15 February 2013

If the next two years are bad… #nlpoli

[Stick to your Lane Update:  See bottom]

No surprise that on the day after natural resources minister Jerome Kennedy talked about looming deficits of pre-1934 proportions that the ruling Conservatives did two things.

First, backbencher Paul Lane reinterpreted Kennedy’s comments on VOCM Open Line with Randy Simms.  There will only be big deficits, says Lane, if we don’t do anything about it. 

Second, Jerome Kennedy didn’t tell the people at his first pre-budget “consultation” anything of what he planned to do over the next few years. 
What Lane said is not what Kennedy said. You won’t find anything that sounds like what Lane claimed in what the Telegram attributes to Kennedy, for example, in James McLeod’s story on page three of the Thursday edition. Kennedy was talking huge deficit.  Period. You can see the same basic thing in the clip on NTV and the one on CBC.

There’s no surprise Lane sang a different tune from Kennedy’s.  Basically the Tories have developed a chronic problem of not being able to say what they mean and meaning what they say.

Lane also doesn’t seem to understand just how big the problem is.  That much is painfully obvious. The finance minister forecast a $1.6 billion deficit for a budget he will deliver in a couple of months.  This is not an amount you can easily hack out of any budget.

To help understand how much money this is, look at Budget 2012.  In order to cut $1.6 billion from the budget you would have to wipe out the education department completely, plus take out natural resources, agriculture, trade, industry and tourism and then find another couple of hundred million besides.

Put another way, you could raise taxes to find the extra cash.  You’d have to double both personal and corporate income taxes to make up that much cash.

The problem is big, Paul Lane.  You might consider clamming up if you can’t offer anything constructive.
Anyway, as for Jerome, there was no surprise he wasn’t letting anyone find out anything beyond what he’d already said about the deficit.  That’s not what these “consultations” are about.  They are a farce and for a government at 30 percent in the polls they are pretty much the opposite of the kinds of things they need to do in order to instill some public confidence in the government’s competence.

Speaking of things to do in order to quell the widespread sense that the government is out of touch with reality, someone needs to keep Tom Marshall off the phone as well.  His call to Paddy Daly on Thursday was so whacked out in its description of the province’s financial state - even for Marshall -  that it is worth a post of its own.  For our purposes here, let’s just say that Marshall and Paul Lane are both working against whatever Jerome is up to.

Now for all that, Marshall, Lane and Kennedy did say the same thing about what caused the problem:  falling oil prices.  And that would be wonderful if it were true, but it isn’t.  You see the Conservatives have known that oil revenue would drop.  They’ve known since 2003, based on oil production forecasts, that there would be less money unless the price for oil just kept going up and up and up as production went down.

To give a sense of how bad things looked, just consider this 2009 forecast from the association representing the big oil companies.  SRBP posted it in 2009.

The numbers vary from chart to chart, oil industry to finance department, but the trend downward is the same.

You can see where 2012, 2013 and 2014 are.  If things are going to be bad – $1.6 billion bad – in 2013 and 2014, then how bad is the deficit going to get out through 2016 when production bottoms out
Or in 2017 when it comes up a bit.

Or 2018 when it is forecast to come back where things are this year.

Or 2019 when it forecast to rise up to the 2012 level before tailing off again.

You see, when Jerome claims that oil revenues will come back in the future, he is probably right.  When you look at production figures, with Hebron included,  you can see the old boy is really blowing a whole lot of smoke up our collective backsides.

But for all that, let’s give him the possibility that at some point in the future things won’t be as bleak as they are today.  Meanwhile, we are in for a couple of pretty bad years.  Now look at that chart.

If the next two years are bad,  then they will be a cakewalk compared to the years that come after that and before this mythical time in the future when Jerome thinks magic will happen.


Stick to your Lane:  Read James McLeod's front-pager in the Telegram on Friday.  If you don't have a subscription, get one.

James did an exclusive with the Premier on Thursday.  As it turns out, Paul Lane's comment to Randy Simms is the correct one, at least as far as the Premier's messaging is concerned.  The $1.6 billion is what would happen if government did nothing.  What happens in the spring will be something else.

Some observations:

Fundamental Communications Problems Persist:  Whether Lane was offside or Kennedy was offside, you still have different messages.  That remains the chronic problem with the current crowd running the place.  They have fried two comms directors in the Premier's Office and still seem to be muddying up the message.

Kennedy said one thing. 

Dunderdale/Lane have a softer approach. 

They are diminishing the scope of the problem both in comparison to what Kennedy said in his characteristically blunt fashion and what the reality actually is.

The second aspect of the communications problem is that they are never clear on what they are talking about.  Go back to an earlier post that noted how the government crowd made a deficit last year turn into a surplus by simply cancelling half their capital works spending.  

While there will apparently be cuts and layoffs this year, if they wind up crying world for the second year in a row, the Conservatives won't have a shred of credibility left. 

Someone may think this sort of stuff is clever but it winds up being too cute by half. That sort of bullshit is one of the ways you get to 30% in the polls.  And it is definitely the way to keep the public sector unions fighting tooth and nail against what appears to be  - in some cases - deliberate deception.

The Problem is Still Enormous

None of what the Premier told McLeod diminishes for one second the comments in this post about the next couple of years after the ones Kennedy was talking about. 

$1.6 billion is the equivalent of all the education spending in the current budget plus another $400 million besides.  You cannot hack that much cash out of the budget easily or in small amounts.

And there's still Tom Marshall

That's another post.

Enjoy the weekend.

You'll really enjoy Monday's offering on the budget and Muskrat Falls.