A couple of years after his war with one prime minister, Danny Williams was locked in another war with another federal first minister.
Williams was demanding compensation for yet another supposed injustice.
“What I said before and I said going in, this is about principles,” Williams told reporters in November 2007 “but it's also about money as well. At the end of the day, the promise and the principle converts to cash for the bottom line ….”
The pattern set in 2004 was repeating itself.
In 2004, the principle had been the clawback that saw, as Williams would have it, the federal government take away money from Equalization transfers that rightfully belonged to Newfoundland and Labrador. Williams demanded that, in addition to the oil revenues themselves, the federal government give Newfoundland and Labrador a payment equal to the provincial government’s revenue from offshore oil production. The payments would last as long as oil revenues flowed.
On three occasions Williams rejected federal proposals for a deal that would last eight years and that would amount to about $2.0 billion. He said the deal wouldn’t last long enough. The second time, he rejected it publicly with the claim that the deal would cost the provincial government between two and four billion depending on the price of oil. The second time Williams publicly rejected the offer, he said the deal would cost the provincial government only $1.0 billion.
Williams vowed publicly and repeatedly that he would never say yes to less than his original demand.
In January 2005, Williams accepted an eight year deal and a single cheque for $2.0 billion. Williams had simply converted the principles to cash.
Nonsense argument
Part of the reason Williams settled is that there had been no principle involved at all. His entire argument was built on a fraud. Williams and his ministers claimed that all they wanted was 100% of provincial offshore royalties. All they wanted was for the offshore resources to be treated as if they were on land.
The problem for Williams was that on both of these points, Newfoundland and Labrador had won in 1985. Williams’ argument was built on an entirely preposterous claim in the Royal Commission on renewing and Strengthening Our Place in Canada - the Blame Canada commission. Their report argued that - unlike any other province in Canada – Newfoundland and Labrador ought to have all its provincial revenues and at the same time receive Equalization as if those revenues never existed.
On the face of it, the argument was unreasonable. There was no way the Government of Canada could agree to such a thing without making the same option available to other provinces with non-renewable resources. Provinces without non-renewable resources would be at a disadvantage. This was the problem that was already controversial within the context of the Equalization program. The federal government and the provinces couldn’t resolve the issue under the program. They certainly couldn’t get the cash through the back door, as Williams was proposing, when they couldn’t get it through the front door of Equalization either.
Put another way, Williams went into the discussion from a position of eminent weakness. If Williams didn’t even have a plausible argument to start with, then he didn’t have much at all.
What’s worse, everyone on the federal side knew more about the issues than Williams did. Paul Martin had addressed the problems with the offsets a decade earlier when he was finance minister in Jean Chretien’s first administration. Martin, finance minister Ralph Goodale, John Efford and a host of senior officials understood that Williams’ claim had no merit on any level whatsoever.
They had experience. Williams had his own political advisors, all of whom lacked experience, to put it gently. When he called Rowe on October 22 for the names friends in Ottawa to support the coming battle, Rowe could only give Williams the name of people who had no ability to influence anything.
Williams’ March demand reflected, as much as anything else, the view of people who knew little of the complex issue but naively – some would say arrogantly – assumed they knew it all. When it came down to the raw calculation of power, Williams was in a decidedly weak position in every measure.
One Tantrum Too Many
Part of the reason Williams caved in January 2005 was that he had gone as far as he could. If Williams believed in October 2004 that a bit of slip-and-fall lawyer bullshit histrionics would frighten the people running a G-8 government than he quickly learned the rights of things.
In his memoir, Bill Rowe, Williams’ personal envoy to Hy’s, plays up the idea that federal Liberals were in a tizzy over Williams’ declaration of war on October 26. There is no independent evidence of any such thing.
What Rowe presents are examples of the panic in the federal camp are actually nothing more than the normal process of managing controversial issues that are in public. Political staffers are always rushing about trying to put out fires. They call people looking to resolve complaints. It does not mean that they are in a panic or deeply affected by the media stories. What isn’t that in Rowe’s memoir is scuttlebutt and rumour and the sort of stuff that one often finds among backbenchers and political staffers far removed from the actual centre of power.
