Using his words #nlpoli

Politicians are usually very careful about the words they use.

That’s why it’s important to notice the words Premier Dwight Ball used this weekend in an interview with Tom Clark for Global’s current affairs show The West Block.

Ball said there was “no real sure fix” for the provincial government’s financial problems. But he did say that the government’s plan would involve revenue-generation, controlling expenses, efficient spending, and “what Ottawa can do to help initiatives around infrastructure.”  Ball also said that the provincial government would be applying for the same “sustainability” funding that Alberta was getting.

So what does that mean in concrete terms?

Yes. The government has big financial problems #nlpoli

Yet another academic paper emerged on Tuesday that pointed out that the provincial government has a big financial problem caused by following the flawed policy of spending all the money it takes in, plus more besides.

Don’t take that as a dismissal of the paper by University of Calgary professor  Ron Kneebone. To the contrary,  Kneebone’s paper adds yet more weight to the argument offered by a few people in this province since about 2006 or so. 

Taken together with the recent report by the Conference Board of Canada on the province’s economic competitiveness and you have a pretty strong indictment of the Conservative/Lockean policy the provincial government has been following since 2003.

Better more, and better #nlpoli

The provincial government has a very serious financial problem. 

The forecast deficit for the current year is the second highest on record at $916 million. 

No one knows how big the deficit will be next year,  but with oil prices forecast to stay in their current range for the next couple of years,  odds are very good that the provincial government will turn in a record deficit next year.

That is saying something.  The forecast in 2004,  the first year the Conservatives took office, was for a deficit of $840 million.  Finance minister Loyola Sullivan called it “the largest deficit in our province’s history.”  He was a wee bit off.  The actual accrual deficit in 2003 was $958 million.

Worry more about next year #nlpoli

Provincial revenue from oil will be $791 million less than forecast in the spring budget, according to the provincial budget update.

A few other expenses are less than forecast and some revenues are up.  All told,  the provincial deficit is now forecast to be almost $1.0 billion.  That compares to the $572 million shortfall predicted last April.

The provincial government’s financial problems aren’t caused by falling oil prices.

Welcome to the bottom of the rabbit hole #nlpoli

Putting a freeze on any discretionary spending is the very least that the provincial government could do in light of the dramatic – but entirely predictable – volatility in oil prices that have made the government’s huge budget deficit even larger.

The fact that Premier Paul Davis finally admitted on Thursday that oil prices are likely to remain low for the foreseeable future – something that has been clear for some time now – is a pathetically small sign that the provincial cabinet is finally starting to realise the depth of the problem the provincial government currently faces.

As small and as pathetic as it is, we do at last have a sign.

Oil and the budget #nlpoli

Lots of people are wondering what the changes to the price of oil will do to the provincial budget.

It will have an impact:  no doubt about that.

But trying to figure out what the provincial budget numbers will look like is a wee bit more complicated.

Political Mummers’ Parade on Monday #nlpoli

Finance minister Tom Marshall will present his mid-year financial update on Monday.  It is supposed to be a way of bringing everyone up to date on how the annual budget is going. It’s an accountability thing.

Since the government’s fiscal year starts in April, the middle of the year was September.  So December is well past the mid-year.  As we all know, December is the last month of the calendar year so this mid-year report is a bit late there, too.  The only calendar that puts December in the middle of some year or other seems to be the provincial Conservative one.

The whole idea of a mid-year financial up-date winds up being a bit of a farce, then.  It’s much like having a consultation about what to put in the budget after the cabinet has already decided on the budget in secret beforehand.

Farce is not a word you associate with good government.  It’s more the type of word you’ll find to describe something like the annual  Mummer’s Parade.  For those who don’t know, mummering is a bit of Christmas entertainment when people pretend to be something they are not. Mummering is foolishness in a good sense of the word.  In politics these days, as with the Mummers’ Parade,  it seems that foolish is the new normal.

And that is not good.

Taxing the Imagination #nlpoli

What is it about the provincial Conservatives and income tax?

Kathy Dunderdale rabbited on about it last fall and again in January.

Last week, the provincial Conservatives were at it again, with a private members resolution in the House that praised the government for cutting taxes and for not raising them now that they’ve fallen on hard times.

Rentierism at the national and sub-national level #nlpoli

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This is the third in a four part series on the current financial crisis the provincial government is facing.  The first instalment – “The origins of rentierism in Newfoundland and Labrador” – appeared on Tuesday and the second – “Other People’s Money”  - appeared on Wednesday.

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A rentier is a person who lives off the income from property and investments.  That distinguishes a rentier from a person who earns income through labour.

