The Conservatives running the province got together with their staff and key supporters this weekend to reaffirm their conviction that they alone ought to be running the province.
Some people seem to think it’s remarkable that they stand together behind Kathy Dunderdale and her supposed wonderful charm, despite what the polls says.
There’s nothing remarkable in it at all. People in power have a hard time understanding it when the voters turn on them. They carry on with their schemes, convinced in their own rightness. It’s a form of self-delusion. It’s what the mind does to help people cope when what they believe and what is true are two radically different things.
Sometimes, the psychological trauma is so deep people never get over it. You can see that in former Conservative cabinet minister Norm Doyle’s new collection of reminiscences, just out from Flanker. It’s especially strong when he writes – very briefly - about things like the Liberal election victory in 1989 that swept Doyle and his friends into the crappy opposition offices. He plays up the popular vote numbers because the Tories were a fraction of a percentage point ahead in the general election.
Doyle doesn’t really pay much attention to what matters, namely that the Liberals won more seats in the House of Assembly. Nor does Doyle go into any other issues about which he had intimate knowledge at the time but which might be a bit traumatic but for the self-justifications he carries around with him. You can get a clue just how traumatic the whole thing was by the way Doyle refers to the shock of going from being a cabinet minister to living in the opposition offices.
Now to get the full effect of that, you’d have to know that the offices Doyle went to weren’t the ones in the north wing of the Confederation Building these days.
Doyle and his mates wound up in the western wing of the fifth floor in a part of the building they had not renovated since it was built in the 1950s. Sometimes water poured in when it rained. That’s the spot the Conservatives gave the Liberal opposition when, in their arrogance, the Conservatives figured that these offices were only ever going to occupied the Liberals or the New Democrats. Doyle had never worked in the Opposition office - despite the implication of one sentence in his book - and most of his colleagues couldn’t remember the time before 1972 when the Tories had won power from Smallwood and the Liberals.
By contrast, Doyle and his colleagues made sure their offices were well-appointed. They spared no public expense to fit themselves out in fine style. Bear in mind that Doyle was part of a provincial government that was in very tough financial shape. Among the Tories, only the Speaker worked in a place decorated in a style best described as a cross between a Turkish whorehouse and a set from Good Fells or Married to the Mob. The rest were lavish as lavish could be in a 1980s way. Doyle doesn’t get into any of that but clearly, from the way Doyle describes the election episode, he still finds the whole thing painful a quarter of a century later.
Conservative Debt threatens Conservative Dream
All the cheering, backslapping, and breakfast-serving in gander this past weekend won’t obscure the reality the Conservatives face in running the government these days. It really can’t hide the difficulties their Muskrat Falls project is facing. Sure they keep insisting that there is a business case for it, or that there are markets for the electricity outside Newfoundland and Labrador, or just that everything is fine.
The reality is that everything isn’t fine.
For one thing, the investors and their friends the bond-rating agencies have a bit of a problem with the huge public debt the provincial government is carrying around. The debt isn’t small, despite what the Conservatives claim. It is – in fact – bigger than the one they took over in 2003. Muskrat Falls will make that public debt bigger by something like another 50%: $13 billionish now. Another $6.0 billion for Muskrat Falls.
Not good for a provincial government that is running half a billion dollar deficits with no plan to reduce that other than hope that oil prices will shoot through the roof again. Norm Doyle might have a problem with the end of sectarian education in Newfoundland and Labrador schools, but we are not far from a time when his successors in the current Conservative government would probably think long and hard about offering human sacrifices to any god going if only that supreme deity would make oil prices go up faster than local oil production will go down.
So it is that Kathy Dunderdale and Jerome Kennedy trotted out in front of reporters to tell the world that the Conservatives will be tackling the unfunded liability in the public sector pension plans. That unfunded liability is, coincidentally, about the same size as the burden Dunderdale and Kennedy want to lay on taxpayers for Muskrat Falls.
