Gaslighting a society #nlpoli

Saturday morning and Facebook delivered a video clip of Peter Mansbridge accepting a lifetime achievement award.

After the obligatory thanks to everyone, Mansbridge delivers a scripted couple of minutes about journalism in the age of fake news and alternate facts.

"Journalism is under threat," Mansbridge warned, "in a way we haven't witnessed before."

"The very principle that we stand for is under attack."

"Truth is under attack."

Finding truth and presenting truth is important, according to Mansbridge.

Challenging power and those who wield it is important for "power unchallenged too often becomes power abused."

Dundernomics 101: how to lose money

In the House of Assembly on Tuesday, Premier Kathy Dunderdale displayed her keen insight into the intricacies of public finance and economics:

We are in the open market and in the spot market and sometimes we sell high and sometimes we sell low. What we need to ensure, Mr. Speaker, is that on average we are doing as well or better than we were selling the power to Hydro-Québec, which has always been their plan.

Ummm.

Yeah.

Well, no.

Not unless you are a complete moron, of course.

There’s just no polite way to say it.

The important thing is to make sure the price you get for the power is averaging more than the cost of producing the power in the first place. 

If the power costs a dollar to make and you are selling in any market – the spot market or to Hydro-Quebec  - for less than a dollar you are losing money.

Losing money is a bad thing at the best of times.  If you are talking about losing billions and billions and billions of oil dollars that belong not to you but to the poor benighted people of Flower Hill and Flower’s Cove then it is something way out beyond the baddest sort of bad that there is. 

And if you are talking that sort of complete shite with the legacy of Sprung and Churchill Falls and all the other bad ideas borne of the same sorts of fundamental ignorance you just displayed, then you should not be allowed to balance your own personal cheque-book let alone run the province. 

It is that frickin’ simple.

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Oil and the budget

The provincial government seems to be in one of those strange places it goes every now and then.

It’s a world where the messages are decidedly mixed, if one picks a generous way to describe it.

Totally confused would be another way of saying there are two completely contradictory messages rolling at the same time.

Both of them are coming from the current finance minister who is also a former finance minister and notorious for running an open cheque-book department.

In the latest incarnation, Tom Marshall is seen supporting a CBC news story that rising oil prices are wiping out the projected government deficit.

Just yesterday it was a tale of looming financial woes. Tom Marshall even repeated the message that government spending  - i.e. the spending he oversaw in the job before - is unsustainable. 

In the CBC story, though, Marshall tries desperately to avoid giving any firm indication of the province’s current financial state:

If the price averages $70 a barrel for the entire year, it could wipe out the provincial deficit, but Marshall cautions against such predictions yet.

"It's not just the price," he said. "It's the volume. It's the exchange rate and of course we don't know what's going to happen in the future in terms of production numbers."

There are a couple of things to note here.

First of all, Marshall knows exactly where things are at this, the midpoint in the fiscal year.  he also knows where things are likely to wind up within a relatively narrow range of possibilities.  Marshall just didn’t want to share, even if CBC actually asked, and he likely won’t share until December if recent practice holds firm.

Of course, there’s a reason why the government holds on to information.  They clam up so that people who ought to have accurate information can’t get it, but that’s another issue. 

Second of all, we can fill in some numbers but not others. 

The stuff we are missing includes revenue figures like sales tax, mineral royalties and personal income tax.   If those are lower than expected, then it would take more than high oil prices to deliver a balanced budget. It’s unlikely those figures will turn out lower than estimated since the finance department routinely low-ball revenues these days.  But still, we don’t know because they aren’t saying.

We also don’t know what government spending is actually like. Operational spending may be up or it may be down.  Ditto the capital budget, or the “stimulus” as it is known currently.  If projects are behind schedule or delayed – as many are – then the cash budgeted for those projects will reduce the overall spending part of the budget.  A healthy chunk of the massive surplus in the last couples of years has been coming from forecast spending that just never happened and wound up not happening for two or three budgets.

As for oil, we can get a fairly good idea of what that looks like. 

Price is one element.  The 2009 budget used a figure of US$50 a barrel and an exchange rate that put oil at the equivalent of around Cdn$60.  Oil is currently almost $20 a barrel higher than that, even allowing for the lower exchange rate with the American dollar.

