Showing posts sorted by relevance for query SIDI. Sort by date Show all posts
Showing posts sorted by relevance for query SIDI. Sort by date Show all posts

03 April 2013

Responsible Public Spending #nlpoli

You don’t need drugs or alcohol to get the feeling of dizziness or stupor like you smacked your head with a hammer. Hard. Repeatedly.

Just listen to a representative of one of the special interest groups talking about the provincial budget and public spending. It doesn’t matter which one.  As your humble e-scribbler was finishing off this post on Tuesday, a representative of the appropriately named St. John’s BOT was on television talking about how government had to cut public sector jobs and tear into public sector pension benefits because of the hideous unfunded pension liability. 

Corporate lawyer Denis Mahoney even quoted the distorted, misleading government claim about the unfunded liability as a share of only a fraction of the public debt to bolster his position. He never mentioned the billions going to subsidize his members, of course. 

In the process, Mahoney looked about as convincing as the labour mouthpieces like the Canadian Centre for Policy Alternatives who said in 2004 that the government wasn’t spending too much.  It just didn’t have enough money.  Of course, they never mentioned that the government was outspending just about every other province on a per capita basis.

Listen to this sort of mindless crap long enough and you don’t have to wonder why people wander around in a daze.

To clear your head, take a look at a chart showing the actual government spending from 2005 to 2012 (in blue) compared to the income from sources other than oil and minerals (in red).

02 April 2013

The Road Not Taken #nlpoli

The number is a hard one to wrap your mind around.

$15.6 billion.

That’s the amount of oil royalties and mining royalties the provincial government collected from 2005 to 2012.

Once you think you have that figure in your mind and understand what it means, think about this:  with the exception of about $1.4 billion, the money is apparently gone. 


Never to come again.

If you want to understand how the provincial government got itself into the mess, just think about all that money.  Newfoundland and Labrador is a “have” province with a government that is laying people off and cutting programs.  Then realize that for all that cutting the government is still planning to spend upwards of a half a billion dollars a year more than it is taking in.

The idea is staggering.

Well, be prepared to be floored completely.

05 April 2013

Political Will and Public Policy #nlpoli

The SIDI simulation of government spending that we’ve run this past week might not be everyone’s cup of tea, but these sort of thought exercises are always useful.

The most striking thing is the amount of money from oil and mining that the provincial government has spent in the past seven years:  $15.6 billion.  That’s enough to wipe out the entire public debt plus the unfunded pension liability and have a couple of billion left over for an unprecedented capital works program. 

It’s a staggering amount of money and the only thing more amazing than how much money there was is how easy it was to do something far more productive than just spending all the money, as the current provincial government has done.

The SIDI simulation included:

  • a steady, sustainable increase in spending each year,
  • an unprecedented, sustainable capital works program,
  • a $3.675 billion real decrease in public debt,
  • the prospect of a complete elimination of public debt within a decade, and,
  • an income fund that would continue to grow with further oil money and generate new income for the provincial government for as long as the fund existed.

The only thing needed to make the simulation a reality was a political desire to do it.  Had the provincial government done any one of the elements of the SIDI approach, then the provincial government could have either avoided the current crisis altogether or significantly altered the profile of the crisis and the prospects for coping with it.

19 January 2016

Updating the Alternative Spending Plan #nlpoli

In April 2013, SRBP ran a series of posts about public spending. The goal was to show how the government could have avoided its serious financial problems by having a financial policy more sophisticated than “spend it all.”

 A couple of very dramatic years have passed since then.

 Let’s update the projections and see what we get.

04 April 2013

Well on the way to Debt Freedom #nlpoli

According to economist-consultant Wade Locke, the provincial government’s “Sustainability” Plan includes a debt commitment:
The long-run target is to bring the province’s net per capita debt gradually down to the all-province level within ten years.
Locke made it clear in another part of his March 25 memo to finance minister Jerome Kennedy that the purpose of any surpluses the provincial government achieves within the next decade will be to fund Muskrat Falls.

For those who haven’t figured it out yet, the Locke-Conservative plan isn’t actually to reduce public debt.  They want to book the Muskrat Falls asset and – since that’s what net debt is -  make it appear they have lowered public debt when they likely haven’t moved it down very much at all.

By contrast, the SIDI model shows that the provincial government could have reduced direct public debt by $3.675 billion.  The net debt would currently stand at $4.6 billion with a downward trend.  According to Budget 2013, the net debt is is forecast to be about $8.5 billion, continuing an upward trend.

Big difference.

30 December 2013

The 2013 SRBP Themes (Part 1) #nlpoli

The end of the calendar always brings the string of Best of, Top 10, and any other kind of year in review piece.  In the conventional media it’s the season of the interview with leading politicians.

At SRBP this year we did a Top 13 for ‘13 list.  It just ran through all the posts and pages that attracted the largest number of readers during the year.

