How to make bad decisions #nlpoli

Premier Kathy Dunderdale sounded genuinely exasperated last week when she chatted at length with Open Line show host Randy Simms about Muskrat Falls.

“Why,” she asked, “would a government want to develop a project that is not in the best interest of the province?”

No government would, of course.

No government ever has.

Not the current government, nor any in the past. Aside from a few naive people, the only ones who think otherwise are the nasty little partisan troll-shits who campaign with slogans like “no more give-aways” and actually believe their own propaganda.  

What goes around, comes around, as the saying goes. That seems to be why Kathy is so frustrated these days. having come to power on the basis of the “no more give-aways” propaganda, she is finding herself on the receiving end of the same sort of foolishness that she and her colleagues used to peddle about their predecessors in government.

Regular readers will recall the warning about this sort of idiocy in a post about the politics of history  in Newfoundland and Labrador:

In eight years time, they may find that many of the changes they hoped for, like massive new industries, will still be little more than the fodder for someone else's rhetoric.

Karma is a bitch, after all.

For all that, Kathy Dunderdale is convinced she is on the right track. As  she told NTV’s Issues and Answers in March, we “need to get to sanction.”

 Nothing will persuade her to change her mind.  And that, of course, is one of the surest ways there is to make a bad decision.

Go back to Kathy’s rhetorical question to Randy Simms.  It suggests that she has tied herself personally to the Muskrat Falls project. When you believe that fervently in your conclusion, you can do all sorts of things that can lead you astray

You can make a bad decision by only listening to people who agree with you.  Kathy Dunderdale has done this already:  she accepts as an expert conclusion the opinion of a lawyer with no experience other than what he’s gotten since taking up the appointment as “consumer advocate”  on the public utilities board.

And you can make a bad decision by dismissing people who don’t.  By contrast, Kathy Dunderdale suggested that former Premier Brian Peckford had very little involvement in energy policy during his 15 years in government serving both as energy minister and Premier.

You can make a bad decision by assuming you are smarter than everyone else.  Take a gander at unofficial Liberal party leader Dean MacDonald talking to CBC’s Debbie Cooper.  After slagging off the public utilities board as being nothing but disgruntled ex-Hydro employees, MacDonald notes that the people at Nalcor are among the smartest people in the world. They are the experts, according to MacDonald.  And by extension they’ve got to be right.

You can hear the same sort of thing in the way Kathy Dunderdale talks about the project:  all the experts and all the smart people back the project, according to Dunderdale.  How strange that Dean criticizes Kathy agree on everything, but yet they are perfect alignment when they talk about Muskrat Falls.  

You can make a bad decision by believing false information.  Kathy Dunderdale tied the two projects together in January in a speech to the St. John’s Board of Trade:

The gatekeepers of the natural transmission route through Quebec were denying us fair opportunity to get the power to market, and having been burnt once on the Upper Churchill, we were determined not to let that happen again.

Quebec does not have a stranglehold on Labrador development.  It’s that simple. 

You can make a bad decision by making a false connection between a current decision and the past one.  Muskrat Falls proponents love to talk about Muskrat falls in the context of the 1969 Churchill Falls contract. In that January speech, Kathy Dunderdale made the approval of the Muskrat Falls project proof that the people of the province have broken the Churchill Falls curse:

Failure to take the right course of action today would be no different than taking the wrong course of action a generation ago.

Rejecting Muskrat Falls – even if it made perfect sense for economic and rational reasons – would be an emotional failure according to Kathy Dunderdale’s construction. 

You can make a bad decision by jumping to a conclusion.  Kathy Dunderdale may like to say that Muskrat Falls is about meeting the island’s energy needs, but the truth is the project was a solution in search of a problem. The current provincial government committed to build something on the Lower Churchill in 2005.  Danny Williams tied his retirement to building the Lower Churchill.  After five years of trying, they couldn’t find any way to make it happen.

In 2010, they decided to build Muskrat Falls alone.  And everything since then has been a series of rationalisations to justify the conclusion they started with.  They did not examine alternatives before deciding to build Muskrat Falls.  They dismissed natural gas as being “purely hypothetical”.  They changed their story to claim they have looked at the alternatives and settled on Muskrat falls only after credible experts explained that natural gas from the local offshore is a viable, cheaper alternative to Muskrat Falls.

There are lots of ways to make a bad decision.

Your intention to do the right thing may not matter at all.

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The Bullshit Vision Thing #nlpoli

Dean MacDonald, the undeclared leader of the provincial Liberal Party spoke to a crowd in Port de Grave district on Saturday night.  There’s an account of his speech in the Telegram’s Monday edition.

Dean crapped on the provincial Conservatives for all sorts of things.  Most of all, he seemed to think they lack what George Bush used to call the vision thing:

“I don’t think we have a vision, I don’t think we have a plan for the province. I don’t feel that we’re all on a team who all know where we’re headed,” MacDonald said. “The party that’s been in power too long believes their own bullshit, and the party that will sweep into power doesn’t, and that’s us.”

Contrary to what the Telegram reported, MacDonald didn’t seem to offer much of a vision himself during the speech. Well, certainly the Telly didn’t report any vision-like utterances and no one who attended the session seems to talk much about Dean’s vision. The Telly just included a few quotes confirming that the handful of people in the province who still support the Liberal Party see MacDonald as the Saviour. 

