The problem we have is not a lack of options and opportunities to sort out the government finances ourselves. The problem facing Newfoundland and Labrador is that the leading people of the province, not just the politicians but all the leading people, don't have the stomach for making the kinds of decisions needed. They don't even want to talk about sensible things. They talk about foolishness like Equalization or fight against imaginary "austerity" instead.
SRBP, "Sovereignty", January 2017
Lately, Alberta economist Jack Mintz likes to remind Canadians that Alberta is pissed off with the federal
government. The Alberta government is
running massive deficits but Mintz thinks Ottawa is to blame, not, you know,
the provincial politicians who actually made the decision to spend more
provincial tax money than the provincial government takes in.
Mintz turned up in the Toronto
Star and CBC Radio last week pushing Ottawa to bail out Newfoundland and Labrador. He’s hooked up with a shadowy new outfit calling
itself the Schroeder Institute that also launched itself last week with a
campaign to get Ottawa to funnel money to Newfoundland - as Schroeder’s Twitter
feed keeps calling it – to stave off financial catastrophe in the province.
Then local musician and business owner Bob Hallett
took 2,000 words on CBC’s local website to deliver the same message: Newfoundland’s financial mess is Ottawa’s
responsibility to clean up.
That’s a wonderful sentiment sure to get lots of
support from people in Newfoundland and Labrador who are worried about their
future. Sadly for those people, Schroeder,
Mintz, and Hallett rely on a string of old fairy tales that have been long
debunked – not to mention stuff that is just wrong – to make their case. They
also are a reminder that wisps of air and pixie dust are a piss-poor foundation
for successful policy against very real problems. That
is, after all, how Newfoundland *and* Labrador got into its current mess in the
first place.
Take for example, the power contract between
Hydro-Quebec and BRINCO for power from Churchill Falls.
The Schroeder Institute claims it happened in 1966 and
that it was about fighting separatism.
The 1969
power contract had nothing to do with Quebec separatism at
all. There’s an old fairy tale from the
1980s, started by Joe Smallwood, but
that was effectively debunked by economist Jim
Feehan in 2011.
Lots of people, including Joe Smallwood, have claimed
since the 1980s that Lester Pearson asked Smallwood not to push for a power
corridor for Churchill Falls electricity through Quebec. There’d have been an incredible backlash in
Quebec at a time when separatism was on the rise, so the story goes.
Except, of course, that it never happened.
Lots of people have tried to make a case that Ottawa
is responsible for Churchill Falls and should pay up. Schroeder, Hallett, and Mintz are just the
latest. The argument fails because as
more information emerges, their case
crumbles in light of the facts from the time.
If you want to know what actually happened in negotiating the
contract, there are decisions in a
number of court cases that provide excellent summaries of the history of the
deal. The earliest was the 1984 water
rights reversion reference.
The most recent was the decision in the “fairness”
case issued just last year.
Even the traditional nationalist perspective that
underpins Ray Blake’s version in Lions or jellyfish presents the
development of Churchill Falls in a far more complex way than suggesting that
it was all Ottawa’s fault or that the deal helped keep Canada together.
Government Income
The Mintz/Schroedinger/Hallett take on Equalization is
no better.
The program is actually very simple.
Equalization
is about provincial government incomes, not outcomes (deficits). The
program is designed so that every provincial government has at least the same
amount of income to spend delivering services to the people in that
province. Money for Equalization comes from federal government
revenues. No provincial government
contributes a penny to paying for Equalization.
The way the
program works these days, the federal government works out an average income
for each province and then figures out the national average.
Here’s a key
bit that a lot of people – including Mintz - bugger up: since 2007, the feds actually work out two
averages. One leaves out half the revenue from natural resources
revenues. The second one leaves out *all* natural resource revenues. If a
provincial government qualifies under either calculation it gets cash – subject
to an upper limit on own income plus Equalization – because the federal
government, even one run by Stephen Harper, still wanted to push as much as
possible to provincial governments that qualified.
Newfoundland
and Labrador’s personal disposable income is above the national average,
according to Statistics Canada figures. The transformation in the thirteen years
after 2003 is astounding, as the illustration at left shows. Newfoundlanders and Labradorians were in last
place in 2003. By 2016, they had the fourth largest individual
disposable income per person, right behind British Columbia, Alberta, and
Saskatchewan. So Mintz’s claim that the province is below the national average
on disposable income is just not true.
What we need
to look at for Equalization is *government* income. Newfoundland and Labrador stopped qualifying
for Equalization in 2009. Those numbers
are all in the public domain. You can
see clearly why the provincial government became a “have” government.
