15 ideas (and more) – Setting the Table

Our economic vision for Newfoundland and Labrador is that of an enterprising, educated, distinctive and prosperous people working together to create a competitive economy based on innovation, creativity, productivity and quality.

Strategic Economic Plan, 1992

Our social vision for Newfoundland and Labrador is of a sharing society which balances its economic and social interests, cares for its disadvantaged, nurtures its human and physical environment, celebrates its quality of life and traditional values of individual respect and community responsibility and provides opportunities for personal and collective achievement.

Strategic Social Plan Consultation Paper, 1995

 

Within a mere two decades, Newfoundland and Labrador transformed almost two centuries of economic backwardness into unprecedented growth.

And yet, as we enter the second decade of the 21st century, a number of factors, some identified in the early 1990s, threaten to rob Newfoundlanders and Labradorians of the bright future they worked to achieve through careful planning, steady work, and a steely determination to endure.

Public sector debt remains at record levels.  Rather than reduce debt, the current Conservative administration plans to increase the debt burden still further by building an economically unsound megaproject.  What’s more, the most recent economic forecast predicts that the current administration’s policies could triple the debt within a decade.  That is on top of the burden from the  Muskrat Falls megaproject.

Changes in the province’s population, forecast in the early 1990s, have started to create pressure for new government spending and more government spending.  Just paying the interest on the growing debt will rob money that could be helping to pay for those new services.

The highly competitive global economy that has emerged in the past 20 years, coupled with fall-out from the recent recession, will demand even greater inventiveness if businesses in Newfoundland and Labrador will meet the challenges these changes present. 

Yet, over the past decade government policy has fostered greater social and business dependence on government hand-outs.  The result is a fragile economy that will grow less robust and more susceptible to set-backs.

The answer to these challenges can be found in the principles that lay at the heart of the 1992 Strategic Economic Plan: 

• We must foster a change in people.  We must renew genuine pride, self-reliance and entrepreneurship. We must once more become outward-looking, enterprising, educated and innovative. 
• We must change government.   Our people do not need saviours or demigods.  They can run their own affairs.  We must introduce fundamental democratic reforms.  Decisions about education, health and economic development must be made closer to the people directly affected by them. The role of government is to create an environment in which the private sector can develop economically and environmentally sustainable  businesses.
• We must change relationships. We must replace the chaotic, secretive and highly centralised government of the past decade, with mature, professional and open government based on sound long-term planning and a genuine understanding of the province’s long-term interests.  Beyond that, we must forge new relationships among governments, business, labour, academia and community groups of the sort envisioned two decades ago. We must build a strong relationship between the federal and provincial governments in order to deliver government services as efficiently and effectively as possible while ensuring that the people who pay for those services can hold the right government to account for what they do.

The ideas that will follow in posts over the coming days and weeks are nothing more than the starting point for discussion.

Only through vigorous, free-wheeling public debate can we build a mutual understanding among all the people of the province on both the necessity of change and of the specific changes themselves.

Change is not a luxury.

Change is not merely possible.

Change is essential.

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Next:  Building the Fishery of the Future

The unsustainable lightness of Tom Marshall

Tom Marshall keeps a tight grip on the provincial government’s purse strings.

He has to do that.

The damn things won’t stay that wide open on their own.

In presenting the provincial government’s budget to the House of Assembly on Tuesday, Marshall announced that the Conservative administration of Kathy Dunderdale would continue the practice of unsustainable public spending set under Dunderdale’s predecessor, Danny Williams.

Overall government spending will grow by 4.9%;  that’s about twice the rate of inflation. 

A windfall in oil prices directly attributable to turmoil in the Middle East helped to erase a forecast cash deficit of $959 million and turn it into a modest cash surplus of $133 million. (Estimates 2011 p. iv)

For the past two years, Marshall claimed the government’s profligate spending came from the need to spend cash to fuel an economic recovery. 

Now he’s got a different excuse:  we can afford it.  Marshall told reporters that the provincial economy was “sizzling”. That’s nonsense, of course.  The economy is actually becoming increasingly fragile and public spending is sustained by cash coming from a volatile source, namely oil. Marshall seems to know that just like he knows the public debt is something he should be reducing.

