is new, sez the wag in the gallery.  True, but look at the words and you get more the sense of a fellow who is anxious to make sure people don’t realize he doesn’t understand a lot of what he is talking about.

He is covering up, maybe temporarily, maybe as part of a pattern.

Another part of Kennedy’s interpretation versus Marshall’s has to do with the annual budget requirement to find some sort of theme for the farce known as “budget consultations.”  Last year it was a debt clock.  Tom Marshall talked a lot about dealing with the debt but in the end did virtually nothing about it all.  This year, Jerome didn’t have a lot of time to find something to use as a prop, as a theatrical device around which to frame all talk.

CBC’s piece gave him that prop, albeit at the last minute. 

A prop really isn’t necessary though, if any of Friday’s session in St. John’s is the guide.  The Board of Trade – predictably – called for tax cuts for businesses as the way to help get through the coming tough times.  otherwise, government should stay the course.

What that means exactly is unclear, since the current crowd have been spending like there’s no tomorrow and no paying down the public debt to any appreciable degree. Plus, as labradore notes, their entire debt pay-down thingy is merely designed to open up room for more public debt.  That hardly sounds like something the Board of Trade would endorse but yet it does.

The only thing more predictable than the always Tory Board of Trade was the Canadian Federation of Independent Business. Times are good:  cut taxes, says Bradley George.  Times are bad?  Cut taxes, says Bradley George.

Again, no concern for the drain on public resources represented by debt and the odds such debt would increase with all those tax cuts.  How will we pay for everything if we cut taxes and cut them again and then cut them thrice for good measure?

The shortcomings of both the Board and Bradley are evident since neither made any reference to the gigantic shortfall in revenues coming this year. They either do not know or care not to know about the billion or so that has to come from somewhere since it won’t be coming from oil and mining and forestry next year.  It is like the debt:  best ignored except to support action which does not occur.

The size of the “or so”part of that equation by the way would be increased, inevitably, by the size of their tax cuts but this is all of no concern.  The only crowd equal in irresponsibility to the business bunch would be the labour and “social” bunch.  Where the business crowd seek to  cut revenue, the other would boost spending in just about every direction simultaneously. 

The current administration enjoys the support of both business and labour, it should be noted. 

Of course, none of this consultation has to make sense, nor must it bear any resemblance to what is actually going on in the world. The purpose of the consultation farce is merely to allow everyone to recite their scripted lines and if it can be held at the hotel owned by a loyal supporter of the government, all the better.

The whole thing is like the annual Christmas pantomime in grade school.   Everyone must memorise the lines and say them, even if they do make sense only in the fantasy world of the moment.

There’s no requirement that the participants in the entertainment actually understanding what they are talking about either.

That, of course, is both painfully obvious and the answer the Telegram’s question.