Last week the Minister of Finance confirmed what everyone knew: lower oil prices are a wrecking ball for the 2014-15 provincial budget. While no one forecast $60 Brent crude, equally we should not be surprised. Events such as this have long been a feature of resource based economies.
When we say commodity demand and prices are ‘cyclical’ that doesn’t mean they go up and then go up further. Prices fall, too, often hard and precipitously. Anyone who has invested in the stock market has felt the euphoria of conquest. But nothing always stays the same. When the market turns, the whiplash of price swings guarantees that those having danced with, and perhaps married risk, get stung. The markets do not discriminate between the well-intentioned, the prudent and the foolish.
The word “prudent” made its way into the Finance Minister’s budget update. Said Ross Wiseman, “In the shorter term…we have to be prudent and adjust our oil price forecast for the remainder of this fiscal year.” The word has no meaning for this Minister; short or long term.
This is a government that has spent the cupboard bare for several years and ran budget deficits consecutively for three of them, knowing the risks of such irresponsible behaviour. Expenses, according to the Auditor General, have grown by $2.9 billion or 58% since 2005; the figure has risen. A forecast deficit of $537.9 million, in 2014-15, is now estimated at a whopping $916.1 million.
Per capita expenses are 45% higher than the average of all other provinces. By March 31, 2016 public debt will exceed $10 billion not counting the additional $3.3 billion equity in excess of the $5 billion financing for Muskrat Falls or the amounts required for cost-overruns. Where do you think that money is coming from?
There is also the 117% increase in unfunded pension liability since 2007-08, and the 282% increase in employee future benefits expense which occurred from 2008-2014; exhibiting a fundamental loss of management control by senior public servants and the politicians.
Where is the prudence of which the Finance Minister speaks?
Then there are the advisors, the boosters and the plain self-interested.
Dr. Wade Locke told the CBC recently it is "important government doesn't overreact" to the Budget debacle. He assures us “it won’t get much worse” and that “we’re pretty close to the bottom…now…”
Locke can call a ‘bottom’ to the markets. Why is he unable to call a ‘top’?
He seems one who has tired of the discipline of economic analysis, having stepped into the business of politics and prophecy, where the fees are far more generous. He is content to run interference for the government with the lazy scribes and the public.
That is the rub. The CBC knows Dr. Locke has been a long-time paid consultant to government and to Nalcor. Reporters choose, anyway, to seek out his views ostensibly because he is attached to Memorial University and the claim to professionalism and independence his position affords. Yet, he is as tied to the Finance Ministry and Nalcor as anyone in the government’s PR machine.
Then there is the St. John’s Board of Trade’s Sharon Horan. “We have been vocal about the need for government to spend less…” She even has the audacity to opine “…what is astonishing to me, when groups…talk about the need to curtail spending, is how polarized people are in their views.” Ms. Horan, and her Board, have been “boosters” for this government and every bit as ardent as Wade Locke. They whisper “tut, tut” over deficit financing while the Board brooks no dissent (just ask David Vardy) within earshot of its members; it warns against tax increases for business, but it is content to flag-wave for Nalcor as it becomes a multi-billion dollar state-owned enterprise (SOE); one overseen by inexperienced bureaucrats.
The NL Employers’ Council suffers a similar problem of cognitive dissonance (holding two opposing views at the same time). While, to its credit it has been slightly more forceful than the Board of Trade, it speaks less with a desire for sensible public policy than as a self-interested advocate for lower taxes and as a foil to labour. It, too, is content to be demure as the province readies itself for more self-inflicted dependency and refuses to rebuke those whose SOE ambitions threaten to injure the Province on a long-term basis.
Business likes to see itself as having an ideology fundamentally different than that of unions. What nonsense! Business and unionism in NL is all about dividing the spoils. The unions now want government to spend its way out of overspending. They will hear nothing of repairs to the deficit or sensible cutbacks to a bloated public service. Gibberish is their recipe for protecting workers’ fundamental interests, long-term. (Lana Payne is not the only culprit in this arena; Mary Shortall's comments on the December 20th "On-Point" proves she is in lock-step with her 'sister')
Business organizations, on the other hand, comprise a membership that ostensibly subscribes to capitalism, to competitive markets, and who feign opposition to over-bearing government. Capital risk, associated with state-owned enterprises, ought to be understood by them.
Yet, in the face of one of the most unnecessary, risk-laden acts of inspired political aggrandizement ever, the business-types can’t compose themselves; such is the allure, not of the assurance, but the mere prospect of a few scraps from Nalcor’s table.
With few exceptions, the common sense that guided their businesses through some very tough years has dissipated in a frenzy of instant gratification. They watch, speechlessly, as South Korea builds the entire “top-sides” for the Hebron project and as Husky delays the GBS for West White Rose. No one thought to delay Muskrat at the beginning , even if Danny dumbly insisted his legacy must manifest; nor did they attempt to stage the “boom”, making it last, in case the work might be needed here. There is only the ‘now’. Our business types don't even present as good Calvinists; they have only an ascription to greed. Ours is a Province of the ‘compradore’, of intermediaries, and of manufacturers’ agents, elbowing each other at the trough.
Business and unions are joined. They offer no leadership. They have no ideology, except “short-termism” and “self-service”.
“Be the Boom” ran the cheerleading exhortation of the St. John’s Board of Trade just twelve month ago. Now, the chant contains the echo of baloney in recoil.
“I believe in Newfoundland and Labrador” is the other exhortation that attempts to raise puffery to the level of serious commerce. The refrain ought to invoke an inspired attachment to culture and to basic values. Instead, it is an advertisement for ass-kissing conformity.
There is much uncertainty ahead; much of it due to an unwillingness to employ our collective common sense or condemn poor governance, regardless of the cost. As a society we have to do better. We have serious problems to fix.
We have listened to the government, its ‘advisors’, ‘boosters’ and ‘shills’. Fortunately, we can turn them off, and we should.
Right now is a time for family and friends.