Oddly, Marshall never seems to do anything about it. 

Marshall forecast that the province’s net debt will increase in 2011, largely the result of continued growth in unfunded pension and benefits liabilities in the public service.

And that’s despite repeated warnings from the province’s auditor general among others.  In 2009 a provincial cabinet minister resigned unexpectedly citing concerns about unsustainable public spending.  Earlier this year, Auditor General John Noseworthy repeated the same concerns;  interestingly enough he did it in a report on Fiscal Year 2009, the same year Paul Oram left cabinet.

Two years later, the provincial government is still on the same path.

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Related:

• Fragile Economy:  Staying the course
• Fragile Economy:  reductio ad argentum
• Fragile Economy:  …and two steps back
• Fragile Economy:  now three steps back and loving it
• Fragile Economy:  hard numbers
• Fragile Economy: The Public Sector

Provincial government wakes up on EU trade

Almost two years after your humble e-scribbler pointed out the blatant stupidity of the provincial government’s decision to boycott free trade talks, the provincial government is now sorting itself out.

The provincial government trade gang will switch from observers to participants at the upcoming trade talks between Canada and the European Union in April.

The old policy  - supported unquestioningly by the same people who have now turned 180 degrees – was stupid because it jeopardized the existing and future economic interests of the province and left local industry to being left out of a new lucrative market.

What’s worse, the old, stupid policy threatened to increase the dependence of the local economy on  on the American market. As a result, the provincial economy would become even more fragile than it had already grown as a result of seven years of backward economic policy by the provincial government.

It may have taken two years but the current crowd have finally figured it out.

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Fin minister Tom Marshall talks debt reduction - audience pees in pants with stifled giggles

According to voice of the cabinet minister, provincial finance minister Tom Marshall is interested  - again – in talking about the provincial debt.

Here’s a excerpt from the VOCM online story, quoted here since it may have been disappeared by the time this gets posted:

Marshall proposes several measures in doing so. First, the government needs to balance sustainable and prudent spending with the implementation of steps to lower taxes and net debt. He says the province has to maximize the benefits from its non-renewable resources now so that it is prepared for when they are depleted. Finally, he argues that it is important to diversify the economy, such as focusing on the Lower Churchill Project.

Marshall’s talked about sustainable spending before but only to the extent of making clear he wasn’t the teensiest bit interested in actually doing it. In fact, Marshall’s record is of a profligate spender who never met a deficit he didn’t like.

And just to get the point across, note that current provincial gross debt is about $12 billion.  That’s roughly where it’s been for the past four years and it higher than it was in 2003 when Marshall and his crowd took office. 

Tom mentioned lowering the net debt.  Well in order to do that he’d have to stop overspending as he’s done the past two years.  According to the most recent financial statements, the province’s net debt went up in 2009 and it is set to go up again in 2010 (the current fiscal year) if current trends hold.

So while that whole “sustainable and prudent spending” thing is a great objective, Tom and his friends haven’t done it yet.  After seven years, Tom’s got to have cajones the size of watermelons to talk about debt reduction and fiscal responsibility with a straight face, expecting the people in the province to take him seriously.

Ditto the part where he talks about maximising benefits from oil and minerals.  Tom and his former boss specifically rejected any suggestions to set aside sovereign wealth funds, real debt reduction and any other ways to accomplish the goal of putting the money from oil and minerals to work for the future.

And double ditto for the bit about diversifying the economy.  The current fragile state of the provincial economy is a direct result of provincial government policy since 2003. 

That leaves the Lower Churchill.

Reducing net debt, right?

Okay, Tom Marshall’s current plan is to force taxpayers to borrow at least $3.0 billion and put a total of about $6.0 on the provincial government’s gross debt load.

Tom also wants ratepayers in the province to accept electricity rates roughly double what they are currently to pay for electricity.  Can you say “uncompetitive” boys and girls? 

And he’d like to ship power free to Nova Scotia for 35 years.

Surplus power would enter the market at uncompetitive rates so the chances of export are pretty much slim and none as it now appears.