This is not news.

Nor is it any sort of vision.

MacDonald reportedly spoke for 30 minutes.  He shat on Kathy Dunderdale. He has done that before.  And just as surely as he has criticised Dunderdale before, we should all remember that Kathy Dunderdale is doing nothing except continuing the plan of her predecessor, complete with his vision and using all the same people that her predecessor picked for their jobs.  Kathy Dunderdale is following the agenda of Dannyism, right down to the hydro-electric project Danny Williams used as an excuse to retire.

In January 2008, Dean told the world  - via The Independent - that what the province needed was 20 more years of Dannyism.  There’s no sign Dean  has changed his mind at all about that.  In fact, after Dean criticised Dunderdale’s unsustainable spending in 2011, he quickly sucked it all back again. 

Go back and take another look at Dean’s interview with David Cochrane last fall.  You won’t be disappointed, which is more than you can say for some of the people who attended the fundraiser on Saturday night.  Those would be the people who didn’t leap to their feet in applause at the end of Dean’s speech.  That would even include the people who did stand and applaud but who did so slowly, after others had started.  Rumours of wild enthusiasm were -  like the depth of MacDonald’s insights – greatly exaggerated. You see lots of people – not just parties in power too long – believe their own bullshit.

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The Persistence of False Information #nlpoli

In an interview on The Current last week,  Anthony Germain asked Premier Kathy Dunderdale why she wasn’t trying to sell Muskrat Falls to people in Newfoundland and Labrador as Danny Williams might have.

“If we are going to break Quebec’s stranglehold on the province…” suggested Germain, as he cast the project as an exercise in building the nation of Newfoundland. 

Well yes, all that is true agreed Dunderdale, but the project was worthwhile anyway because it gave the people of the province an asset.

Germain didn’t come up with the phrase by accident.  The official Muskrat Falls news release in November 2010 included this quote attributed to Danny Williams:

"This is a day of great historic significance to Newfoundland and Labrador as we move forward with development of the Lower Churchill project, on our own terms and free of the geographic stranglehold of Quebec which has for too long determined the fate of the most attractive clean energy project in North America…” [Emphasis added]

You’ll find variations of the same line  - about breaking the Quebec stranglehold - in most news stories on the project.  Just consider this a sample:  a news story in the Star from April 2012, a CBC online backgrounder on the project from April 2011,  a Telegraph-Journal story from April 2011, a Globe and Mail editorial from November 2010 and a gushing Canadian Business Journal piece from January 2011.

The idea that Quebec is blocking development of Labrador hydro-electricity is very familiar.  In that respect, there was nothing surprising  in the fact that Anthony Germain asked the question he did and that Kathy Dunderdale breezed over it as true and then went on to talk about some other detail of Muskrat Falls.

What is amazing about the idea is that there isn’t a shred of truth in it.

Period.

Not true.

Completely false.

We know that Quebec no longer has a stranglehold on Labrador development because Danny Williams said so.

The time:  April 2009.

The situation:  Nalcor’s sale of electricity from Churchill Falls to Emera in New York, wheeled through Quebec.

As CBC reported at the time:

"It shows that our power is not stranded power," [Williams] said.

"We're not forced to just sell it at the border to Quebec at whatever price Quebec wants to pay for it."

Now one can understand that this sort of reporting happened in late 2010 when people were still covering the events immediately in front of them.  But why has this particular piece of false information persisted in news stories about Muskrat Falls since then?

Partly it’s because politicians keep repeating the false information.  Here’s natural resources minister Jerome Kennedy in the House of Assembly on March 22:

…Gull Island is not possible because we cannot get through Quebec, …

For the mainlanders, you can put it down to the fact they just never heard of the April 2009 deal and know even less about electricity regulation in Canada and the United States.  Add to that the lousy fact-checking in the modern, highly-competitive, under-staffed newsrooms of the 21st century.

As for the locals, though, the persistence of the stranglehold claim is a bit of a head-scratcher.  After all, they covered the April 2009 wheeling deal and reported Williams comments at the time. That didn’t stop them from ignoring it entirely a year later when they covered news stories about  Nalcor’s unsuccessful appeals to the Quebec energy regulator about transmitting Labrador electricity through Quebec.

You can probably explain the locals with the Echo Chamber effect.  As it seems, the local media don’t challenge official pronouncements especially when nobody else in the community is doing so.  They report what others said or did, nothing more.   You can find a similar practice in other places, but the big difference between here and the United States, for example, is the existence in the US of strongly held and publicly expressed alternate points of view. 

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The Muskrat Ah-Prentice #nlpoli

The local Tories were all twitterpated over the weekend with Jim Prentice’s comments about the Lower Churchill.

One suspects, of course, that they were loving it all up for the same reason they love Muskrat Falls in the first place:  they don’t know anything except that it is the official plan of the moment for their team and therefore they are all for it.

You see, neither of the loyal MFers who tweeted and re-tweeted actually looked at what Jim-bo said.  If you accept the VOCM version, it went like this:

Speaking to the Newfoundland and Labrador Offshore Industries Association, Prentice states now is the time Ontario, Quebec and Newfoundland sit down and work out a long-term plan to deliver power to the rest of Canada.

