10 February 2016

Politicians and Public Debt #nlpoli

Remember the debt clock?

Finance minister Tom Marshall went around the province during that year’s budget consultation – now “rebranded” as “engagement” – with this big electric counter that purported to show how much interest on taxpayers were racking up on the public debt.

$1,400 a minute back then.

“That clock is ticking away showing a tremendous amount of money on interest that I'd rather see go into programs," said Marshall,  in a CBC story about the annual budget circus.

Now here’s the real question:  what year was that?

Here’s a clue:  public debt was around $12 billion.

That’s a bit of trick actually, because the public has been around $12 billion since 2003.  It never dropped below that amount for very long.

Here’s another clue:  in the year that Tom Marshall went on and on about how much he worried about public debt, he introduced a budget that called for a cash deficit of $800 million dollars. For those who don”t quite get the hypocrisy of that, understand that Tom planned to add almost a billion dollars of new debt onto that mess he was supposedly so worried about.

Still not sure?

Maybe you can find the year if you look at this pretty picture of all the government’s financial obligations since about 2001.  It’s what we owe already or are liable to pay in the future.  The figures come from the most recent Auditor General’s report and the picture is from the always-pithy labradore.

A bit more help:  Tom didn’t become finance minister until early 2007.  He wasn’t finance minister after 2013.

Tom talked up public debt in 2008.  If you look at that chart you can see that liabilities went down in 2009.  That’s largely because the government ran large cash surpluses due to skyrocketing oil prices.  They put cash toward public sector pensions.

But 2009 was also the year the world recession hit hard.  The Conservatives already started hiring huge numbers of new employees and gave everyone in the public service a 20% increase in pay starting in 2008.  All those new employees and big pay increases added huge amounts to the annual spending and to the pension liabilities, which grew again after 2008.

In 2008,  total liabilities was about $14 billion.  By the spring of 2015  – Tom Marshall finished as Premier in late 2014 – the total public liabilities  (debt, in another word) was half as big again as it was when Tom was wringing his hands about debt during the engagement sessions,   errrr consultations. 

Not smaller. 


The lesson here is that we have been down this road before.  We have politicians talk up the horrors of public debt only to turn around and increase the debt themselves.  So we have heard a great deal of talk from the current administration but very little that would lead anyone to believe they intend to do anything fundamentally different than we have seen before.

Wonder what would happen if the current crowd did what the old crowd used to do?