22 February 2009

Verbal tics (5) and wandering into a math minefield

Two things stand out from this scrum by the Premier and finance minister a little over a week ago. [CBC video link: “Premier Danny Williams and Finance Minister Jerome Kennedy respond to the latest from the nurses union. The union said Friday that it would not return to negotiations until its strike vote is completed.”]

First, Danny Williams utters only 11 of his now famous “you know” verbal tics in the entire nine minute scrum.  He racks up a mere four in the first two and a half minutes and only hits 10 by the end of four minutes.

Either he’s much more comfortable with this subject – the nurses’ labour negotiation – than he was with other subjects or he’s been doing some anti-tic practice in the past couple of weeks.

Second, finance minister Jerome Kennedy gets himself into a bit of a pickle when he brings up the projected deficit.  He puts the shortfall at about $500 million based on assumed production levels and assuming CDN$50 per barrel for oil and then adds on the $400 million from loss of the Equalization option.  We’ll grant him that even though it’s a bit of a fiction.

Then Kennedy starts down the dangerous road, mentioning the need to allow for “growth”.

How much growth?

Six per cent.


Or put in other terms about six times the rate of inflation.

That’s pretty typical for an administration that has been known to ratchet up spending by about 14% annually in some years.

So even with oil prices down, mines in limbo and mineral revenues down drastically, a thousand people out of work in central Newfoundland who knows what else, the government is actually planning to increase overall spending in 2009 by six per cent.

That alone would whack $400 million or so onto the deficit all by itself.

Looks like all that the federal changes to Equalization did was take away the convenient federal transfer that would have covered some of that planned unsustainable increase in public spending. Now they just have to stick it on the provincial Amex card.

But still, if you look at where Kennedy headed as he wandered into that mathematics minefield, we are looking at government booking a $1.2 billion deficit this year, the largest in the history of Newfoundland and Labrador, before or since 1949. 

In fact, in one single budget, these guys sound like they are going to add more debt to the shoulders of Newfoundlanders and Labradorians than the entire debt millstone that sank the country in 1933-34.

If you go back and look at the assessment by PriceWaterhouseCoopers in 2004, the projected deficit for next year – based on the finance minister’s own numbers – will look worse than anything in that document.

That probably explains why Kennedy’s voice trails off at the end of his discussion of the coming deficit.  he realised what he’d said.