Ontario and Quebec submitted a proposal in 2005 to develop the entire Lower Churchill, not just Muskrat falls.  The provincial government rejected the proposal out of hand in favour of what Danny Williams called the “go-it-alone” option. Jim Prentice  - quite obviously - doesn’t know anything about the Lower Churchill project.  Nor do people who are re-tweeting his words as an endorsement of a project he clearly knows nothing about. They don’t know what they are talking about either.

But wait.

It gets better.

Jim wants a long-term plan to deliver power to the rest of Canada.  If Jim knew anything about electricity transmission he’d know that Nalcor could move power tomorrow if they wanted.  The lines are there.  Nalcor is already using the lines to wheel power to New York.

All Nalcor would need to move power to Ontario would be an Ontario customer.

Well, if you missed it, go back a couple of paragraphs and note that the provincial government rejected a guaranteed sale.  Nalcor has been trying ever since to find a customer in Canada – or anywhere else – for their electricity.  They can’t find one because the Lower Churchill power is too expensive.  Hydro-Quebec isn’t an obstacle.

It’s that simple.

So that’s two huge problems with Jim’s comments. Now for the third.

Even if Nalcor sold electricity to Ontario at a loss – as they’d have to do given current markets - Muskrat Falls won’t meet the existing needs for the power as Nalcor has described it. Between January and March the plant will barely meet the island need.  Nalcor will likely have to ship recall power from Churchill Falls to Nova Scotia for free to fill the gap.

And if they wind up send Muskrat Falls electricity to meet Labrador mining needs they really won’t have enough juice.

Replacing Holyrood would take about 500 megawatts.  There’s another chunk of a 160 MW or so that goes to Nova Scotia. Muskrat Falls will only produce about 570 MW, on average.  Sometimes it will produce close to the installed generating capacity of 824 MW.  Sometimes it could push out less than 350 MW.  That’s all because the river’s water flows don’t come at the same steady rate all the time.

Now those Labrador mines will need about 750 megawatts of steady power. Do some pretty simple math.  You will see that even for the couple of months a year when Muskrat Falls cranks out its maximum, it won’t be able to supply all the demands Nalcor and the provincial government have already claimed Muskrat Falls will support – newfoundland, Nova Scotia and Labrador mines.

Nalcor certainly couldn’t ship any electricity from Muskrat Falls to Ontario because they won’t have any to ship.

So yeah. Jim Prentice thinks Muskrat falls is a great idea.  He supports it because he has no idea what is going on.

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Corner Brook hospital: follow the money talk #nlpoli

Let’s get something clear up front.

The provincial government will build a new hospital in Corner Brook.

That much shouldn’t be in doubt.  The existing Western Memorial Hospital is long past due to be replaced.  The provincial government has the cash in the bank.  And even if they didn’t, they’d have to find the money somehow to build it.  That’s the thing about hospitals.  You have to build them even if you don;t have money in the bank.

The current political problem finance minister Tom Marshall faces in his hometown comes from the usual problem he and his colleagues seem to have:  they announce something, put timelines on it and then fail to deliver on time.

Then the other problem cuts in:  they resort to all sorts of bluster and such, all the while insisting that absolutely nothing is wrong. That’s the thing about the Tories:  you always know what they are going to say. 

Tom Marshall went to the Corner Brook Board of Trade on Friday to talk about the budget and, inevitably, the hospital. The Western Star sent Gary Kean out to report on it.  He’ll stay in politics until the steel for the hospital starts going up, insisted Marshall, “and I plan on going soon.”

Good on both points:  Marshall was supposed to retire last year.  He put it off as part of the deal cut inside the Tory caucus that left Kathy Dunderdale as leader to get them through the election.  Marshall is due to go as are a number of others, including, most likely, Dunderdale herself.

As for the money supply, he was equally firm that there wasn’t a problem.  He’s a quote from the Western Star story:

“That is one of the stupidest things I’ve heard in a long time,” Marshall said, when asked about criticism that government doesn’t have the money to proceed with construction right now.

“We are flush with cash. Our financial position is the strongest it has ever been. The economy is as strong as it’s ever been.”

Let us forget, for the moment, that the main message Tom is carrying around these days is that the provincial government coffers are flush with cash.  They are full to overflowing.  And now, having just finished spending public money the likes of which we have never seen in this province before – including taking the public debt to record heights -  Marshall  must now start on a 10 year program of spending cuts and layoffs in the provincial government the likes of which we have never seen in the country before, let alone the province.

Let us just forget all that for a moment.

Let us also dial back Tom’s inevitable hyperbolic outburst a bit.  They will have the cash. They will have to find the cash because they need to replace the hospital.

And so they will build a new hospital once they figure out what they want the hospital to do.

The first plan the health department came up with wasn’t the right one, according to health minister Susan Sullivan.  According to the Western Star,

Sullivan said the plan did not adequately reflect the province’s changing demographic, so planners were sent back to the drawing board to come up with a better programming strategy.

When the Western Star wondered how that could have happened, Sullivan claimed she didn’t know.  She wasn’t the minister when they started so she had no idea what they were asked to do.

And as for what “better programming strategy” means or what the “demographic“ thingy was, she didn’t let on. Those are wonderfully vague terms, wonderful bits of bureaucratic gobbledygook. What it sounds, like, though, is the same sort of problem the current administration have run into with other major projects.

