31 October 2016

Ball, Bennett, Williams, and Marshall #nlpoli

One of the things finance minister Cathy Bennett told NTV's Issues and Answers this weekend was that the Premier Dwight Ball scrapped the fall mini-budget in September in favour of his own Grand Strategy for Moving Forward in a Generally Advancing Fashion with Vision.

Ball scrapped the financial course laid out in the budget because of the way people reacted badly to it. If anyone asked Ball asked him about it,  he would deny the polls had anything to do with the change of plans. Then again, last week's marathon meeting had nothing to do with protesters at Muskrat Falls either.

The change of direction actually happened much earlier than September.  Dwight Ball made it pretty clear last summer he'd reverted to his old plan.  That consisted of keeping government on the strategic course the Conservatives set in 2006ish:  spend as much as possible and change government organisation and spending only by the smallest necessary to shift money from one spot and put into another.

Muskrat Falls is a huge part of that since it promises to bring new revenue.  For a guy who thought a small hike in the provincial sales tax was a job killer, Ball apparently never grasped the concept that Muskrat Falls was a tax four times larger on the same population. Flip back to August and run through the post "Continuing continuity" if you need more details.

Another thing Bennett did on Issues and Answers is give an even bigger talk about Equalization. During Thursday's mid-year financial update,  she took a swipe at Quebec, noting that the provincial government there gets $10 billion and is posting a surplus this year of $2.2 billion.  With Issues and Answers,  Bennett mentioned that Nova Scotia gets a block of Equalization.

People in Nova Scotia will find it just way out beyond bizarre for a provincial government with offshore oil revenues to envy a province getting hand-outs from the federal government, but there is no mistaking the line that Bennett is following.  Dwight Ball said the same thing just after taking office.  Ball talked about how easy things would be here if we just had Equalization.

Equalization isn't an option for Newfoundland and Labrador.  The program has always been a way of funnelling money from the federal government to provincial governments that does not have enough money from its own sources to deliver provincial services.  The federal government and the provinces will rejig federal transfers over the next few years, largely because the provincial governments will be facing a huge challenge of delivering health care with an ageing population.  Newfoundland and Labrador will be especially hard hit.  That's something we've known about for decades but government after government chose to ignore the looming problem.it.

As much as the federal government might put into Equalization and other transfers, there is an upper limit. The money comes out of federal revenue, after all, so the federal government couldn't just give an open-ended commitment to the provinces. That's why Danny Williams failed in 2004 when he tried to get a permanent Equalization transfer equal to  - and on top of - all the oil money that was flowing to the provincial government. No federal government could agree to it without offering something similar to every other province.

Ball and Bennett, like Tom Marshall and Danny Williams before them, are actually deceiving people by mixing together Equalization with government's financial problems. Nova Scotia and Quebec will post surpluses this year because the governments in those provinces spend what they have and nothing more. It is as simple as that.  The provincial government has been running deficits because it spends more than it is taking in. There's nothing more to it than that.

The politicians talk as if the lack of federal hand-outs is what is causing the financial problems. We would not be be facing a $2.0 billion deficit if we had federal hand-outs.  That's the deception,  the falsehood, the lie. If you need any convincing about this, just recall that the provincial government here ran deficits every year it got hand-outs except for once.

For those trying to figure out what the provincial government plans to do to deal with the chronic $2.0 billion deficits we have,  you now have all the information you need.  Go back to that post from last January.  Dwight Ball said we just needed to "bridge" from where we are to the point when commodity prices come back to where we need them to be. That basically views our current situation as a short-term one.  There's nothing fundamentally wrong. We just need to riff until new money shows up.

That means that the government has a revenue problem not a spending problem. We don't make enough money. Ball pointed to commodity prices as a source of cash.  He also added the federal government and its transfers. Add Muskrat Falls in there, too.  Now we can add Ball's "vision" in which all the really small sources of revenue the government currently has magically produce oil-like cash.

Some of you who saw Bennett's interview will see there is another issue in all of this.  During the mid-year financial update and again on Issues and Answers,  Bennett said emphatically that we have a spending problem.  That's true.  The strategic problem is that we spend way more than we can afford. But the whole Equalization comparison with other provinces says we have a revenue problem.  And, in fact,  what the government emphasises with Ball's comments from last winter onward is that the provincial government has an income problem.

The course we are on is the same one that got us into this problem in the first place. Keep spending; just find some new cash.  That means the government's position is strategically unsound.  The line about Equalization is deceptive in that it blames a lack of federal funding for the financial problems instead of correctly identifying the culprit as government policy itself.  In that sense,  the Equalization line is an excuse for chronic mismanagement in the case of the Conservatives  and now an excuse for failure for the Liberals.

If you want to know why two successive administrations are making the same mistake,  check back on Wednesday.