Given all that’s going on in the province and what Tom Marshall and his pals have actually done since 2003, the finance minister’s audience on Thursday must have peed in their pants with stifled laughter as he rambled on.

Surely no one would take Tom seriously, not with all the evidence against him.

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Traffic for 5K and 50 “members”

1. Connie Leadership rigged?
2. Undisclosed risk:  financing the Lower Churchill
3. Connie Leadership 2011:  democratic deficit
4. Connie Leadership 2011:  editorial kick-back
5. Leadership by fiat
6. Connie Leadership 2011:  Persistent Rumour Department
7. Fragile Economy:  finance minister complains about his own policies
8. Pater knows best
9. Is Gerry Byrne completely nuts or what?
10. Connie Leadership 2011:  for the sake of five large and a gang of kids

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Just imagine…

For some reason, the Conservative government of Danny Williams wanted to smash Fishery Products International and sell off the bits and pieces.

FPI used to be a large and successful fish processing company based in Newfoundland and Labrador.
Now it doesn’t exist any more and the most lucrative bits and pieces wound up in the hands of people who don’t do much business in Newfoundland and Labrador.

Just imagine if certain powerful interests in the province hadn’t destroyed the company.  FPI might be doing what one of its former competitors is now doing:  trying to buy into the Iceland fish business.

High Liner announced late Tuesday that it made an unsolicited offer worth ¤340-million ($445.4-million) to acquire Icelandic, one of the three biggest value-added seafood processors to the U.S. food service market. It wants the company simply to bulk up its own business.

That wouldn’t normally be front-page news. But in this case, it was the main story in at least two major media outlets. Why? Because Icelandic is owned by a public pension consortium run by the Framtakssjódur Íslands fund. And the owners have excluded the Canadians so far from the takeover process. High Liner piping up publicly was akin to a foreign company telling Iceland’s politicians to smarten up and open up the sales process to more bidders.

There’s a fascinating story in the Financial Post on the whole thing.

The world is only as small as people imagine themselves to be and, for the past seven years, this province has been dominated by people whose vision is incredibly myopic.

The consequences of such limited thinking are all around us, from the fragile economy that worries the cabinet minister who helped create it to this sort of lost opportunity in the fishery.

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The Fragile Economy: finance minister complains about his own policies

Finance minister Tom Marshall thinks its time for the private sector to step in and boost the economy around Corner Brook.

“Other than construction, I would like to see more economic investment; I would like to see more businesses coming in and investing here,” he said. “It is jobs ... What we have seen is government spending, in a massive way, in this area.”

That’s from a story in last Friday’s Western Star.

Two observations come readily to mind.

First of all, that’s a great big “D’uh” there, Tom.  Your humble e-scribbler has been banging out post after post after post over the past six years on this very subject.  The number of posts on it has gone up in the past two years because the fundamental situation is getting fundamentally worse. 

It is getting fundamentally worse – to hit the second point – as a direct result of government policy.  In everything from its energy policy to its disastrous seizure of private sector assets in 2008, the current administration has shown itself to be relentlessly opposed to creating an economic climate that attracts investment, promotes innovation and rewards entrepreneurship. 

The current fragile state of the provincial economy  - “fragile” is a word Tom Marshall used not so long ago, by the way - is a direct consequence of government policies.  Only a fundamental shift in those policies can move the province off the course it is currently on.

As it stands in early 2011, the current administration is firmly committed to continuing the policies that have contributed to putting the economy in its current parlous state.

We have seen the enemy, says finance minister Tom Marshall, and he is us.

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2010: The year in review

For the year-end post, you’ll have to wait until Friday to find out what the readers picked as their favourite stories of 2010.

For today, here’s another view.  Your humble e-scribbler has picked one Bond Papers post or topic from each month as a reminder of the year’s events.  I f you take the time to wander back through the archives, you’ll find all sorts of things from the UFO story that ran among last winter to a couple of posts on education.  There are also posts on the fishery that got some public attention – h/t to CBC’s Fisheries Broadcast.

So much more happened in the province than people seem to remember and the stuff they do remember is often not the most important things.