The health centre in Lewisporte, for example, went so far over budget that the provincial government started hacking out services in order to get the costs under control. That was at the heart of the problems in 2009 that contributed to Paul Oram’s untimely departure from politics.

So while Corner Brook will get a new hospital - at some point in the future - the major problem seems to be a familiar one:  balancing what gets done in the hospital with what it costs to build it. Part of that problem could be in whatever promises He Who Must Not Be Named suggested eons ago that are simply no longer affordable, if they ever were in the first place.

Almost certainly, part of the hang up is within the health department.  After all, they are trying to cope with increasing pressures on budgets at a time when cash is getting tighter and tighter.  You see that’s the real issue.  Corner Brook will get a hospital, but the government’s financial and demographic problems will have a profound impact on what the hospital costs and therefore what the final hospital winds up doing.

Now as for all that financial stuff Tom Marshall mentioned that we said we’d forget for a moment?

Well, the moment is up.

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So close to a deal they just can’t finish it #nlpoli

As CBC reported on Friday, a spokesperson for Nova Scotia Premier Darrell Dexter says it is just an “update” meeting.

"As you know this is a very important project for both provinces, and the partners have update meetings as needed," Jennifer Stewart, a spokeswoman for the Nova Scotia premier's office, said. "This is one such meeting."

Newfoundland and Labrador Premier Kathy Dunderdale says it is a meeting to continue negotiations on an agreement to develop Muskrat Falls:

“We’re concluding our negotiations of the term sheet with Emera. We do this on a pretty regular basis and he’s here to talk about it.”

Okay so the term sheet is already done.  What they are supposed to be doing is finishing the whole agreement.

But anyway, there’s a bit of a difference between a routine meeting and a negotiating session.

And there’s an even bigger difference given that when the two companies missed their second deadline to finish the deal, both parties said there were just a few things to tidy up.

Real close to a deal though.

So close they didn’t need to set a new deadline.

That was how many months ago now?  Three months since they missed the second deadline at the end of January and five months beyond the original deadline from the end of November.

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Why People in Corner Brook (and elsewhere in NL) are Worried #nlpoli

About four years ago, your humble e-scribbler pointed out a fundamental strategic problem with the way the provincial Conservatives spent money.

The premise was pretty simple:  at the same time that we knew  - as a matter of irrefutable fact  - that provincial costs for things like health care were going to skyrocket, the provincial government wanted to start building megaprojects. 

In 2008, we were just talking about Hebron and the few hundred million dollars.  We didn’t know and still don’t know how much the final costs will be. That was before the Premier and other ministers acknowledged provincial spending was unsustainable. That was also before the global recession.

It was before the provincial Conservatives wanted to spend upwards of $10 billion on a hydro-electric project that won’t produce any revenue outside the province.  And it was way before those same Conservatives decided to embark on a decade long period of public sector job lay-offs and spending cuts. Well, at least, that’s what CBC reported on Thursday night that the Tories plan to do.  They were reporting on what finance minister Tom Marshall told the St. John’s Board of Trade at a luncheon speech..

If anything, that 2008 series of posts about the precarious provincial financial position understated things.  Things are so bad that even Wade Locke had to warn his political friends in the Conservative Party that they needed to deal with the problem.  Locke had this to say in 2011:

“It gets progressively worse as you go out, from five years onwards,” Locke said. “The next five years, it’s manageable, but after that it gets less manageable if we don’t start dealing with it now.”

…

“There is a a serious problem in terms of debt and deficits,” Locke said. “I understand that people believe that we are a ‘have’ province, which we are technically. However, they then believe that there’s unlimited money to address all of our needs and wants. That is not true.

People in Corner Brook are worried that the provincial government is going to have problems building the new hospital they promised in 2007.  They were supposed to start construction this year but, as it now appears, they won’t be ready to start work for at least another year.

People are nervous.  The politicians are more nervous.  You can tell they are nervous by the way Tory politician Vaughn Granter shat massive, enormous, huge bricks on Twitter Thursday night.

If he could, Granter probably would have used a 72 point font in addition to the capital letters to make sure everyone knew just how enormously, massively complicated this hospital project is.

Huge, it is.

Bigger than humans have ever done before on the planet. 

People on the island’s west coast won’t be persuaded by Granter’s amateurish horseshit.  In fact, no one would be surprised if his nervous tweeting and the same sort of foolishness in person only served to increase public anxiety about the hospital.

Of course, as people start to realise the way all those big economic things are coming together, the provincial Tories will have a harder time persuading people that the hospital and other projects aren’t at some risk.  It’s not like the Tories can avoid building something in Corner Brook. They need to replace Western Memorial Hospital. But that doesn’t mean that they will build the hospital they promised in 2007.

It wouldn’t take much to make the current tight financial situation all that much worse.  Drop the price of oil at the same time that  - as we know - oil production will drop off over the next decade.  Drive up the cost of Muskrat Falls at the same time.  Nothing radical and nothing at all unusual. Then think about building a hospital project that they said would cost the better part of a billion dollars before they started building it.

Then think about all those projects that were far less complicated, as Vaughn Granter would tell you,  than the new hospital.  Think of a small aquaculture office building, for example.  Announced in 2007 to be finished in 2009.  They didn’t start construction until 2009 and by the time they turned the key on the front door, the cost was more than double what they estimated originally.

Hospital in Labrador.  Started at $56 million.  Hit $90 million and still counting on a project that has actually been longer in the “planning” stage than the one in Corner Brook.