Rowe’s observations about the negotiations appear to be that of a person who had more to say about getting his used snow tires shipped to Ottawa at public expense than about what Goodale said to Sullivan or Martin said to Williams. Rowe’s memoir goes into great detail about what he knew and, as it turns out, he knew little of substance about anything of importance.
One can tell that Williams’ three month-long media circus had no impact on the federal government because of the final deal. It is – in its key elements – exactly what Williams and the provincial government had before the war started. They got $2.0 billion on a deal that lasted the length of the existing Accord offsets and no longer.
All of the other things were relatively trivial. This is the only conclusion that one can reach if one uses Williams’ own dictum that principles convert to cash. That is also the only conclusion one can reach given that both the federal and provincial governments had estimates that showed the provincial government would likely become a have province before the offsets expired anyway.
The final cheque was bigger than the one offered in October not because Williams beat more cash out of the recalcitrant government but because the federal government just used a higher dollar value for a barrel of oil when they made the calculations. Recall that Sullivan had said public that the deal would be worth $1.4 billion but could be worth $2.0 billion based on the price of a barrel of oil. It wasn’t rocket science.
Williams got what he asked for… in January 2003
Part of the reason Williams signed the January deal was that the federal government had delivered what Williams originally sought. Most assessments of the 2004 war start from the slide deck Williams released in March. This is the position Williams later claimed was what Martin had accepted in June.
Williams, though had made another proposal much earlier. In January 2004, Williams wrote to the Prime Minister to follow up on their December meeting. He described the difficult financial state of the provincial government. Williams told Martin how he planned to tackle the problems. Williams also asked for financial assistance from the federal government. Williams committed to use the federal cash on infrastructure and debt reduction.
Martin accepted Williams’ proposal when he replied to Williams at the end of January. From that perspective, all that Martin did in June was repeat what he had done in January: he accepted Williams’ proposal as the basis for a discussion. What Martin proposed to Williams in May – a pot of cash and an eight year deal – was consistent with Williams’ proposal five months earlier.
In October and in the subsequent variations of the agreement, the federal government brought back Williams’ own words. That was no accident. As Williams’ public demands grew in shrillness, the longer he ranted, the harder a bargain the federal government drove. Through it all, though, the federal government offers met what Williams had first talked of in December 2003.
Williams tried to personalise the negotiations. He attacked Goodale personally in December 2004 and January 2005. Before that, Williams and his colleagues had mercilessly sliced in John Efford and Martin’s spokesperson, Scott Reid. At other times he called the Prime Minister dishonest. This was a tactic that Williams and his successors would try again and again in other confrontations.
In each instance in discussions with the federal government over a new federal transfer in 2004, Martin’s response was tolerant and professional. He ignored Williams’ posturing. It was only when Williams penned his bilious screed in January 2005 that Martin dressed Williams down, in public. By that time Williams had done all that he could. He had gone, in effect a tantrum too far. .One can only wonder what Williams might have done if Martin had sorted him out publicly in October instead of January.
He’s right because he’s popular and he’s popular because he’s right.
The single biggest thing that Williams got from his war with Paul Martin was a reputation. On October 21, Williams’ finance minister was defending the .proposed deal against criticism from the likes of Vic Young, chair of the commission that had popularised the political fraud at the heart of Williams’ crusade for cash. Young didn’t think there was enough money in the cash compared to figures worked up for his commission. A week later, Williams had rejected the federal deal. Young backed the premier unreservedly, as did the rest of the province by Young’s estimation.
After three months of fighting, Williams came home to teary-eyed adulation. “We got it,” Williams cheered. His popularity – badly affected by his budget cuts in 2004 – had rebounded 18 points in the three months.between August and November 2004. Support for his party climbed similarly and satisfaction with his government’s performance went up almost 30 points from May to November. By early 2005, Williams’ personal popularity was at record heights, as was support for his party.
Williams dined out on what he came to call the Atlantic Accord fight. For the rest of his political career, his publicity machinery never failed to mention the victory he claimed in January 2005. And each year, the government’s budget pointed out the money that had been earned from the Accord. They presented it in such a way that some could easily believe that the massive increases in government revenue from oil that came in 2007, 2008, and 2009 were due to Williams’ January deal with Martin.
