10 January 2017

If only we were New Brunswick... #nlpoli

Premier Dwight Ball has talked about it.

CBC's Peter Cowan tweeted about it Sunday night.

If only we were like all those lucky provinces that get Equalization,  we'd be right as rain.

We can allow that Peter may not understand federal-provincial finances at all, even if he does cover the legislature a lot.  If there's one thing SRBP readers will know is that most people in the country, including pretty well every reporter and politician,  hasn't got a clue about Equalization.  Well, give Peter a bit of a break but there's no excuse for cabinet ministers being stupid enough to talk about Equalization like a province was entitled to it because it was running a deficit.

You can find a summary of Equalization from SRBP last January. You can find an earlier dose from 2005. That should give you the basic understanding Dwight and Peter evidently lack. But for the fun of it, let's look at how we might fare if we were the same as New Brunswick as far as Equalization is concerned.

New Brunswick gets Equalization because the provincial government makes less than a national average amount from its own sources.  Newfoundland and Labrador doesn't get any money because it makes quite a bit more than that average.  In other words, a provincial government doesn't get cash because it ran up a big debt.  The cash is handed out based on provincial government income.

The federal government works out the numbers based on the population of the province.  With a little bit of math, the New Brunswick population (about 754,000)  and the last New Brunswick budget,  you can figure out that New Brunswick generated $6,783 per person in own source revenue. It got $2,214 in Equalization.

Newfoundland and Labrador has a population of about 528,000.  With a bit of math,  you can figure out that Newfoundland and Labrador would make $3.581 billion of its own money.  Equalization would bring in another $1.168 billion. Total:  $4,749 billion.

Newfoundland and Labrador's 2016 budget forecast the province would collect $5.591 billion on its own.  Right away you can see why Newfoundland and Labrador wouldn't want to be in the same spot as New Brunswick.  The provincial government in this province makes huge amounts of cash on its own.  New Brunswick is still heavily dependent on what flows from Ottawa.  There's no way any sane person would want to be back in that spot.

But anyway,  as for Peter's suggestion that Newfoundland and Labrador would have a deficit of only about $600 million, he's basically ignoring how Equalization works.  In the same position as New Brunswick,  Newfoundland and Labrador would actually be $800 million worse off with a deficit of well over $4.0 billion.  As it is,  Newfoundland and Labrador's deficit   - that is what the province has borrowed to make ends meet this year - is more than New Brunswick made on its own, in total.

The problem in Newfoundland and Labrador is that the government spends too much money.  And as long as the politicians refuse to come to grips with that spending problem,  the government's situation will only get worse.

As far as revenue is concerned,  we'll be looking a bit further into the issue of a bail-out on January 16.