That’s a 60% increase in cost, incidentally.  Sixty percent is the low end of provincial government cost over-runs, these days.  So if, by some estimates, this Corner Brook hospital started out at $750 million, think of how much it might really cost.  $1.5 billion wouldn’t be outrageous.  $1.2 billion would put it on par with the Labrador cost over-run.

Now go back and lower the price of oil, increase the cost of Muskrat Falls and do all those other very likely things. The more people like Granter talk up the enormous cost and the complexity of the hospital and the longer they delay getting it started, the more likely people are to worry.

And it’s not like they weren’t worried already, before the politicians started protesting too much in their denials about a problem in Corner Brook.

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There’s no greater fraud… “unsustainable” version #nlpoli

The provincial Conservatives promised on Tuesday that they had a 10 year plan to reduce the provincial debt.

They have been in office since 2003.  in that time they boosted public sector spending by more than 60%.  Since 2009, the Conservatives have acknowledged their spending practices are unsustainable.

To date they have done nothing to change their ways.

Here’s some of what they promised in 2003:

• Keeping real program spending constant by limiting the annual growth in spending to the anticipated growth in inflation. New needs that arise will be accommodated within this budget constraint.
• Ensuring value for money by eliminating ineffective and inefficient programs, and by setting objectives for program spending and tracking results.

…

• Reviewing financing arrangements. In 2001-02, the province spent $700 million to service its debt. We will immediately review all financing arrangements in all government departments and crown agencies to reduce interest costs. Such a review will include all debt, investments and cash management practices. We will also review the $1 billion sinking fund to determine if a portion should be used to reduce the Province's debt and reduce interest costs.
• Approximately 40% of all government expenditures goes towards salaries and employee benefits. Over the next five years, approximately 25% of the public service will be eligible for retirement. A Progressive Conservative government will use this five-year period to reduce the size of the public sector through attrition.

There really is a greater fraud than an unkept promise.  It’s making promises on top of the unkept ones.

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Finlandia

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Trouble near mill: the Corner Brook hospital #nlpoli

The 2012 provincial budget includes $1.4 billion in capital works but none of it is apparently connected to two hospitals..

How long should it take to start construction work on a new hospital? That’s a really good question. 

For the provincial Conservatives in Newfoundland and Labrador, six years is not enough.

They announced money for it in 2006.  They had a tractor start digging a hole in the ground for a new hospital in time for a 2007 by-election in Labrador.  By 2010, the whole thing was on hold with a budget that was well on its way to doubling the original estimate.

The new Corner Brook hospital is apparently caught in the same time vortex::

• Promised in 2007.
• Some work done in 2008.
• Site selection September 2009.
• Tender to extend water and sewer to the site, June 2010.

According to a September 2010 release, “[c]onstruction is anticipated to begin in August 2012 with occupancy expected in April 2017.”

Yeah, well, that was then.

According to finance minister Tom Marshall, there’s only $1.0 million in the 2012 budget for the new hospital. That was for “planning”. if that runs out, the public works guys can spend another $5 million for more “planning”.

If the public works minister “runs out of money,”  Marshall told the House of Assembly on Wednesday, “they can come back to me for more money for planning.”

As for construction, Marshall had no answer as to when that might happen.  Odds are good, the hospital won;t be starting in 2012 and it definitely won’t be opening in 2017.

 

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That didn’t take long: public sector negotiations #nlpoli

Here’s what your humble e-scribbler said on Wednesday morning about the fact the provincial government didn’t include any amount in the 2012 budget to cover salary increases:

Pull the other one

The budget contains no amounts for wage increases.  Any talk of forcing departments to come up with increases out of existing budgets is..well..talk.  That’s all Tom Marshall does.  The Tories left out the amounts because they don’t know how much they’ll be forced to pay yet.

Watch for it.

And here’s what Premier Kathy Dunderdale said in the House of Assembly on Wednesday afternoon in answer to a question about the negotiations from Liberal leader Dwight Ball. 

Bear in mind Dunderdale warned the universe until the end of March that she and her colleagues would be hauling three percent out of government spending and were looking at layoffs of hundreds of public servants:

PREMIER DUNDERDALE:  Mr. Speaker, this will not be our first round of negotiations with the wonderful people who work for the Government of Newfoundland and Labrador and the people of Newfoundland and Labrador.

…

Given our record, Mr. Speaker, we have not done badly and we have not had to fire people, lay people off, and close down programs as a result of our negotiations, nor do we expect we will have to do the same this time either.

At least you didn’t have to wait for too long until you saw Kathy blink.

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More significant budget digits #nlpoli

3%:  The amount by which Premier Kathy Dunderdale said she and her colleagues would be cutting spending in the current budget.

As the Telegram editorial pointed out on Wednesday:

Instead of the three per cent in program cuts suggested at one point by Premier Kathy Dunderdale, the province will actually increase its program expenses by $113 million and its debt-servicing expenses by $40.5 million.

That $153.5 million increase in costs means the province’s spending — despite an expected $1.1 billion in reduced oil royalty and Atlantic Accord revenue income — will actually increase by 2.1 per cent, slightly under the expected inflation rate of 2.2 per cent. This, despite non-core program cuts that saved $38.8 million in additional spending.

Yes, friends, the three percent cut morphed into a 2.1% increase.

