23 March 2015

Budget ignorance abounds #nlpoli

The provincial government’s own economics and statistics agency conducted a telephone survey for the budget consultations this year. 

They released the results along with the questions and some details about how they conducted the poll. Let’s just look at the answers to some of the questions, as presented by the provincial government.

revenue oil

Public Lacks Crucial Information

As amazing as it seems 60% of the poll respondents did not know how much of the government’s annual spending comes from oil.

This level of ignorance is both staggering and instructive.

The question the government pollster asked is wordy and misleading:

Prior to being contacted to participate in this survey, did you know that such a significant amount (23% - approximately $1.5 billion) of the money the province spends on programs and services comes from oil revenues?

$1.5 billion is actually the amount this year.  In other years the amount and the percentage of all revenues has been higher.

The question is so badly worded that many people who actually know the figures would have a hard time choosing only a yes or no answer.

That has to colour any of the other responses about what government should do to deal with the current budget problem.

All the same,  91% of respondents knew the price of oil had dropped and 85% were concerned that there would be “in excess of $1 billion less” money to deal with it.

There’s another example of the misleading nature of the poll questions.  Government hasn’t told us how short they are this year.

Were you aware that due to this drop in oil prices, the province is anticipating the amount of money it will have to spend on programs and services for next year's budget will be in excess of $1 billion less?

How much in excess of $1.0 billion will it be?  And is that the amount they will borrow now that they have already made the budget decisions or is that the actual difference between last year’s revenue and the current estimates?

Adding to the Public Debt

Consider how much people don’t know about government finance when you read this next result.  55% of respondents were “comfortable” with the idea of borrowing to overcome the shortfall.borrowing

When you look at the survey, the idea of borrowing more money got greater support than any other choice. Hiking taxes on people making over a certain income was only slightly less popular (54% of all respondents) By contrast, 24% wanted a hike in sales tax. Only 18% supported a hike in gas taxes. Respondents were given a list of choices from which to pick.

Borrowing is the one way of dealing with the deficit that has least immediate impact on respondents. They would have to pay a hike in gas tax out of their own pockets. Ditto for a hike in income taxes.

The next most popular response after borrowing was also an option that would impact most respondents the least:  most of them don’t earn in the tax bracket (above $150K) to get a hit from that kind of tax change.

But notice that the poll question didn’t indicate the current size of the public debt nor did the poll try and gauge awareness of public indebtedness. It’s hard to imagine anything more irresponsible than conducting a poll that may influence policy and yet gives no insight into what people know or don’t know.  If they are as ignorant of the public debt as they are of oil revenues, then you’ve got a big problem.  If they are aware of the government spin number – the relentless use of “net debt” – they are as ignorant as if they knew nothing at all.

Someone Else’s Problem

All things considered, none of the responses on questions about how to deal with the government’s financial financial problem are surprising.  People would logically want to push off the pain of dealing with any budget problem so that it doesn’t affect them.

70% don’t want any reduction in the public service, if it would affect delivery of services.

85% were happy to see any cuts to the public service happen through “attrition” or a combination of attrition and layoffs.  But that’s only if the attrition and layoffs had to happen in the first place.

Beyond that, very few people – less than 40% in total – wanted to offer any specific suggestions like – say – cutting funds for municipalities.

Their most popular answer – borrowing – is the one that pushes off the consequences into the future. The next most popular answer is for government to hike taxes on anyone but the people responding to the poll.

Make of all that what you will.  On Thursday, we’ll take a look at where it seems the government is heading.