But if you
distrust *those* numbers, look at other indicators of how the provincial
economy is doing. Statistics
Canada’s figures show that in 2016 Newfoundland and Labrador’s economy was
the third largest in Canada measured as GDP per capita. These figures hold up since 2009. The Government of Newfoundland and Labrador
is one of the wealthiest in the country.
It doesn’t need Equalization, which is all about incomes. It should be able to provide services in the
province without extra help.
Get
this: the Conference
Board of Canada compared Canadian provinces to other countries. Its figures for 2016 showed some impressive
results.
Not only did the Conference Board
rank Newfoundland and Labrador third among Canadian provinces for the value of
its goods and services divided by the population but it also showed that the
province’s economy ranked eighth out of the 26 countries and provinces it
compared. Newfoundland and Labrador’s GDP
per capita ranked ahead of Australia, Austria, Denmark, Germany, and Sweden.
Equalization is about government incomes but what
people in Newfoundland and Labrador are troubled by these days are outcomes.
The provincial government is running massive deficits annually and will soon
have to run even higher ones coping with the lunatic Muskrat Falls projects.
That’s not Ottawa’s fault and it is not Ottawa’s
responsibility to deal with it. Outcomes
are solely the responsibility of the provincial government. Even Mintz had to
acknowledge in his recent interview with CBC’s Ted Blades that the provincial
government would have been better off doing something besides ramping up
spending to astronomical heights that oil prices couldn’t sustain. Mintz then
makes up a story about how the provincial government didn’t know about the
Equalization rules, which of course, is utter foolishness. The Equalization system is precisely the one
the provincial government fought for and every government in Canada knows how
the rules work and how the money gets doled out.
The hard reality is that despite all that information it
had and despite warnings from the Auditor General, the provincial government
decided in 2006 to ramp up government spending based solely on record-high oil
prices. Just as sure as the sun comes
up, oil prices collapsed a couple of years later. But rather than change their ways, the
politicians – with the full support of opposition parties and the public – kept
on spending. They have kept on spending
far more than the government takes in through another two down-turns in oil
prices.
When Dwight Ball came along, he kept up the spending. The
central policy dispute at the start of Dwight Ball’s administration was the
fight between Ball and finance minister Cathy Bennett over the province’s finances. Bennett wanted to take action to put the
provincial government on a stable financial footing. As Ball
told reporters shortly after he took office, he wanted to do as little as possible, while
trying to squeeze money from Ottawa until the oil revenues came back Ball fought with Bennett until she finally quit and
left politics. Ball and his new finance
minister abandoned the plan to balance the books by 2023, although they kept
misrepresenting the story in every budget since then. They also made new spending commitments, including
a billion dollars of new debt for a risky offshore oil project, that still has
not shown up on the provincial books.
So committed was Dwight Ball to keeping up the disastrous
policies of his predecessors that he kept in place all the key senior advisors
from the Conservative administration.
Not surprisingly, they advised him to stay the course. They wrote
superficial rationalizations for continuing with Muskrat Falls, reciting old
claims that had been disproven years before.
And they added a new one, Bay du Nord, which they promised would bring
back the oil money Ball wanted desperately.
Denial
Danny and Kathy and Dwight did all that not just
because they wanted to do it or just because their friends and supporters would
make money out of it. They kept spending
because they were wildly popular across the province. Politicians fought with
their colleagues to keep the spending up because they knew anything but more
spending would spell their defeat at the polls. Even when defeat was almost certain, the
Conservatives kept spending right up until they lost power in 2015.
Remember that upwards of 75% of people across the
province supported Muskrat Falls even as the costs skyrocketed. Some of the most recent polling shows that
more than a third of Newfoundlanders and Labradorians till think it was the right
idea. They felt the same way about all
that spending after 2006 because it put money in *their* pockets. They got tax cuts and high paying jobs or big
pay increases. And if they didn’t, their relatives did. Heavy equipment
operators – the bluest of blue-collar jobs – made a couple of hundred thousand
dollars year at Muskrat Falls. Not
accountants. Not business owners. Not politicians. Ordinary workers. Everyone made big money during the binge.
They voted Williams and his crowd back into office in
2007 and again in 2011 and in 2015 they elected a Premier who promised to keep
everything going in much the same direction.
When that new government tried some modest efforts to reduce a deficit
that was larger than entire provincial budgets 25 years ago, they screamed and
howled in opposition. They called for the Premier’s resignation.
