Danny Williams is
angry with Stephen Harper. Williams sees Harper not living up to a commitment, of "betraying" Newfoundland and Labrador.
Fair enough.
While his latest news release doesn't put a dollar value on the loss to this province, in the past he's said the province will receive $200 million less under the proposed Equalization changes each year compared with what it would be receiving. The cap on transfer payments included in the new Equalization formula is the key to Williams' ire since it supposedly limits how much money the provincial government can get.
The larger problem here is not a prime minister who says one thing before an election and then does something else later on once he's in office. That happens, sometimes for
perfidy, sometimes because political and economic circumstances demand it.
The larger problem is that our provincial government - since at least 2001 - has become obsessed with maximizing federal hand-outs to our poor province, as the common description would put it.
Look at it another way.
Danny Williams is upset at the supposed loss of about $400 per capita per year. $200 million works out to be $400 for every person in our province of roughly 500,000 people.
Yes, there are numbers and math involved, but it is actually very simple to follow the logic.
The Hebron development was pegged by economist Wade Locke as offering $10 billion of revenue for the provincial government over the 20 year lifespan of the project. He gave a range of $8 billion to $10 billion, but for our purposes let's take the larger number. Let's allow for developing the whole thing as opposed to just one of the fields.
That works out to $1000 per capita over two decades.
Consider the Hibernia South development and its 300 million barrels of oil, virtually all of which would be extracted when provincial royalties are at 30%, as opposed to the 7% the provincial government currently makes.
If we allow for oil at an average of $45 per barrel over 15 years, that field development works out to bring $540 per capita into provincial coffers.
Put it together and we have almost $1600 per capita in provincial revenues, all of which flows untouched into the provincial bank account to be spent as the provincial government sees fit.
That's four times - that's right, four times - the amount Danny Williams is in a snit over.
That amount doesn't include other developments in the economy, like new mines in Labrador. It doesn't include any other economic development at all. It also doesn't include the spin-off benefits that would come, inevitably, from the new investment coming from a healthy, growing economy. Like renewed interest in exploring for oil offshore Newfoundland and developing gas resources off Labrador.
Success breeds success and moving two large industrial projects forward last year would have branded this province as a place to invest in.
That $1600 per capita would give Newfoundland and Labrador a fiscal capacity on par with Ontario. We might wind up losing Equalization hand-outs by 2012 when the fields would have been fully running, but in the meantime, extra cash - in addition to the $1600 per capita - would have flowed through the Equalization program and through the Atlantic Accord (1985) and the later deal.
Some will object that what is involved in this scenario is converting a non-renewable asset into cash. Once it's gone, it's gone.
Absolutely true.
But that is exactly what Norway and Alberta have done with great success.
Those governments have made a conscious decision to take some of their oil and gas revenues and put the cash in the bank. If that didn't happen, they paid down public debt or built long-term infrastructure. As their economies grew, they were able to do all three, in addition to spending money to provide day-to-day services.
There's no reason Newfoundland and Labrador couldn't do the same thing.
Given the amount of money flowing from those developments, the provincial government could easily devote $400 per capita - 25% of the total - to debt reduction, for example.
After 20 years, the provincial direct debt would be half of what it is right now. As debt reduces, the cost of servicing that debt would reduce, thereby freeing up more cash for infrastructure, savings or whatever else we need to spend the money on.
Success - and some responsible government policy - would breed success. Success and sound policy would turn an asset into other assets.
There's no reason not to follow this scenario, except that provincial politicians of all stripes just don't get the logic. They are trapped in political rhetoric from before Confederation that looks like it works. Actually, it doesn't do anything in the long haul except to ensure that the problems of today remain the problems of the future.
Some will reject this sort of proposition because no one else is saying it. Well, the truth is that many politicians and other opinion leaders are not saying anything even close to it. That doesn't make their version true; it just means they prefer the simplistic rhetoric over simple logic and basic economics.
Others will reject the idea because they don't trust the numbers. It can't be that simple and obvious, they claim. The numbers are real. One recently elected politician questioned Bond Papers' numbers for just that reason. And it that obvious.
Part of the larger problem with the rhetoric coming from this administration and previous administrations of other political stripes is that is focuses on the negative. People start to accept that the people of the province are always hard done by. They see betrayal in everything done by others. They accept that "we cannot sign good deals."
The evidence to the contrary is all around us both in past economic deals like the offshore and Voisey's Bay. It's also found in the private sector in a raft of small and medium sized manufacturing companies. It can be seen easily in a company like Fortis.
The real betrayal here is the betrayal of our own potential that comes from the corrosive messages our own leaders tell us about the state of our province and its future.
We focus on the 25% and ignore the 75%.
We focus on the limitations of the cap if we stay on federal hand-outs and ignore the unlimited potential if we take another path.
All it takes to change is to change our thinking.
We just need to look at the problem another way.
