08 May 2016

Measuring Thick: either or edition #nlpoli

While Des Whelan was clacking out his column for Saturday's Telegram one of the editors -  Brian Jones  - came at the government's financial mess from another direction the day before.

In the bizarro world of local politics,  people think that Des Whelan and the business crowd are on the Right while Jones and his friends in the NDP and the public sector unions are the Left.  Nothing could be further from the truth, as some famous politician once said.

"Bennett and Ball’s first tough decision was straightforward,"  wrote Jones. "It was to determine who is more important: the people of this province, or the credit-rating agencies in New York?"

It's telling that Jones sees it as a choice of one or the other. It's also revealing that he found it hard to watch what Jones described as "trolls, Liberal diehards and people secretly ashamed of having voted for Ball spout predictable putdowns."

What was his example of a put-down?  “'What’s your solution?' they demand, as if any and all alternative suggestions are automatically unrealistic and impossible."

If that is an insult, poor Jones isn't going to want to read any further.

Asking people for alternatives is actually a very useful exercise.  Brian should have tried it as your humble e-scribbler did. The folks who would actually have a conversation sometimes came up with worthwhile  suggestions. The diehard partisans, especially those among Jones' friends on the political left in the province, didn't really ever offer much beyond the slogans and the assumptions they usually spout.

That's okay.  They wouldn't be die-hard partisans if their minds weren't already closed to any new ideas.  The folks on the imaginary right were much the same.  Both had their entitlements and, when you strip away all the pretense, they just wanted to keep those entitlements intact.

For all that, Jones poses an interesting idea, though. He suggests we should just ignore the bond-raters and the folks lending the provincial government money.  That's a bold idea considering that, for the second year in a row,  the largest source of government income is from those people.  Clearly, Jones doesn't realise that or, if he does, then it gives him no bother.

For all that, let's see if we can figure out what would happen if the government took Jones' advice and ignored what the bond-rating agencies said. Let us take away the largest source of government income.


Let's keep it simple, too. We will just allow that all the provincial government's creditors didn't call due the $15 billion in debt we have outstanding at the moment. Rather than call the outstanding loans, they just won;t give us any more cash.

Not a cent.

For it's part, the federal government, already mired in its own problem with a shortage of spare change, couldn't step in and fill in the gap with any kind of bail-out.

So here we are.

$8.5 billion in spending commitments.

$5.0 billion in likely cash.

Let's write a budget. People are making "calculators" to show the impact of budget decisions. We don't need a computer program.  You can do it with a pencil and paper and some basic math skills.

Do we raise taxes?  Truth is there is very limited room to do that.  $500 million to $800 million might well be the limit but since the folks on both the imaginary Right and the fictional Left dislike taxes,  let us just work with what we have.

For starters, there's no way we can keep Muskrat Falls going. We won't have to borrow $1.3 billion, so that reduces our spending to $7.2 billion.  We'll leave aside any claims by companies or the Nova Scotians  suddenly left in the lurch because we stopped Muskrat Falls.

Next, we can subtract the $1.0 billion in debt servicing we need to make.  That leaves us with about $4.0 billion in income and $6.2 billion in spending commitments.

What are your biggest priorities?  Health care,  police,  education, snow removal, ferries?

Health care:  $2.9 billion
Justice:  $251 million
Education:  $865 million
Transportation:  $356 million

That's about $4.3 billion.

Already you have spending commitments greater than you have cash.  You can't even think about money for the university.  All those people from Nova Scotia won't be able to get a heavily discounted education at Memorial any more. Ditto for other post-secondary education, social assistance,  fisheries, environmental protection, child protection, and fire protection.  No pay.  No play.

Municipalities might be able to take over some of those. In practice, thousands of people in huge regions of the province would be left to fend for themselves. And if we consider the thousands thrown out of a good government job,  even those local municipalities will have to struggle now they have no tax income from people with government jobs,

The truth is that as much as people like Brian Jones like to imagine the bond-raters and the folks on low and fixed incomes are part of an either/or choice,  the two are intimately connected.  The choice isn't one or the other.  No matter who is running the government, the choice is about how you deal with one to help the other, how you keep the bond raters happy so you borrow enough cash to keep the government running.

Fortunately, that scenario isn't likely to happen.  Unfortunately, the one we have is not much better.  Equally unfortunately, folks like Jones - people who quite clearly neither know nor care to know what is going on - fight strenuously against any effort to cope with a very precarious situation.

On the pretend Right and the Counterfeit Right,  you can measure Thick by the size of the public financial mess both worked so hard to create.