Irresponsible Self-Government
Not surprisingly, the screamers - Ball included - also
started to push the idea that the only solution to the government’s problem was
an Ottawa bail-out. That's basically where Mintz, Hallett, Schroeder and others have taken up the same story. They want to keep
everything as it is while getting someone else to pay for the consequences of
all the decisions that got us into the mess in the first place. Not your fault Newfoundlanders - oh yeah, and
Labradorians – and not your responsibility, either.
(Checks notes)
Correction: It is their moral obligation.
What the bail-out advocates ignore is that there are plenty
of options that the province can take on its own on Muskrat Falls, for example,
that would:
- pay for the project,
- set an appropriate price for electricity, and,
- regulate the province’s energy sector more effectively than it has been for the past 15 years.
The same is true of the financial state of the
government itself. This is the other
serious financial issue, on top of Muskrat Falls, that people have largely
forgotten about. There are lots of ways
to lower the cost of government, deliver needed services more effectively, and
introduce new programs and policies for the future.
We just need to discuss them.
The problem in both cases is that we don’t discuss
them. Instead, we have well-intentioned people
like Bob Hallett recycling tired old stories about how everything is really
someone else’s responsibility. Jack Mintz tells fairy stories. And Walter Schroeder gives them the money he got from selling the bond rating agency that helped government work itself into this hideous mess to spread the hokum and nonsense of their "solution".
Bob isn’t the first. He won’t be the last. Politicians take up those same lines about someone else's job because blaming others is easier than doing the job you got elected to do. It is easier to tell people Uncle Ottawa will fix things and then blame the politicians up-along when they don’t. People lap up the pixie dust stories and reward the politicians with votes so the whole cycle continues.
Bob isn’t the first. He won’t be the last. Politicians take up those same lines about someone else's job because blaming others is easier than doing the job you got elected to do. It is easier to tell people Uncle Ottawa will fix things and then blame the politicians up-along when they don’t. People lap up the pixie dust stories and reward the politicians with votes so the whole cycle continues.
This doesn’t just happen in Newfoundland and Labrador,
either. Mintz has been doing great business
In Alberta where the supposedly Conservative government ramps up the talk of
grievance against Ottawa rather than put its financial house in order. “Think-tanks”
that are really just political propaganda factories and academics like Mintz
play the same role in Alberta that academics like Wade Locke have played in
Newfoundland and Labrador: they give the
veneer of credibility to the weak arguments of their partisan allies in the
provincial legislature.
Think about it. In Newfoundland and Labrador, we just
went through a provincial election in which neither of the three political
parties was willing to talk about the problems the province faced let alone
offer credible solutions to its financial problems. Instead, the parties pandered to the delusion
they helped create that things are good and that government can carry on
spending lots of money we don’t have without consequence.
And after the election, the opposition parties
endorsed the provincial government’s plan to keep everything the same, at the
very least. The Tories had no stomach
for tackling the government. The NDP
used their position to bargain for a few goodies on behalf of their corporate
backers.
A few townies and mainlanders living in the east end
of St. John’s want to shift baymen out of their homes. A few more think that it costs more to
deliver services in this province compared to everywhere else on the
planet. But there’s no evidence to back
that up claim about expenses and the government’s multi-billion dollar financial
problems aren’t caused by a few hundred people and a few million dollars in
ferries. But that’s it as far as popular discussion of potential solutions to our problems goes.
Larry Short is right in that we have to start talking
about solutions to our problems. Sadly
that’s not possible where no one wants to have a self-governing, “have” province
and all the obligations that go with it. Sometime in the past 15 years people in
Newfoundland and Labrador decided they no longer wanted that as their
objective. They want to have a second home in the woods, take regular trips to Florida
and Las Vegas and fight bitterly about paying a couple of hundred bucks for
garbage collection.
But govern themselves?
They couldn't be arsed.
Forget all this hooey from academics about safe spaces,
silos, having more committees in the House of Assembly or whatever notions they
want to call democratic reform. People in Newfoundland and Labrador don’t want it. They don’t want the same goal they did when
Brian Peckford dreamt of the day when the sun would shine and have not would be
no more.
They don’t want to live in a “have” province. They don’t. They want someone else to look after them.
If they wanted self-government and about finding solutions to their problems, not one of them would be talking about finding someone else's supposed moral obligation to bail them out. People who value
democracy, who cherish governing themselves simply can’t make argument that denies
their own moral responsibility for running their own government, footing the
bill for it, and cleaning up after themselves when things go wrong.
Until we put aside the decades of excuses and fairy tales, there can be no change in the financial weather for Newfoundlanders and Labradorians.
-srbp-