For the past 40 years or so some political scientists and economists have studied something called a rentier state.  In simplest terms, a rentier state is one that derives a significant portion of its national government income from the money they get from oil and other high-value, but volatile commodities.  [FN 1]

For our purposes, we’ll rely on a definition of “significant portion” as being 40% or more of  government income.  [FN 2] We’ll also focus the discussion on states that derive most of their income from oil.

What we are talking about here goes by several names including  the Dutch Disease or even the resource curse.   Jeffrey Frankel of the Kennedy School of Government put it this way:

It has been observed for some decades that the possession of oil, natural gas, or other valuable mineral deposits or natural resources does not necessarily confer economic success. Many African countries such as Angola, Nigeria, Sudan, and the Congo are rich in oil, diamonds, or other minerals, and yet their peoples continue to experience low per capita income and low quality of life. Meanwhile, the East Asian economies Japan, Korea, Taiwan, Singapore and Hong Kong have achieved western-level standards of living despite being rocky islands (or peninsulas) with virtually no exportable natural resources. Auty (1993, 2001) is apparently the one who coined the phrase “natural resource curse” to describe this puzzling phenomenon. …

Other People’s Money #nlpoli

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This is the second in a four part series that offers an interpretation of the current financial crisis the provincial government is facing.  The first instalment – “The origins of rentierism in Newfoundland and Labrador” – appeared on Tuesday.

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As much as people imagine a great difference between the Confederate and anti-Confederate forces during the National Convention, the two agreed on one thing:  someone else would have to pay for Newfoundland’s return to responsible government.

The London delegation asked the British government to provide the erstwhile country with money. The British balked, pleading their own financial hardship after a long and costly war.  That refusal is largely what prompted Peter Cashin to claim that the British were trying to sell the country the Canadians.  As many words that have been spilled and as many books sold trying to prove the conspiracy existed,  there’s never been a shred of proof that such a plot ever existed outside Cashin’s frustration.

The Ottawa delegation found wealthy Canada more receptive to the Newfoundlanders expectations and after a first referendum and a run-off vote, Newfoundlanders and Labradorians voted to become part of Canada.  For Labradorians the moment was especially sweet.  The National Convention and the referenda were the first time any residents of the mainland part of the country had ever been allowed to vote.

The Origins of Rentierism in Newfoundland and Labrador #nlpoli

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Over the next four days, SRBP will offer an interpretation of the political underpinnings of the current financial crisis.  This series goes beyond the immediate to place recent events in both historical and comparative, international perspective. 

The first two instalments briefly describe some characteristics of the political system and Newfoundland political history before 1934 and from 1949 to about 1990.  The third post will look at the concept of the rentier state and the relationship between dependence on primary resource extraction and politics at the subnational level (states and provinces).  The fourth post will place recent developments in Newfoundland and Labrador in the larger context. 

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Before 1949, the Newfoundland government’s main source of income was taxation of imports and exports.  The Amulree Commission reported, for example, that the government brought in around $8.0 million dollars in the fiscal year ending in 1933.  Of that, 71%  - $5.7 million  - came from customs and excise duties.  The next largest amount was $700,000 (about 9% of total) that came from income tax while the third largest source of income was postal and telegraph charges totalling slightly more than $587,000.

Newfoundland also had almost no experience of local government before the Commission Government in 1934.  St. John’s was the only incorporated municipality and the city council was quasi-independent of the national government. 

Beyond the capital city, the national government “managed a highly centralized system through the stipendiary magistrates stationed in each electoral district, “in the words of historian James Hiller in his recent note on the Trinity Bay controverted election trial in 1895(FN 1).  The central government also appointed the members of some local  boards to manage education and roads.  The money for all of it came from accounts controlled by St. John’s.

The members of the House of Assembly had enormous control over government and that public money.

Hobson’s Choice #nlpoli

The provincial Conservatives love to spend public money. 

That doesn’t sound very conservative and it isn’t.  Politically, the provincial Conservatives in Newfoundland and Labrador are more like Republicans than the Progressive Conservatives who used to run the province in the 1980s. American Republicans like to cut federal taxes and jack up federal spending and then blame the resulting financial meltdown on the Democrats.

Around these parts, the Reform-based Conservative Party, as the Old Man used to call them, blames everything on the Liberals.  That is the Liberals who, in case you missed it,  haven’t been in power in a decade.

The Wrong Tool #nlpoli

About two thirds of the people in the province who file tax returns earn less than $35,000 a year before taxes.

It’s the kind of detail that you cannot banish from your mind when you read about the politically popular economist Wade Locke.  The guy who directly and indirectly helped the provincial government create the current financial mess is on a leave from his university job to help with the new budget.

