Jerome Kennedy told reporters on Wednesday that he and his officials are forecasting that the provincial government will rack up almost $4.0 billion in deficits over the next three years.
That consists of about $725 million this year, followed by two years in which the government will spend $1.6 billion each year than it will take in.
None of that should come as a surprise to any regular SRBP readers. This corner has been warning about the current administration’s spending practices since 2006.
So now what?
Well, the first thing to understand is that Kennedy’s revelation comes only a day before he starts the annual series of meetings across the province that he and his predecessor have billed as “consultations”. Since Kennedy and his cabinet colleagues have already decided what they plan to do over the next couple of years, they really don’t have anything to consult about.
They aren’t interested in what people tell them. As SRBP noted some years ago, these “consultations” are merely part of the current administration’s efforts to manage political demands. The finance minister uses the sessions to tell people what he wants them to know.
In this case, Kennedy talked up the huge financial mess not because the mess is a fiction but because Kennedy and his mates want to beat down the demands from people to spend money on stuff Kennedy and his pals aren’t interested in.
Like all-day kindergarten.
Or giving people across the province water that is fit to drink without boiling it for five minutes.
So now Kennedy, like Tom Marshall, and Loyola Sullivan before him is trotting out the “we so po’” machinery. As SRBP put it in 2008:
Since 2003, however, the province has experienced unprecedented levels of economic growth and provincial coffers have consistently swelled. This has been due entirely to policies established before 2003 and, in the case of oil, to the benefit of development deals for offshore oil and gas which the premier derided as 'give-aways' in his election campaign. He has tried repeatedly to claim credit for the current economic success and a great many have fallen for the misrepresentation.
At the same time, however, the provincial government has tried, since 2003, to poor-mouth its own finances.
The difference between then and now is that Kennedy isn’t bullshitting when he says there isn’t money in the bank any more. He and his buddies spent it all.
What’s more, Kennedy and his colleagues plan to continue to spend more than taxpayers can afford. That’s why Kennedy announced they will run deficits over the next couple of years that are larger than anything since Confederation. In relative terms, Kennedy’s deficits look like they will rival the average annual deficits run between 1920 and the final collapse of Responsible Government in 1934.
The Conservatives have produced an unprecedented economic disaster in Newfoundland and Labrador over the past decade through unprecedented, chronic, financial mismanagement. They spent and spent solely for political reasons and used public spending in many parts of the province as a substitute for sustainable economic development.
Add to that the incredible problems in the public service like the high turn-over in the senior ranks and the evident lack of controls on spending and performance revealed annually in the last few reports by the Auditor General and you have a fairly good idea of what has helped create the current problem.
So now what?
Well, we can be assured that the next few months will be - politically - some of the most difficult the people of Newfoundland and Labrador have ever experienced. Most of the heat will come from a clash between the public sector unions and government over lay-offs and rumoured wage freezes and roll-backs over the next three years.
Internally, the Conservatives may be strained to the breaking point if the harsh financial measures implicit in such massive deficits come to pass. One of the reasons they will be running historic deficits is that they cannot agree on how to get the province’s finances back under control.
Too many of them, evidently, are afraid that they will be destroyed politically if they do what common sense would dictate and restore the province’s financial health. They want to keep the money taps wide open. They have noisy allies, including labour federation boss Lana Payne.
If the province is to get back on the road to a financially healthy and prosperous future for everyone, more of the the crackpot thinking that created this mess in this first place will not work. We need to break the annual cycle of obfuscation and misinformation that accompanies the budget. People can support sound decisions if they understand the issues and if they have trust in the politicians involved.
Recent opinion polls suggest that few if any of the politicians in the province at the moment hold the kind of public trust needed. All three political parties are polling somewhere in the low 30s and mid 20s according to MQO. A decade of political deception has clearly taken its toll.
Jerome Kennedy could change that. Well, he could start to change that. He could start by laying out the government’s plans in detail at the “consultation” session. Kennedy might wind up delivering budget details a little earlier than planned but the situation is that serious.
Something in the way Kennedy dropped his deficit bomb on Wednesday, though, suggests that he is just plodding along in the footsteps of his two predecessors.
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