The truth was something else. In keeping with the deal signed formally on Valentine’s Day, 2005, the provincial government put the entire amount of the deal against an unfunded public sector pension liability. The “Atlantic Accord 2005” numbers that showed up in the budget each year were merely formal recognition of the money as it was earned.
The new cash that produced record surpluses each year had nothing to do with Williams at all. Oil prices soared in the years after the deal, exceeding even the optimistic forecasts at the time Williams had taken the cheque from Paul Martin. The cash came from the workings of the royalty agreements worked out by every administration from Brian Peckford to Roger Grimes for the three major fields producing offshore.
The public impression of the provincial government’s financial state was different. Even people like Vic Young were misinformed. Young was a favourite interview subject in the months of open warfare through the end of 2004. In one news story, Young said Williams was fighting because of the province’s dismal economic situation.
“That's why, I suspect, the premier is sticking so hard on getting every last cent. Because No. 1, we need it. And No. 2, we deserve it.”
In the pre-industrial society of Newfoundland politics, popularity was all Williams needed. The January agreement gave it to him. He had done battle with the foreign enemy and brought home spoils. In the process, he had recited the political worship words - no more Upper Churchill - and donned the robes of the mythical tribal leader.
If he did not get the cash he dreamed of, Williams’ got popularity. He and his supporters used it to silence his critics for the rest of his term. Their motto was simple: he’s right because he is popular and popular because he is right. Federally, Williams and his colleagues had destroyed John Efford as a political force in the province. They had either enthralled or co-opted other politicians from Newfoundland and Labrador into Williams’ orbit.
Mr. Williams Goes to Hell
Williams may have felt like he was in heaven after October 22, 2004 but where he was more closely resembled a sort of hell. The day before the war, Williams had been the biggest fish in a very small political pond. After the war, the pond was the same size but Williams was even bigger.
Outside Newfoundland and Labrador, though, Williams had no friends, no sources of influence, no relationships on which he could rely to help influence national events that might affect his province. Small provinces, like small countries, need friends and allies to help them. Williams’ did not make bridges from his province to other people and places. He set fire to them and blew them up.
Williams’ predecessors had kept a respectful difference between the federal and provincial worlds. Don Jamieson did not always see eye to eye with Joe Smallwood or Frank Moores. John Crosbie had rocky relations with Clyde Wells and Brian Peckford. In both instances, the politicians found a way to work with each other despite personal, partisan, and professional differences.
By contrast, Williams and his colleagues deliberately targeted Efford for destruction. Williams showed little respect for anyone else. Even when he was heaping praise, it came across as disingenuous. Williams alternated between praising Martin and insulting in such a way that his expressions of trust in the Prime Minister sounded insincere.
No one was safe from a Williams tirade..Brian Peckford supported Williams in the talks with Martin. Two years later, Williams’ ministers would savage Peckford as irrelevant and ignorant. Federal Conservatives who gleefully helped Williams attack the Liberals would, in due course, find themselves on the receiving end of Williams’ ire. They would wind up suffering far more serious wounds than the ones Williams inflicted on others.
The result of Williams’ caustic approach to politics was isolation for the province. Williams had destroyed his relationship with the Martin Liberals and with federal officials. He had insulted and alienated provincial premiers. After the September health care talks, Williams had made it plain that he thought that in negotiations it was every man for himself. Taken altogether, Williams clearly didn’t play well with others.
For the rest of his time in office, Williams was reduced to sending letters to federal politicians during elections like the head of a local advocacy charity. That was his approach to federal-provincial relations. The provincial government got the same federal spending deals as every other province. But on other issues, like fisheries reform, Williams was spectacularly unsuccessful in advancing any provincial initiatives at the federal level. Williams’ successors copied his style with a comparable lack of success.
The biggest thing Williams got out of the war with Ottawa in 2004 was a reputation. True to everything else about the war, what people in Newfoundland and Labrador thought the reputation was and what everyone else saw were two very different things.
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