09 May 2016

Choices and values: ideologically-driven nonsense versus reality #nlpoli

Memorial University history professor Robert Sweeny discovered something recent.  he discovered that the finance minister's budget speech and the Estimates contained two different sets of numbers.

Hot on the trail of this discrepancy,  Sweeny delved deeper. He clacked out a really long account - even by SRBP standards - of his search for the truth. Then the folks at theindependent.ca  posted the whole thing including a very big table documenting how some parts of the government were getting less money and others were getting more.

There was only one conclusion.  Well, only one for Sweeny.  This was all part of a vast international conspiracy.  "Cathy Bennett, the fast-food millionaire, has pulled a fast one on the public,"  concluded Sweeney. "The finance minister is either incompetent or dishonest—take your choice—but she most definitely must be held accountable, as too must Premier Ball. The very quality of our democracy depends on it."

If the quality of our democracy depends on the melodramatic twaddle Sweeny is peddling, then we are royally shagged.

In case some of you are not regular SRBP readers, let's just get some basic stuff out of the way up front.  First, the budget speech and the Estimates have two different sets of numbers. The reason is that they are prepared using two different methods of accounting.  They present the same thing in different ways. There is a page in the budget speech that reconciles the two.

All governments in Canada reported their public accounts using the same method of accounting. They now use accrual accounting, which is a form of assets and liabilities statement. Newfoundland and Labrador switched in 2003.  They used to use cash accounting.  In 2007,  Newfoundland and Labrador started using both types of accounting.  The budget speech is based on accrual accounting.  The Estimates show the cash flows.

We don't need to get into the  details of how the two methods of accounting differ.  We just need to know they are different.  We also need to know the history of how government has recorded the public accounts since you cannot reliably show things like the public debt earlier than 2003 without noting the difference.  RBC Economics, for one, shows a long table comparing provincial public debts over time without noting that the numbers aren't comparable over time.

Second, regular readers also know that, as Sweeny found,  the government's austerity budget is not austere at all.  Spending went up by 12% overall, just as it did in 2015.

Third, there is no vast international conspiracy.  Sweeny just discovered something really simple. He should have concluded that all the talk of austerity is nothing but hot air.  Since that doesn't fit with his previous conclusions, Sweeny just goes off on a snipe hunt.

There is a bit more to this than just chuckling at another guy in search of the gunman on the grassy knoll.  Sweeny genuinely doesn't understand what he is looking at.  He claims, for example,  That doesn't mean Sweeney is wrong about the increase in spending. There is one. In fact, that none "of the funds 'saved' by taxing books and abolishing the heating oil tax rebate will go toward reducing the deficit."

That's just not true. To understand Sweeny's mistake, look in the Estimates. Find the total revenue last year  - $5.0 billion -  and the total spending this year, which is $8.5 billion.  The difference is $3.5 billion. That's what the deficit was before the government raised a whole bunch of cash by raising all those taxes people dislike.  

If Sweeney then looked at the projected revenue for this year in the 2016 Estimates, he'd see those new taxes will bring in about $500 million in new revenue. That drops the amount we need to borrow - that is, the deficit - to $3.0 billion. The combination of tax hikes, new fees, and some cuts did reduce the amount of borrowing by about $500 million from what it otherwise would have been.  Overall, spending went up, though. 

The question Sweeny should be asking is why did spending go up when everyone thinks it went down.  Then he should ponder why this is the second year in a row that happened.

While we are waiting for that, let's take a look at Sweeny's proof of the conspiracy.  Sweeney claims that the finance department budget for financial assistance (Line 2.1.04) goes from $285,000 to more than $4.4 million or a whopping 1745% increase. 

Again, that's just not true.  The last budget set aside almost $2.0 million in this line and the government actually spent $285,000. If this is proof a conspiracy, then the conspirators are not very good at funneling cash to their pals.  Increasing the potential amount they could spend - two and a half times the previous year's allotment is meaningless if they don't actually spend the money. 

What Sweeny has stumbled on here is nothing more than the usual amount of money government provides to businesses to create jobs.  It's not new.  Governments have been doing it since the 1880s in Newfoundland and Labrador.  One of the problems government has been having for the past decade is that they cannot find companies who qualify to get the cash. This is hardly any proof that government is handing out cash to its pals, regardless of which politicians are running the place.  Just for good measure, Sweeney should have gone back to the 2015 Estimates.  In 2014,  the government budgeted $1.2 million in this line item and spent nothing. 

Some conspiracy that is.  Nor it is a slush fund,  the outrageous claim New Democrat politician Gerry Rogers made. On the face of things,  if this was a slush fund, there isn't much actual slush being slushed around.  After all with budgets of almost $4.0 million over two years, the government only handed out a couple of hundred thousand bucks.  Sweeney makes the same mistake when he looks at the next line (2.1.05)  His reference to "friends of the government" is nothing more than ideologically-driven nonsense. 

Both of these funds are the sort the government has maintained for decades.  They are similar in every respect to the money government gives to the arts community as "investments" in "cultural industries."  Anyone passingly familiar with recent history in this province would understand that the government isn't likely to stop trying to encourage new businesses at a time when its own revenues are down and the economy is in a recession.

Had Sweeny actually understood what he was looking at in the budget, he'd have recognised the simple facts.  The government over the past five years has made very small changes in spending and redirected the money to spending in other areas.  That continued spending goes to many places including paying salaries for the thousands of employees the government added in the past decade even though we couldn't afford it.  That's how we got into our current financial mess.

Sweeny ignored what is actually going on and substituted his own fiction for it.  There's the why we ought to be worried about the future of our democracy, not just the quality of it.