In any event, here’s the Year in Review:

January:  Spending scandal:  when “facts” aren’t true

February:  Three on one topic:  Deep Throat, Deep T’roat and Deep Throats

March:  The Fragile Economy:  staying the course

April:  Jon Lien:  mensch

May: The search for meaning challenge – yet more unfounded news media claims. 

June:  Roger Fitzgerald’s bias – the House of Assembly is at the point where partisan bias openly displayed by the Speaker is now commonplace.

July:  Calamity Kathy’s story doesn’t add up.  The local media are already praising her political genius.  Here’s another example of how short their memories are or how low are their standards.

August:  Good to the last fish

September:  The politicisation of public emergencies

October:  Breasts:  they’re not just for gawking at

November:  Reversing the entrepreneurial drive

December:  How to win without news media – Part 2

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The Fragile Economy: reversing the entrepreneurial drive

In a province that is so heavily dependent on public sector spending, it’s hard to imagine anyone would think that having the government play such a huge role in  the provincial government in the economy would be a great idea.

Step forward the head of the St. John’s Board of Trade:

Chairman of the Board of Trade, Derek Sullivan said government contracts give a competitive advantage for local businesses and “can be a very powerful and reliable revenue stream.”

Talk about throwing the engine of economic development into complete reverse. 

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The Dismal Science: Debunking the “federal presence” fairy tale

Far from being hard done-by when it comes to federal jobs in the province, Newfoundland and Labrador is pretty much on par, according to a recent study conducted by the Frontier Centre for Public Policy, and reported by the National Post.

You can find a news release summarising the report here, while the full report is available in pdf format.

Some provinces  - Prince Edward Island, New Brunswick, Nova Scotia and Manitoba – have significantly more than the national average number of federal jobs per 100,000 population.  Quebec, Saskatchewan, British Columbia and Alberta have less.

Newfoundland and Labrador and Ontario are only slightly higher than the national average.

The study effectively refutes claims that this province is receiving something less than its “entitlement’ to federal pork spending.  The comparative figures also demolish two reports released by Memorial University’s Harris Centre in 2005 and 2006.  The provincial government has used those studies repeatedly to bolster its claims for increased federal transfers to the province to offset what turn out to be imaginary grievances.

The Frontier Centre study refers to these federal jobs as a form of “stealth” Equalization.  That is, they contend that the federal jobs serve as a type of federal transfer to the local economy in each of the provinces. More importantly, though, the Frontier Centre contends that the transfer comes in addition to the formal Equalization program and is particularly heavy in the provinces it refers to as “major” have-provinces.

The study also notes that the have-not provinces with the highest ratio of federal government jobs also tend to have higher than average reliance on provincial public sector jobs generally. They compare provinces based on the number of public sector employers as a share of the total population.  Newfoundland and Labrador is third highest on that scale, with Prince Edward Island and Manitoba coming, respectively, first and second.

Looking at the same information but as a share of the provincial labour force, Newfoundland and Labrador is by far the province with the largest dependence on the public sector.  Almost 30% of the provincial labour force is employed by the federal, provincial or municipal government.

The Frontier Centre study puts the findings into a particular context, namely transfer payment reform:

The stealth equalization of unbalanced federal employment described in this paper is part of a much bigger problem —an approach to public policy in Canada that transfers money out of high-productivity regions into low-productivity regions.

Not only is this policy approach harmful to our productivity growth, it is also, quite simply, unsustainable. Historically, the taxpayers in three provinces—British Columbia, Alberta and Ontario, have paid most of the bill for high levels of public sector employment in the have-not provinces.

At the same time, the study does point to issues that are especially relevant to Newfoundland and Labrador, even if the report’s authors simply missed the poster child for their argument of unsustainable public spending and the dangers of reliance on what the author’s call “the state driven approach to economic development”.

Most residents of the recipient provinces are unaware of the extent to which their economies are state-driven and reliant on transfers. Beyond the official equalization money, massive amounts of revenue from elsewhere flow into these provinces from a number of different sources. Stealth equalization through federal employment is one important example—but there are others. Higher dependence on federal
government transfers to individuals and discrimination in ordinary  operating programs in favour of the have-nots are two more examples of ways Canadian public policy transfers wealth into the have-nots.

