01 August 2016

Continuing continuity #nlpoli

In the face of thousands of well-informed people telling Dwight Ball that the provincial government must change direction to survive, in the face of mountains of evidence that the province has been on the wrong course since 2005 or so, and lately, in the face of dire warnings from the folks who advise others about the value of the government's bonds,  Dwight Ball will continue to do what everyone knows doesn't work.

The provincial government is abandoning its economic plans, as the Telegram's James McLeod would have it last Friday.

Well, not really.

“This is not about cutting,” Ball told reporters on Thursday morning at a news conference. “This is about where we can create new sources of revenue for Newfoundlanders and Labradorians.”

It may be different from what the budget said, or what people thought it said, but in truth abandoning cuts and looking for new money is what Dwight Ball promised he would do when he This is Dwight Ball's fetish for consistency even in the face of changed circumstances.

This is the sequel to Continuity with Change.

This is Continuing with Continuity.

"This problem is not going to be solved by cuts.  We're going to need to look at new sources of revenue."  That is Dwight Ball last December,  the day of the budget update,  a week after Ball took office.   That is almost word-for-word what Ball told reporters last Thursday, more than seven months later.

No layoffs.   "Engage" with "stakeholders" to find "efficiencies" and look hard for "new sources of revenue."

In his year-end interview with McLeod,  Ball added a bit of colour but basically he wasn't even interested in "efficiencies" if it meant laying people off.  Ball was so wedded to everything staying precisely where it was that he even rationalised the massive increase in the provincial public service under the Conservatives.  They were there to deliver new services to people, claimed Ball.  They weren't, of course.  They were doing the same old things the same old ways.

It didn't really matter , though, if you believed Ball's recitation of Kathy Dunderdale-style nonsense or not.  At the very time he said it,  Dwight Ball knew the provincial government couldn't afford all the extra vote-jobs the Conservatives had added.  Never could afford them,  which is why now that oil prices had dropped Ball had the problem that made him look so sour.

Ball was especially keen to find more money in Ottawa.  We "need to find a way to bridge us [from] where we are currently,"  Ball told NTV's Mike Connors last January, "until the commodities rebound and be [sic] the significant contributor we need them to be."  Ball kept up with that basic theme in February, even as it appeared he had changed his position.  He hadn't changed really.  Some of us just thought he had. Ball had actually been characteristically unclear about what he'd hoped to get out of negotiations with the unions.

As it now seems, we should have drawn the thread of continuity through it rather than assume he'd go looking for job cuts at the bargaining table.  There will be no cuts. Ball fired Cathy Dornan as an expert in crisis communications because the government doesn't need her. Ball plans to do nothing at the bargaining table to address the government's financial problems. We shouldn't be surprised if, in a few weeks, the government cuts off McInnes Cooper as well, for the same reason.  They just don't need outside expertise to help them do nothing. They can do that on their own.

Government action, directed from the Premier's office, has been remarkably consistent since December.  Even in May, as some people in the media misread the government's plans,  you can see the thread of continuity. Some additional revenue from tax increases and charges like the levy.  Minor changes in spending in some areas with the money transferred to others. There is no austerity, no matter what some people fraudulently claim.  Overall spending went up: by the time the House closed the deficit had actually increased to $3.4 billion.

If you want to see this, go back to that post from last May. Peter Cowan asked Ball about the levy, which, at the time, was still in its original shape.  Ball's answer did not talk about cuts to public spending at all. He cited the plan to remove wasteful spending. Tax hikes were the first choice, in order to increase revenue.  Removing "waste" was the second step of Ball's plan and only much later might we see something like cuts to the public service.  Go back to the earlier answer, though and you will see "waste" was also narrowly defined such that it couldn't involve very many layoffs, if it involved any at all.  "Might" see layoffs meant only if they are absolutely, unavoidably necessary.  

Staying the Course 

The provincial government has been following the same policy since 2005.  This chart is something regular readers have seen a lot but it illustrates what the Conservatives did and what the Liberals are still doing.  The red line shows the government's income from everything except oil and minerals.  The blue-green line is spending.

The gap between the two lines used to be covered by oil.  Once the oil ran out,  the Conservatives started borrowing.  In 2015, they overspent by more than $2.0 billion.  The Liberals have had to borrow more.