Their news conference came – not coincidentally – the same day Moody’s released a global assessment of debt load held by states and provinces in four western countries. They singled out Newfoundland and Labrador as one of the problem children. This is not good for a place try to interest people in buying provincial government bonds. Hence, the news conference.
There’s another threat to the Muskrat Falls dream as well. The company that owns the Come by Chance refinery hired a lobbyist who registered with the provincial government this past August. Her targets for meetings, calls and so forth included the Premier’s Office, the natural resources and finance departments, and the Executive Council. The cabinet, in other words.
Kathy told the rest of the province what is going on when she mentioned in a scrum that the owners have the refinery up for sale. They want to dump it.
This causes two problems.
First of all, if the owner can’t sell the aging refinery, it refinery will likely close. This will be a severe hit to the economy in the northern part of Placentia Bay and the bottom of Trinity Bay.
Second of all, and more importantly for Kathy, Cathy, and the Muskrateers, the loss of the electricity demand from the refinery is just another reason not to build Muskrat Falls. Part of the scenario Nalcor and its hired experts used to justify the project was that electricity demand on the island would not decrease due to the loss of any of the current industrial operations. They forecast an increase, not a decrease.
The review conducted by Manitoba Hydro International noted the vulnerability of Nalcor’s demand forecast to changes. They focused on the Corner Brook paper mill likely because they figured it was the most obvious and likely demand source to shut its doors in the near future.
Well, take the refinery out of the picture and you also make it much easier to meet anticipated demand without Muskrat Falls. If you think replacing the thermal plant at Holyrood is an equally urgent issue, Muskrat Falls isn’t the best choice for that either if you also take the refinery out of the picture. Some conservation measures, a line across the Avalon to increase the transmission grid’s capacity, plus some small, relatively inexpensive hydro projects and you have the job done.
Pension Liability and Cancelling Muskrat Falls
With a little thought, you can understand why the Conservatives are concerned about public debt, the Come-by-Chance refinery, and Muskrat Falls.
That concern also explains why they are all the more keen on rather loud public displays of unity. On Sunday morning, the Tories all got out of bed and went down to breakfast served by Kevin O’Brien and his fellow Conservative politicians. It was a rather obvious display, tweeted out by the Premier’s Office staff and assorted young Conservatives. Before they ate, the Conservatives all got to their feet, raised their arms and waved them back and forth while loudly chanting about how great it was to be a Tory.
If they weren’t down in the polls and inwardly shit-baked at the implications, the Tories wouldn’t be putting on such big displays of unity and confidence. Had they handed out ruby slippers and clicked them together, the Tories couldn’t have telegraphed their true feelings any more clearly.
Muskrat Falls is in big trouble. Nalcor and the provincial government are having trouble raising money for their project even though they have already spent billions. There are no markets. Electricity in the United States these days is going for about one tenth of what it will cost to make at Muskrat Falls and that’s even using old cost estimates. The only way Nalcor can make Muskrat Falls work is to force everyone in Newfoundland and Labrador to pay the full cost of it, no matter what.
By the provincial government’s own estimate, Muskrat Falls will amount to an added tax on domestic consumers of $450 million annually. That sort of number can’t be making the bond raters any happier, either. After all, that $450 million added tax burden is another $450 million in tax room the provincial government can’t raise in order to cover its expenses if they needed it.
Cancelling Muskrat Falls is the right thing to do. But cancelling Muskrat Falls doesn’t mean that we can then let the pension liability and the public debt carry on without dealing with. The pension liability is an enormous problem, made all the worse by the Conservatives’ chronic financial mismanagement over the past decade.
Cancelling Muskrat Falls would at least take one additional financial drain off government’s plate while at the same time opening options to cope with the other problems the Tories have ignored or made worse since 2003. The SIDI series posted earlier this year at SRBP demonstrates both the extent of Conservative mismanagement and the sorts of options available if the politicians want to take them.
There are lots of viable options. One of them isn’t delusions of the sort the Conservatives have thrived on daily since 2003 and now traffic in almost hourly.