Production is another element.  Last year, oil production exceeded 125 million barrels.  This year, the provincial budget used a figure of  98.5 million barrels or a decline of  21%.  As it stands right now production in the first five months of the fiscal year is down about 27% compared to last year.  A 27% drop in production would mean a total production of about 93.75 million barrels.

But that’s not the whole oil picture.

The other bit is the percentage of each barrel the treasury gets and neither the budget documents last March nor Tom Marshall these days will talk about that publicly either. 

Thanks to the 19 year old Hibernia royalty regime, the provincial government take at Hibernia jumped to between 30% and 42.5% this year when the project hit pay-out.  Terra Nova and White Rose are already in pay-out and are pumping 30% royalty rates based on the original royalty regimes from before 2003.

And that’s where it gets interesting.

The budget figures don’t appear to include the higher royalty rates. factor those in and even the lower production total of 93 million barrels would produce provincial royalties of at least $1.9 billion. When your humble e-scribbler ran the numbers in August - estimating the revenues from each project -  the figure came out about the same as last year’s oil royalty. 

What all this means is that even allowing for some variation in other revenues and in overall spending, the books will likely be balanced this year on an accrual basis even at the low-end estimate.  On a cash basis there would a shortfall;  the budget forecast $1.3 billion. 

On the upper end, the forecast accrual deficit would turn into a surplus of something on the order of $500 million.  On a cash basis, the books would be balanced.

All in all, though, one must wonder why there is some much confusion coming from the current and former finance minister(s).  They could be letting the rest of is on their own projections since, the only negotiations going on right now are with voters.

Voters have a right to know how their own finances are looking, don’t they?

Oh yes.

And let’s not forget in all this that the budget last year included $1.8 billion in temporary investments that no one wanted to draw any attention to.

Makes you wonder why Tom and Jerome and Danny have been putting on the poor mouth again, even if just for a minute now and then.

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The positives of negativity

The much-feared inflation demon continues to shrink away.

In Newfoundland and Labrador, inflation hit  -0.9% in September 2009 compared to a year earlier, down from –0.7% in August.

The figures come from the latest Statistics Canada release.

Back just before the collapse last year, some people were speculating that it might be time to take action to fight the largely imaginary inflation demon. Subsequent events seem to have taken care of that little problem nicely.

Then again, there are other issues which some people seem hell bent on ignoring.

Kinda funny when the guy responsible for both the largest spending increases and one of the largest budgeted deficits in Newfoundland history accuses others of going on a wild spending spree.

And then re-appoints to run finance the guy who oversaw the real open cheque-book government in the first place.

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The Open Cheque-book Government

Danny Williams recently accused Gerry Reid of planning an open cheque-book government.

For the record, here is the public sector debt since 2003, as contained in the provincial estimates for 2007.

Table 1: Public Sector Debt FY 2003 - FY 2007(f)

Source: Dept of Finance, Budget 2007, millions of CDN$

	2003	2004	2005	2006	2007f
Direct	6692.7	6581.5	7244.0	7069.5	7306.5
Crown	2404.1	2885.8	2657.4	2660.4	2666.9
Total*	8007.1	8345.2	8644.4	8355.6	8496.4

* Total is Direct and Crown debt, less sinking funds

Since 2003, the total public debt has increased by $489.3 million. Direct debt increased by $612.9 million. This continued the trend for the previous four years.

In the same time, the provincial governments net expenditure (capital and current) rose by 35% ($1.307 billion) from $3.674 billion to $4.981 billion.

Gross expenditure (capital and current) rose 30% from $4.261 billion in FY 2003 to $5.560 billion in FY 2007.

This is significantly beyond the annual rate of inflation for the province, which averaged 2.275% between 2003 and 2006.

At a speaking engagement in Corner Brook:

Williams ridiculed Reid’s business sense, comparing his understanding of the oil industry to the popular U.S. TV show, “The Beverly Hillbillies.”

“This is not Jed Clampett, Gerry. This is big business.”

Funny thing about that attempted slur is that Jed Clampett was actually a wily, sensible and conservative gentleman.

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