45:  The number of temporary positions supposedly cut in Tuesday’s budget.

As the Telegram noted, though:

The 45 temporary jobs that were cut actually weren’t enough to offset 142 new positions created in other areas — including 47 temporary positions.

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Oil and Democracy #nlpoli #cdnpoli

Michael Ross contends there is a relationship between oil revenues and democracy.  Crudely put:  oil hinders democracy.

First, the oil-impedes-democracy claim is both valid and statistically robust; in other words, oil does hurt democracy. …

Second, the harmful influence of oil is not restricted to the Middle East. …

The third finding is that nonfuel mineral wealth also impedes democratization. …

Ross has a couple of simple tables comparing the relative reliance of some national economies on oil and non-fuel minerals.  in both cases you just calculate the export value of the minerals as a share of gross domestic product.

In 2011, the provincial GDP was $33 billion.  Of that, the province produced and exported about $10.7 billion in oil and $4.6 billion in non-fuel minerals.  That gives an Oil Reliance number of 32 and a Mineral Reliance number of 14.

To put that in perspective,  Ross’ calculation using 2006 figures for oil producing countries puts Newfoundland and Labrador on the same rank as Qatar and Saudi Arabia, both of which scored 33.85. It puts the province behind Brunei, Kuwait and Nigeria but miles beyond Libya (29.74), Iraq (23.48) and Venezuela (18.84)

Norway scored 13.46.

The Mineral Reliance score puts Newfoundland and Labrador at the fourth highest spot among the countries on Ross’ chart. Third place belongs to Bahrain (16.39), while fourth on the chart is occupied by Chile at 12.63.

Canada as a whole scored only 2.2.

Before you get too excited, the relationship between oil and democracy is a wee bit more complex, as Ross relates.  Let’s just look at those simple calculations first.  We’ll get back to the other ideas Ross discusses in his new book The Oil Curse.

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Another Tom Marshall masterpiece #nlpoli

You’ve gone through the media reports and heard the interviews and comments from pundits and politicos alike.  Now you want a better idea of what is going on and what isn’t happening.

Well, right off the bat, anyone who reported about an austerity budget or that forecast any significant change to provincial government practice was completely and utterly full of crap.  CBC kept pushing that theme even though they’d been told that all talk of cuts and restraint were no longer operative.

No decision too serious to avoid 

What you’ve basically got here is a budget that pushes off any decisions about anything until some undefined point in the future.

The “program review” that will last a decade has no real goals and thus has nothing to deliver. It will deliver exactly that. The people who created the provincial government’s unsustainable spending aren’t going to change it. They can’t.

That isn’t a political surprise.  At the very best, Kathy Dunderdale is an interim leader.  She can’t commit the Tories to a serious fiscal reform when she’ll be retiring soon.  fair enough.  If that’s the case, someone else can make some serious financial reforms in a couple of years time.

At the very worst, Kathy Dunderdale she is a leader who  can’t get her own agenda through cabinet. This would be an enormous problem.  After all, Dunderdale admitted she’s got a financial mess on her hands.  People remember her board of trade speech.  Announcing a crisis and then doing nothing looks dumb.

And speaking of dumb…

Threatening layoffs is one thing.  Not delivering any at all is pure political stupidity.  People remember this shit. And they’ll really remember if the financial mess the Tories are trying to avoid turns out to be real.

Pull the other one

The budget contains no amounts for wage increases.  Any talk of forcing departments to come up with increases out of existing budgets is..well..talk.  That’s all Tom Marshall does.  The Tories left out the amounts because they don’t know how much they’ll be forced to pay yet.

Watch for it.

What government cannot deliver capital works?

To get a good sense of how the current crowd run things you need to look at last year. You need to look at the budget and the figures they project and then you have to look at what actually happens.

In this case, you will find the budget forecast in the 2011 Estimates and the actual spending in the 2012 Estimates.  We’ll be looking specifically at Statement I, the summary of cash, as well as the revenue forecasts in Statement II.

Note that the Estimates are presented on a cash basis. The budget speech is delivered on an different accounting basis so the numbers don’t match up. There is a table in the budget speech that reconciles the two. 

The provincial government 2011 budget forecast a deficit of roughly $769 million. They produced a cash surplus of $411 million.  That’s a variance of 14.75 percent ($1.18 billion on an $8.0 billion budget)

Bear that in mind when you hear anyone from government talk down the prospect of any spending they don’t want to do, like say municipal infrastructure spending.  They say the same thing every year: we don’t have any money.  And then they turn out a giant surplus. 

Here’s Hisself from 2008:

“People need to understand government cannot write a cheque for everything,” said Williams. “We can’t be all things to all people.”

“On the other hand, even in poor times, we have tried to do the best we could for people who were, for lack of a better term, in poorer positions.”

Back to the miraculous turn-around last year:  you probably think it all came from oil.  Well, you are partially right, but a few other things helped turn around the 2011 result from the forecast.

( in 000s)	Forecast	Actual	Difference
Personal Income Tax	862,300	939,453	+ 77,153
Payroll Tax	121,498	168,472	+ 46, 974
Oil Royalties	2,269,400	2,800,772	+ 531,372
Total Own Source Revenue	5,351,309	5,903,224	+ 551,919

The total isn’t higher because they over-estimated some revenues.  The net difference was about $551,919,000.