Most residents of Newfoundland and Labrador are unaware of the extent to which the provincial economy is state-driven and reliant on federal transfers in addition to overall public sector spending.

They aren’t alone, of course.  The current provincial administration operates as if going off Equalization was a tragedy of biblical proportions.

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Related: 

• Fragile Economy:  staying the course
• Fragile Economy:  reductio ad argentum
• Fragile Economy:  The public sector
• Fragile Economy: …and two steps back
• Fragile Economy: …now three steps back and loving it

“Get fiscal house in order” first: analyst

An analyst with the Atlantic Provinces Economic Council told a conference in St. John’s that the provincial government  “has to get its fiscal house in order” before it makes an investment in any version of the Lower Churchill energy megaproject.

Fred Bergman said the province’s net debt to gross domestic product ratio remains among the highest in Canada at 41%.

Bergman is quoted by the Telegram [page four story, Wednesday November 3, not on line] as saying:

“Get your fiscal house in order, get your debt-to-GDP ratio down, get your budget balanced and then you can afford to tackle something like that.”

The Williams administration ran a half billion cash deficit in 2009 and budgeted for a $900 million cash shortfall in 2010.  Budget projections released in spring 2010 do not include any forecast for balanced budgets.

Finance minister Tom Marshall has previously consistently rejected balanced budget legislation.

In its various configurations, the Lower Churchill project could cost anywhere from $6.0 billion to $14 billion.

The following charts show the provincial government’s liabilities and net debt.  The vertical axis is in millions of Canadian dollars.

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Related:  “The Fragile Economy: staying the course”

Traffic Drivers, July 19-23

1. There is a green hill (not so far away)
2. Telly web design sucks, kills RSS feed to popular content
3. Drill baby drill:  Dunderdale rebuffs Quebec concerns about border, offshore oil spills
4. Government website still POS
5. Scientists find new sea creatures near deep water oil exploration sites
6. New 500 MW intertie for NS and NB
7. The Irish Miracle
8. Forever blowing bubbles
9. Fragile economy – the Public Sector
10. Semrau guilty on one count, not guilty on others

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Fragile Economy – The Public Sector

Last week, labradore comments on the size of the provincial labour force occupied by the provincial government public sector.  He capped it off with a chart (below) showing a comparison for all 10 provinces over the past decade.

All this brings home one of the points made here earlier this year in a series of posts on the increasingly fragile state of the provincial economy. More the provincial economy is dependent on trade with a single market, namely the United States.  There are fewer private sector industries driving the economy and, at the same time, provincial government spending has assumed an increasingly large role in the economy as a whole.

If you extend the picture back over the three decades for which data is available, you can see both the persistent over-reliance in Newfoundland and Labrador on public sector labour compared to the situation in other provinces as well as the increase in the public sector labour force over the past three years.

These charts go a long way to demonstrating the extent to which popular perceptions of local prosperity  are entirely wrong.  Whatever is going on locally is most certainly not the result of private sector economic development.

Rather there are more public servants making more money, 20% more, in fact over the most recent four year contract.  Couple this with the dramatic increase in overall provincial government spending – upwards of 60% in four years – and the picture is unmistakeable.

Those who want to talk about prosperity in the province or those who want to celebrate the province’s “have” status would do well to look at the three provinces with the smallest proportion of their labour forces working for the provincial government.  It is no coincidence that those provinces with the strongest economies are also ones in which the public sector labour force is a relatively small proportion of the overall working population.

That doesn’t mean that public servants and public services are unimportant.  Rather, the situation in Newfoundland and Labrador demonstrates the extent to which successive provincial governments in Newfoundland and Labrador – but most particularly the current one – have failed to create the climate in the province for sustainable economic development let alone diversification of the local economy.

What makes the current administration stand out, though, is that increasing the role of the public sector in the economy, whether through NALCOR or through admittedly unsustainable growth in public spending, is openly stated as the goal.

