08 August 2016

Afraid of a second moratorium #nlpoli

During the filibuster in the last session of the House of Assembly, education minister Dale Kirby reminded everyone of why the current administration is following its financial policy.

Didn't want to create a second moratorium,  Kirby said.  or words to that effect.

Significant cuts to government spending of the kind needed to cope with the government's financial problem would cause a second moratorium.  Kirby's point was that the current crowd were not gonna do that.

No way.

That comment was a reminder of the financial and economic update Dwight Ball delivered a week after taking office.  The government's forecast was that economy would shed jobs steadily through to 2019 as the current pile of mega projects finished up.

They were forecasting employment would fall by 7.2 percent, in total,  with the heaviest drops in 2017 (3.5%) and 2018 (2.1%).

Just to help you understand those numbers, the most recent figures for Newfoundland and Labrador from Statistics Canada show that the economy  shed 4,300 jobs (seasonally-adjusted)between July 2015 and July 2016.  That's a drop of 1.8%,  roughly double what the government forecast. The worst drop in the string was supposed to be 3.5%.

Faced with a decline in the economy anyway, both as a result of local and global factors, the Liberals decided not to make it worse.  The crowd currently running the place made precisely the same decision as the crowd running the place before them:  do only what is necessary to get by.  They satisfied the bond rating agencies but only so that the government could continue to borrow upwards of $3.4 billion this year.

People who are expecting bigger cuts than we've seen got that idea from somewhere else, not from actually paying attention to what the politicians were saying back last fall during the election and last winter.   They it got from the news media and other folks who started attacking the Liberals even before the election was over for breaking promises or knowingly making false promises. The same folks were running around haughtily proclaiming the election was dull and predictable.  It wasn't but then again, veracity never stopped some folks from reciting the same untruths over and over while others of the same ilk proclaimed them brilliant insights.

Three things to bear in mind.  First, and most importantly,  the generally bad financial state of the provincial government was obvious in the 2015 budget.  The Conservatives planned on a $2.0 billion cash deficit.  No one among the usual opinion leaders in politics and the news media - pointed out the fundamental problems in the assumptions that underpinned the budget.  They talked about an "austerity" budget that actually increased spending 12%.

Second, and almost as important,  all three political parties had the same financial plan throughout the 2015 general election.  The only difference among them as how much borrowing they'd do to fund overspending. Again, you won't be able to find anyone from the usual opinion leaders in politics and the news media who acknowledged this.

Third,  the Liberals have generally delivered on the plan all three parties endorsed.  There have been some feints,  that is, there have been times when it appeared they would do something different.  But overall, the Liberals  have actually stuck to their plan.  The Liberals have trimmed spending in some areas to shift money to other areas.  This is as far from austerity as anyone can get.  Whether continuing to pile up more debt is good is another issue.

There was another indicator recently of the bad times as all of the Conservative chickens come home to roost.  The most recent statistics on personal bankruptcies shows that Newfoundland and Labrador, Saskatchewan, and Alberta have the three highest rates and saw the highest growth in the numbers of bankruptcies.

Figures like that coupled with the political backlash over the spring budget will reinforce the political argument against any effort to cope with the Conservatives legacy of financial mismanagement.  That's the cause of the current problems,  ones that are likely to only get worse as the same way of thinking that made the problem continues to dominant thinking about how to address the problem.