Still a long way from the total variance, though of more than $1.1 billion.

The net current account spending was almost dead on the forecast.  They budgeted to spend $6.080 billion and they came in at the end of the year having spent $6.086 billion.

The other chunk of cash came from capital spending.  The 2011 budget had net capital account spending of $1.271 billion.  Instead, they spent about half that - $677 million -  a difference of $594 million.

That’s been the pattern for pretty much the whole Tory tenure. They budget for capital works but just can’t deliver.  In fact, the last time they did more than planned was 2004.  They came close in 2005 – $199 million against $204 million budgeted – but in every year since, they couldn’t spend what they budgeted.

In 2010, they had budgeted to spend about $1.064 billion and spent about $741 million.  But the next year they budgeted more – $1.2 billion – and spent less ($677 million) than the year before.

That doesn’t sound anything like exemplary financial management.  It’s more like managerial ineffectiveness.

And for the municipal leaders like Danny Breen of St. John’s, it should be the information they need to wring a few bucks from the tight provincial government fists that have the cash by the bucket load but – quite obviously – can’t deliver their capital works.  After all if Tom and Kathy can’t use the money, it’s just as well to give it to people who can.

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The rule of opposites, Penashue edition #nlpoli

Federal intergovernmental affairs minister Peter Penashue wrote a letter to the Telegram to take issue with a previous correspondent in the province’s largest circulation daily:

In a letter you published recently, Kate MacDonald of Portugal Cove-St. Philip’s suggested that Newfoundland’s concerns have been “neglected” in Ottawa under the current Conservative government.

This could not be further from the truth.

Penashue then rattles off a bunch of thing the federal Tories have done while “both opposition parties either opposed or flip-flopped on these initiatives”.

Big fat hairy deal.

Seriously.

Who gives a frig?

What’s really interesting about this letter is the letter itself.  A federal cabinet minister has to write a letter to the local paper taking exception to the comments of a vote.  The question most people would ask is “why?”.

The answer is right at the end:

In closing, Ms. MacDonald was wrong to call me a “lapdog.” She should know that our province has produced only two dog breeds, the Newfoundland dog and the Labrador.

Like me, both are excellent working dogs but very poor lapdogs.

It’s the rule of opposites.

Not X = X.

If it were otherwise - that is, if Penashue wasn’t some federal politician’s bitch -  Penashue wouldn’t have to write a letter and compare himself to dogs in order to rebut the assumption is a “lapdog”.  People would know it already.  And Penashue would be confident that people knew. So he wouldn’t have to write a letter to the paper.

Besides, Penashue’s letter is wrong.  More than two dog breeds originated in the province. He – or perhaps his mainland ghost-writer – should have checked.  There is the Newfoundland and the Labrador.  But the Labrador derived from another breed:  the water dog. 

And of course, people from Labrador are probably wondering how Penashue forgot about the Labrador variant of husky known, oddly enough as the Labrador Husky.

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Significant budget digits #nlpoli

As you try and contain your excitement on provincial budget day, here are a few numbers you might want to keep in mind:

Dozens:  What CBC reported on Friday as the number of layoffs in the budget.

Fewer than 150:  What CBC reported on Monday as the likely number of layoffs in the budget.

$5.0 billion:  The amount of cash Tom Marshall had in the bank last year after the finance minister paid all the provincial government bills a year ago.  Don’t believe it?  Check Volume 1 of last year’s Public Accounts.  Windfall oil prices have delivered every penny of it.

$5.1 billion:  Total spending in the Tories’ first budget in 2003.

$13 billion:  The public debt, i.e. gross liabilities. Roughly $26,000 for every person living in the province. 

Don’t believe it?  Check the Public Accounts.

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No truer words #nlpoli #cdnpoli

“When you wage an ideological war,” wrote Lana Payne this past weekend, “lies are necessary weapons.”

Payne, for those who don’t know, is president of the province’s labour federation and a major player for the provincial and national New Democratic Party.  She has a column in the weekly Telegram, for which she once worked.  That’s where she wrote those words, at the start of a column about the federal Conservatives.

Payne has a special hate on for Stephen Harper and his Connies. Sometimes it seems that hardly a moment goes by before Payne is tweeting, writing or telling a reporter about the awful f*ckers, those federal Tories.  No words are too strong for Payne to use in condemning Harper and his cronies.  There are no crimes, it seems, that she could not imagine them doing.  There is no evil too black for them to plot, deep in their caves,as they stroke their beards and lick the blood of some freshly killed innocent from their lips.

Payne hates Tories the same way any ideologue hates competition. Doesn’t matter if the ideology is religious or political. The reaction is the same, one for the other.  Payne’s column follows the form:  the Tories are waging an ideological war. She is merely exposing them.  They Lie, the blasphemers.  Only the “I” can tell you the Truth. Her opening sentence is a tracer round fired to light up the enemy.

Only a true ideologue, though, could start a column about the crucial role of lies in ideological war and not – apparently – realize the veracity in all tracer rounds  Tracers, you see, point both ways.

The same weekend that Payne fired at Harper about fighter jets and cooked books, Payne appeared in her usual role as pundit on CBC’s On Point with David Cochrane to talk about next week’s provincial budget.

Asked about the provincial government’s limited restraint coming in the next budget, Payne blessed it as sound since the government’s problem was “short-term”. Things are growing. Things are good.

