06 January 2016

Let's hear it for the Fraser Institute geniuses #nlpoli

A year after Kathy Dunderdale left office, the Fraser Institute said she was one of the best fiscal managers of all the Premiers in Canada.

Provincial Conservatives repeated the story anywhere and everywhere they could, just as they had done the other time the Fraser Institute said Kathy was a financial genius.

Sound fiscal management was a big thing for the crowd that just finished up their latest term running the place.  Danny Williams listed “sound fiscal management” as one of his big promises when he announced his first cabinet.

In his first budget speech,  Conservative finance minister Loyola Sullivan reminded everyone of the promises he and his colleagues made in the 2003 election.
Prior to and during the election, we outlined a number of commitments to the people of Newfoundland and Labrador. I would like to focus today on three major commitments: 
First, to balance the Budget on a cash basis in four years and restore sound fiscal management; 
Second, to expand the economy and create jobs; and 
Third, to ensure that our health and education systems meet the needs of Newfoundlanders and Labradorians and are sustainable into the future.
In hindsight, it all looks like some kind of sick joke.  And it would be finny too if we all weren’t the ones living through the awful truth of just how badly wrong the Fraser Institute and all the rest of them were.

The Fraser Institute was in the news again Tuesday telling everyone that public sector debt was a fearful thing.  Indeed it is. 

And it was a fearful thing back when the crowd at the Institute were loving up Premiers like Dunderdale who had not only continued to rack up massive public debt but had a plan to rack up even more. 

The problem is not that they are partisan, although it is curious that Fraser likes Tory leaders but raises questions about Liberal ones.  Rather, the problem is that their reports tend to be so obviously superficial.

It’s like Kathy Dunderdale when she tossed out that line about 19% of the population paying 70% of the taxes that were helping keep the government afloat.  That’s a level of detail that should have given someone a reason to think twice about applauding the Premier of a province planning to double the public debt and expecting that small tax-paying crowd to shoulder the burden.

It’s like Hebron and old people.  The folks at the C.D. Howe Institute noticed that little problem of an ageing population this time last year.  Newfoundland and Labrador would be hit particularly hard, of all the provinces, by an ageing population.

Larger health care costs, you see, and a significant portion of the budget is eaten up by health care.
Just to add to that, consider that the short- to medium-term projections for Newfoundland and Labrador show the workforce is going to be smaller than the portion of the population over 65 and under 18.

That means – in effect – that fewer people will be supporting more people.

That’s not a good thing when you consider all that increased debt from a project like Muskrat Falls with the only revenue from it coming from those same people in the workforce and the folks on fixed incomes. 

And even before that, the Conservative plan to buy stakes of oil production offshore significantly changed the government’s cash flows. That looked pretty stunned at the time, to anyone paying attention.  What it meant was that taxpayers had to fork out cash up front. 

Then they had to get paid back before they could make a profit.  At the back end of the project they were on the hook for close-out costs.  And along the way,  taxpayers – who actually owned the resource – were compromised in their ability to regulate the companies effectively.

The alternative would have been for the resource owners to just collect their royalties, free of any encumbrance.  They didn’t need to buy equity at all in their own oil.  That really didn’t make any sense when oil prices were low – like about what they are now, in effect – and we knew as a matter of fact that we’d have all that debt and all those old people and extra costs.  By the time you added Muskrat into that, the whole thing look looked like what it was:  positively idiotic.

The other word would be “superficial” and that’s what we have been getting from the folks at the Fraser Institute or some of the local commentators.

But hey, let’s all give them a big hand for getting it right once in a while.

Public debt is a big problem.