As the Telegram reported on Wednesday, Locke’s “contract with the government stipulates that he'll be paid $250 per hour for his consulting work to a maximum of $75,000.”  That would be on top of the 80% or more of his university salary that he is entitled to for being on what the faculty contract calls a “sabbatical” leave.

The Telegram also reported that Locke said he would only bill taxpayers one dollar at the end of his contract.  Let’s take him at his word.

Still, you have to wonder why he would sign a contract in the first place for more than twice what most people in the province make in a year.  Don’t misunderstand.  A consultant should get what he can earn and if Locke can get someone to pay $250 an hour for his services, then more power to him.  Given the context, though,  the contract is still rather distasteful.

Locke’s supporters will defend any amount of money because they value his advice. And that’s really where we can peel back the cover on this little can and see what is inside.

If the next two years are bad… #nlpoli

[Stick to your Lane Update:  See bottom]

No surprise that on the day after natural resources minister Jerome Kennedy talked about looming deficits of pre-1934 proportions that the ruling Conservatives did two things.

First, backbencher Paul Lane reinterpreted Kennedy’s comments on VOCM Open Line with Randy Simms.  There will only be big deficits, says Lane, if we don’t do anything about it. 

Second, Jerome Kennedy didn’t tell the people at his first pre-budget “consultation” anything of what he planned to do over the next few years. 

Time to Break the Cycle #nlpoli

Jerome Kennedy told reporters on Wednesday that  he and his officials are forecasting that the provincial government will rack up almost $4.0 billion in deficits over the next three years.

That consists of about $725 million this year, followed by two years in which the government will spend $1.6 billion each year than it will take in.

None of that should come as a surprise to any regular SRBP readers.  This corner has been warning about the current administration’s spending practices since 2006. 

So now what?

A Manufactured. Right. Here Mess #nlpoli

The Premier, the finance minister, and their favourite economist are talking about tax increases, layoffs, and spending cuts.

They are talking about cuts and layoffs at a time when the provincial government has more money coming into its accounts than any government in the history of Newfoundland and Labrador before 2003.

The provincial government finances are in a mess.

A Crisis. Or Not. #nlpoli

“Muskrat Falls is a project that will not impact net debt by a single dollar,” finance minister Tom Marshall said in a provincial government news release.

Unfortunately for taxpayers, they won’t pay the net debt.  That’s an accountant’s calculation of what the provincial government owes less any assets they could theoretically sell off if they had to clew up business in a hurry. 

What taxpayers will have to contend with is the total liabilities and Tom plans to make those liabilities get a whole lot bigger than they are today.  On the day that Tom Marshall predicted that his current budget will have a deficit three times what he forecast in the spring, Marshall also forecast billions more in borrowing to pay for Muskrat Falls and to pay for the government’s day-to-day expenses.

You’d think that a finance minister would understand that. 

Evidently, Tom Marshall doesn’t.

Either that or he thinks the rest of us are so stupid that they would accept his ridiculous comments as if they were true.

Not exactly, there, Tom, b’y #nlpoli

As part of the orchestrated campaign to attack the people making the comments instead of the comments themselves , finance minister Tom Marshall trotted out in front of the news media on Friday to lace into a group of five lawyers.

Marshall said comments by five lawyers opposed to Muskrat Falls were “nothing new” and had been addressed before. All true.

At the same time, though, Marshall quickly read through an obviously prepared diatribe in which he said that the “use of such inflammatory language in my view is irresponsible and borders on fear mongering.”

People should pay attention to Marshall’s comments, but not because of Tom’s laughable hypocrisy.

Reality Check: drops and buckets version #nlpoli

Via labradore, a chart that plots Conservative unsustainable public spending since 2003 with recently announced controls on discretionary spending.

-srbp-

The Bow-Wow Parliament lacks bark and bite #nlpoli

In the wake of the latest revelations of financial mismanagement in the provincial government, SRBP has been looking at some of the possible contributing developments over the past decade or more.

Last week, SRBP noted that it appears the provincial government broke up the treasury board secretariat around 2007.  They sent some of its bits off to one department and put the rump of its administration  – about the size it had been in 1968 -  under the finance department, as it had been before the 1973 reforms introduced by the Moores administration. 

At around the same time, the provincial cabinet started a series of massive annual increases in public spending that Premier Kathy Dunderdale admits is unsustainable.

And the same cabinet also ballooned the size of the provincial public service. Again, it’s something that Kathy Dunderdale admitted was something she and her colleagues now had to sort out.

These three things are connected. 

Even if the government loosened the constraints of its internal financial controls, there are other agencies that have a role to play in keeping an eye on the public treasury.