She dismissed Telegram editor Russell Wangersky’s challenge that the problem wasn’t so transient.  We have paid down on debt, according to Payne. The debt-to-GDP ratio is among the best anywhere.

The provincial government has done no such thing of course.  The public debt remains at record levels. It only appears smaller by some calculations if you include a raft of cash the government has laying about.  The money is ear-marked, of course, for Muskrat Falls.

So paid down the debt?  No.  That would be false.

And as for the debt-to-GDP ratio?  Well,  that would depend on your definition of debt.  The provincial auditor general uses net debt.  As we’ve noted, that figure can be misleading since it includes cash that is actually already ear-marked to be spent.  The result is a misleading, low number for debt compared to a value of the economy, which, by the way, shifts based on a couple of highly volatile prices.  

Really with that indicator you are dealing with the same problem as the first one.  So far Payne is zero for two biggies on the veracity front.

Payne also doesn’t talk about the vulnerability of the economy, built on the precarious base of public sector spending that comes from volatile and unreliable oil and mineral prices.  Think of that as a lack of veracity by omission.

Zero for three.

These omissions must be a necessary weapon in the ideological war, as Payne told us. The ideology in this case is Payne’s concern to represent the major unions in her federation. They represent people who get their paycheques from the public purse. More public sector good.  Less public sector bad, always, according to that ideology.

Now ideology, like religion, can be a good thing. It can help people give shape and meaning to life. It can help them do good.  It can be a comfort.

The problems start when ideology becomes a barrier to other ideas or to thought and reason.  That’s when you get tunnel vision.

And nothing good for anyone ever came from tunnel vision.

-srbp-

Muskrat Voodoo #nlpoli #cdnpoli

A Canadian Press story on Muskrat Falls this week starts with economist Brendan Sullivan’s recent critique of Muskrat Falls:

He said in an interview that the province and its Crown corporation Nalcor Energy are using "voodoo economics" to justify a long-term power purchase agreement.

…

But Sullivan argues the agreement essentially writes off depreciation later — "kicking the can down the road" for future generations — and that it wouldn't get past private shareholders who expect faster return on investment.

CP also gives Nalcor boss Ed martin some space.  Curiously he tosses out some additional voodoo as if to prove Sullivan’s point without realising it.

Try this for starters:

In an email, Nalcor CEO Ed Martin said the province needs more power and that Muskrat Falls is cheaper than if Newfoundland generates its own energy, much of it dependent on an aging oil-fired plant.

Two bits.

First there’s the claim that MF would be cheaper than generating energy on its own.

It’s a weird way to say it:  “cheaper than if Newfoundland generates its own energy.”  After all the end-users foot the entire bill either way so whatever that curious phrase means it doesn’t matter.

Second, the infeed system isn’t cheaper than the alternatives. Nalcor hasn’t studied the alternatives and won’t have studied them before government sanctions the project.  At best they don’t know.  At worst, as some of the critics have suggested, Muskrat falls is actually more expensive and potentially the most financially risky choice of all the ways to me the island’s electricity needs.

Third, look at this:

Muskrat Falls "moves the island from dependence on thermal generation to the use of clean, renewable hydropower," he said.

The island isn’t dependent on thermal generation now.  Thermal is part of the mix.  Any place that has a majority of its year-round generation from thermal sources is “dependent”.  The island uses Holyrood for less than three months a year.  Some years, Holyrood supplies a mere 11% of the island’s electricity needs.

Fourth, and, as Ed Martin knows, if he spent a few hundred millions, he could shutter Holyrood for about 15 years.  Martin has a supply of hydro available from the old Abitibi properties to displace Holyrood.  The problem is that the line between the generators and the consumers on the Avalon can’t handle the extra load.

And for fifth, recall another wonder bit of voodoo on Martin’s part:  the Muskrat Falls scheme actually includes more thermal generation for the island than is currently installed at Holyrood.  It’s right there in the same Manitoba Hydro report Martin keeps citing when he pronounces himself baffled that the public utilities board refused to answer his set-up question with Martin’s pre-determined answer.

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If Danny didn’t have the balls for it… #nlpoli

Job cuts in the public service.  One of the more spectacular communications frig ups by the Premier lately.

Here’s what your humble e-scribbler said on March 6:

So if Danny Williams couldn’t cut anything even after saying it in plain language, what makes anyone think that Kathy Dunderdale and the rest of her crew are even saying “cuts” let alone thinking about doing them?

Then the Friday before the provincial budget is scheduled to appear, CBC reports that “sources say the job cuts will number in the dozens, instead of the hundreds.”

Surprise!

Of course, public sector spending is still unsustainable.  The provincial government has been saying it since 2009.  It’s like debt reduction.  They talk about that too.  They just never do anything about it.

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The essence of bribery #nlpoli #cdnpoli

Authorities in Quebec have their hands full with a raft of corruption investigations, according to the Globe and Mail.

This paragraph toward the end of the Globe story stands out:

The opposition parties alleged that the unit was being hampered by political interference. The Parti Québécois this week revealed in the National Assembly that the government had failed to cooperate with the anti-corruption unit in an investigation involving the awarding of daycare spaces to individuals who were alleged to have close ties with the Quebec Liberal Party.

Daycare spaces.

The essence of bribery involves very mundane things.

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