The fact that observers outside the provincial government have repeatedly failed to notice that this is occurring is another matter.  No surprise, though, that if they cannot even correctly identify the trend to growing fragility, they may not pay any attention at all to the very serious implications from policies that promote the hollowing out of the province’s economic underpinnings.

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Traffic Drivers: July 12-16

1. General and master corporal face charges over relationship
2. When will she get the flick?
3. HQ and NALCOR on same side in US transmission play
4. The Fragile Economy:  hard numbers
5. Five years of secret talks…
6. If you could get him for what he knew…
7. The energy hub and the loose wheel
8. September contrasts
9. And it only took a year…
10. Labour Force Comparison – a first look

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The Fragile Economy: hard numbers

As labradore has been putting it in a series of posts, the provincial public service in the first half of 2010 comprises 53,780 people working directly for the provincial government, the university and public colleges, health care authorities and public school boards.

That works out to 26.2% of the working people of the province.  That’s double the comparable percentage for all 10 provinces.

And here’s the truly unsettling bit:

In the thirty years in which Statistics Canada has measured public sector employment, the percentage of employed people in Newfoundland and Labrador labour force who are employed in the provincial public sector has never been this high.

Those 53,780 comprise 21% of the entire labour force and, once again, that’s the highest this percentage has been in the three decades that Statistics Canada has been measuring public sector employment.

And they make up about 10% of the entire population of the province.

That’s a pretty sharp contrast to the talk in 2004.  As CBC reported, Danny Williams’ first budget forecast a cut of 4,000 public service positions.  By 2005, that planned cut disappeared. The planned cuts have evidently been replaced with a pretty hefty hiring plan.

Now if the private sector had grown at a similar or greater pace, there wouldn’t be so cause for concern.  As the job numbers show, though, the proportion of the labour force employed in the public sector has grown to an amazing level. in some regions of the province – like, say, Grand Falls-Windsor -  the provincial public service is the major employer.

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Economic recovery – not exactly as illustrated, part two

cbc.ca/nl is reporting an economic miracle in Grand Falls-Windsor.

That’s the town where the major private sector employer closed its doors and where the provincial government expropriated the mill and hydroelectric assets.

When AbitibiBowater stopped production at the mill in early 2009 there were concerns the town's economy would tank, but that hasn't happened.

This time last year, construction was started on 16 houses in Grand Falls-Windsor, but by this June, work had begun on 60 new homes in the town.

There’s even a comment in the electronic version of the story, the one that aired on the supper hour news, to the effect that uncertainty about the mill kept a lid on development.  Now that things are resolved, as it were, then people are now spending freely.

Well, that’s exactly the same sort of story the Telegram carried back in February;  but then, as now, the story looks more like a contrived bit of nonsense rather than a factual appraisal.

Take for example, the thing about housing and a supposed dampening effect before the mill close din early 2009.

As the Telly reported in February,  there were 118 housing starts in Grand Falls-Windsor in 2008, but only 50 in all of 2009.  You can get links to the Telly story and other details in the Bond Papers post from February.

Based on that, the current number of housing starts in 2010 is only 20% above the 2009 level. And even if the housing starts continued at the same pace and there were another 60 houses built in the second half of the year, that would only match the last year the mill operated.

That wouldn’t be too bad, if it turns out to be correct.  But it sure as heck is a far cry from the idea that people are thinking differently now that the fate of the mill is known.

The potential cause for the resurgence  - such as it is -  can be found in the sources of cash identified in the CBC story:

The town's hospital — the Central Newfoundland Regional Health Centre — is the community's largest employer. It serves people from dozens of communities in central Newfoundland who spend money in Grand Falls-Windsor when they come for health care.

You can add to that a bunch of other government offices moved into to the town under Brian Tobin’s administration and more recently by the Williams’ one.  In other words, the town is now dependent on government spending for its major economic activity. 

And what isn’t coming from government is coming from migrant labour.  That would be former mill workers who are commuting to places like Alberta.

And lastly there’s another source of growth:  retirees flocking home after a lifetime spent working on the mainland.  Nice as that is, those retirees only add to the burden of an economy where there are fewer and fewer people earning a wage compared to those in the so-called dependent portion of the population.