You get a bit of a different picture of the year when you go through the posts month by month to see what turns up.  Patterns emerge that aren’t as readily apparent when you are reading them – or writing them – daily.

23 January 2017

Sovereignty #nlpoli

Newfoundland and Labrador is one of the very few countries on the planet that got itself into such a financial mess that it gave up self-government.  The people gave up their right and power to govern themselves. That is, they gave up their sovereignty.

They took it back in 1949,  no matter what sort of fairy tales some people continue to believe.  Now with massive public debt coming from chronic overspending and the crushing debt of the insane Muskrat Falls project, some people are raising the prospect that Newfoundlanders and Labradorians may once again see their sovereignty in jeopardy.

Energy analyst Tom Adams has raised the issue of sovereignty with Pete Soucy and Paddy Daly recently.  Muskrat Falls is likely to create such financial problems that the federal government will have to bail the province or Nalcor out, argues Adams.  And it is almost certain that the federal government would look for some "austerity measures", as Adams put it,  as part of whatever deal lets the money flow.

14 April 2014

Budget Basics: Unfunded Pension and Benefits Liabilities #nlpoli

While the provincial budget for 2014 was all about spending government money, the budget speech did raise one issue that the provincial government appears intent on cutting dramatically.

A key component of the province’s net debt relates to unfunded pension and other post-retirement liabilities. Despite an investment of more than $3.6 billion, the liabilities have continued to grow. As of March 31, 2013, they accounted for 67 per cent of net debt. By 2016-17, they will account for 85 per cent of net debt – almost $9 billion.

The provincial government has been talking about the unfunded pension and benefits liabilities for a couple of years now.  It’s a hot issue among business groups like the employers’ council or the Canadian Federation of Independent Business. 

As regular readers know, the board of trade is keen to deal with the unfunded liability, too, even if the president or whoever wrote her column in last week’s Saturday Telegram don’t appear to understand what it is all about.

For whatever reason, business groups get quite agitated about public sector workers and their pensions.  Other public debt doesn’t get them quite as worked up and, as the board of trade demonstrated quite clearly, there’s a fair bit of misinformation about the unfunded pension liability.

In this second post in the Budget Basic series, let’s take a look at public sector pensions and put them in a wider context.  Misinformation never leads to good public policy but right now, pretty well all the anti-pension commentary is based on some amount of misinformation.

23 September 2013

Debt, Demand, and Delusions #nlpoli

The Conservatives running the province got together with their staff and key supporters this weekend to reaffirm their conviction that they alone ought to be running the province.

Some people seem to think it’s remarkable that they stand together behind Kathy Dunderdale and her supposed wonderful charm, despite what the polls says.

There’s nothing remarkable in it at all.  People in power have a hard time understanding it when the voters turn on them. They carry on with their schemes, convinced in their own rightness.  It’s a form of self-delusion.  It’s what the mind does to help people cope when what they believe and what is true are two radically different things.

28 March 2014

The Whizzo Quality Assortment #nlpoli

On the outside, the spring budget for 2014 looks like a delicious assortment of goodies for everyone.  You can tell it is delectable because everyone is shouting for joy and drooling over their good fortune.

There is not a single group who have had their hands out for government money that did not get something. And they are telling anyone who will listen just how happy they are. 

Once you bite into one of sweetmeats in the Conservative Quality Assortment budget,  though, the result might be a wee bit less tasteful.

01 December 2014

Rational. Disciplined. Principled. #nlpoli

Back at the start of the current Conservative administration in 2003, they were very sharply aware of the problem with using one-time revenues for day-to-day spending.

They were so concerned about using that one-time money that they tried to get the federal government to do the impossible, namely give the provincial government here a permanent handout equal to oil revenues, in addition to the oil revenues that the provincial government collected.

Then they tried to get the federal government to exclude those one-time revenues from the Equalization formula so the provincial government could get the oil money and the hand-out at the same time. That didn’t work either.

The one thing the Conservatives didn’t do – for all their rhetoric about independence – was to act like a responsible, independent government.  They didn’t manage public finances for the long haul.

21 April 2014

Budget basics: Dealing with the Debt #nlpoli

Public sector pensions in Newfoundland and Labrador are underfunded.  There’s not enough money in the fund account to cover all the likely money they’d have to pay out to people when they retire.

But make no mistake, the province’s public sector pensioners are not in any real danger of losing their pensions as a result.  That’s because the Pension Fund Act guarantees that the provincial government will make up any difference between the money owed to pensioners annually and the money available from the fund.  Unless some provincial government in the years ahead changes the law governing the pensions, people will get the money and benefits they’ve been promised.

The provincial government isn’t going to default on pensions any more than they are likely to take the completely irresponsible advice some might give them to change all the plans immediately - unilaterally if necessary - to make them defined contribution plans instead of defined benefit plans.

It’s important that people remember that because there is a concerted effort going on at the moment to mislead people about public sector spending generally, and pensions in particular.