This version of the chart brings the numbers up-to-date, as of last spring's budget.  You can see the massive increases in spending to cover Muskrat Falls over the past couple of years.  Look at the size of the jump in the blue line.  Now look at the relatively modest jump in the red line.  That's all the forecast increases in taxes and charges from the current budget.  Now look at the enormous gap that remains between the red line and the blue-green line.

The government's forecasts last December and the budget last spring would continue those kinds of gaps for most of the next decade.  All of the gap is new debt on top of the record debt we already hold. Moody's and other bond raters are warning now that if the government needed more cash,  they will not get it.  They will have to start chopping into current spending. In other words, we are already pretty much tapped out.  Something like 35% or more of our spending each year comes from borrowing.  We are on borrowed time.

Spending more money than we have on things we cannot afford and an electricity project we do not need.  That is the legacy of the Conservatives.  That is also now the Liberal plan.


Dwight Ball does not want to cut spending.  Dwight wants to find more money instead.  He does not say where he might find the cash.  That is because there are no sources of cash that could make up the more than $2.0 billion he needs.

If there was any way to find quick money, the other crowd would have found it.  Since Dwight is taking advice from exactly the same folks who helped the other crowd run the place, we can be reasonably sure that the new crowd running the place are no more likely to find the imaginary sources of cash than the old crowd were.  The same people - with the exception of the few politicians - are doing the same thing over and over again and expecting a different result.  That is the definition of insanity.  

That is the special kind of insanity that afflicts our provincial government, regardless of the political stripe.  On the one hand they say they want new sources of cash.  But when asked about a big new aquaculture project,  Ball says he won't put cash into it unless "it makes economic sense."   Ball has no choice but give money to this project and any other like it.

Never mind that we know this sort of thing doesn't work. Decade after decade.  Politician after politician in Newfoundland and Labrador, back to the time before the place went bankrupt the first time.  The government gives them cash or free land and other resources or a big break on taxes.  In the last sessions of the legislature, as the politicians were debating the bill that ended self-government in Newfoundland, they were voting to give "concessions" to some company or other.

You see, by the time a company comes to the provincial government looking for cash,  it has already exhausted every source of cash from banks and other investors.  Those folks have deemed that the project doesn't make economic sense.  That is why the people running the business that makes no economic sense come to politicians like Ball. They know that politicians like Ball cannot say no.  Will no say no.  

Look at Muskrat Falls.  The thing makes no sense.  There is no evidence the project ever made any sense at all.  The whole idea always was to force the people in Flowers Cove and Flower Hill to pay for the whole thing so Nalcor could give a free block of electricity to Nova Scotia and sell discount electricity to anyone else who wanted it. The reason we have to buy it all, of course, is because no one else wants the electricity from Muskrat Falls:  it is too expensive.  It makes no economic sense to buy electricity for at least double what you can get it for somewhere else.

But Dwight Ball said in September,  long before he knew the full story about Muskrat Falls, that we could not afford to let it fail.  That was a blank cheque for Ed Martin.  Then we all found out that Ed Martin had frigged up badly on the contracts for the project, that Martin had actually lied about things like the demand for the project and the contracts he frigged up. Dwight refused to fire Martin.  So when Martin said to Dwight he wanted to quit, Dwight's first response was to try and get the frigger-upper to stay.

That makes no economic sense.

Heck, that makes no sense, economic or otherwise.

But it is the course we are on.

All of 25 years ago,  we realised that there was no magic pot of money,  no missing opportunities out there for easy cash.  We knew that there was no sense in just handing over cash to a company in the hopes we might make back a few bucks in taxes.  The whole thing always works out to be a net loss. That's why the provincial government started to do things differently.

That's also why it made no sense - starting in 2005 - when the provincial government went back to the old ways.  They kept giving away free cash.  They got nothing of any value to show for it.  Best example:  Kodiak boots.  Handed government cash on the promise of more jobs.  The company cut jobs right away.

The old ways don't work.

Hard, bitter experience has showed us that time and time and time again.

That's why it makes no sense to keep heading down a road that we know will lead us nowhere.

We need change, not more of the same.