If you look at it, what you see in Grand Falls-Windsor is not the picture of some sort of miracle but rather of the increasingly fragile nature of the Newfoundland and Labrador economy. No amount of spin from a local car salesman can cover over the very real problems that fragility brings for a beautiful community and for the province as a whole.

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Audio Update:  CBC Central Morning Show.  Look at around 6:54 for the start.  The intro to one section repeats the “housing boom” – complete with the 16 to 59 numbers -  evidently because someone forgot to do a simple check of the facts.

When the quota of good news meets a failure to perform

The provincial government’s business department issued a news release today crowing about an estimated increase of the province’s population by a mere 96 people.

To see the business department’s stunning record of success to date, check out the list of news releases for 2010 or read about the fragile economy.

What will they say when the recovery sets in and outmigration resumes once more?

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The Fragile Economy confirmed

BMO Capital Markets lays out the scope of the problem:

Newfoundland & Labrador [sic] saw a sharp 10.2% real GDP contraction in 2009, the worst performance in Canada. However, improvement in the mining sector and a reversal of some temporary factors will drive 4% growth in 2010 and solid 2.8% growth in 2011.

Problem? sez you, wiping the purple freshie from your lips. 

Growth returns. 

Here’s the problem:

However, the biggest economic driver in the province in the next two years will be construction activity. Government infrastructure spending will total about $1 bln in FY2010/11, helping boost total
capital spending an expected 23% in 2010. Provincial government infrastructure spending will amount to more than $5 bln over the next several years, keeping the economic fuel burning into 2011. At more than 3% of GDP, the Province’s infrastructure program is among
the largest in Canada relative to the size of the economy.

It is definitely not good when the public sector is driving the economy to such a degree.

And as for all the rosiness in BMO’s outlook. 

Well, let’s just say they obviously haven’t done any detailed analysis of the local economy especially if they think the recent population growth is driven by anything other than migrant labourers returning home from other parts of the country.

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$8 million government loan to Kodiak under review

The provincial government is reviewing an $8.0 million interest-free loan made two years ago to Kodiak, according to the Telegram.

The cash was supposed to cover the cost of consolidating the company’s Canadian operations at Harbour Grace. As a result, and according to the official government news release, the work force of 170 at the boot plant in Newfoundland was supposed to increase by another 75.

Last week, the company slashed the Harbour Grace operation to 100, blaming a depressed marketplace.

In the government hand-out photo, from left to right, Harbour Grace MHA Jerome Kennedy, Premier Danny Williams, then-business minister Paul Oram and then-innovation minister Trevor Taylor try on some Terra boots at the cash hand-out ceremony in September 2008.

The loan to Kodiak represents more than half the cash the Williams administration has managed to hand out to business since it announced its cash give-away programs in 2007.

Out of $75 million in total budgeted for the business attraction fund since 2007, only $14 million has actually been announced. In the first year, the government spent not so much as a penny of the $30 million initially budgeted. As the Telegram’s Rob Antle noted:

Other pots of cash set aside by the department to generate economic activity in the province have had similarly little take-up.

A "special initiatives" fund has doled out just $4 million of a budgeted $19.5 million over the past three years.

The department has budgeted an additional $7.75 million for special initiatives this year.

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Related – The Fragile Economy series:

• Staying the course
• Reductio ad argentum
• …and two steps back

Stat Porn: April’s Hits

The top 10 Bond posts for April [with links fixed]  as determined by the statporn machines at  feedburner.com:

1. Colbert doesn’t RATE (Municipal politics)
2. Rosy with a chance of goofballs (Economic forecasting)
3. Epic Fail of the Week:  prov gov loses to Abitibi…again (The Fubar File)
4. Crisis at Tammany (Municipal Politics)
5. Western Star raises issue of Danny Williams resignation (Provincial Politics)
6. The Abitibi Expropriation:  TARFU (The Fubar File)
7. Dunderdale on Abitibi/Fortis/ENEL Expropriation:  Oops! (The Fubar File) 
8. The Fragile Economy…two steps back (Economic policy)
9. Just shoot me (humour)
10. Labour Force and Employment, March 2007-March 2010  (Economic analysis)

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