Monday, 25 January 2016

"PERFECT STORM" NOT SOLVED BY INDECISION

There’s no joy to be found in poking fun at the new Liberal Government’s dithering over the province’s fiscal crisis. See Budget Consultations: Wait for the Colouring Books.

There is only worry that they are not up to the challenge, or don’t fully understand it.

That we are in the midst of an ill-timed and poorly conceived public relations/consultation campaign is particularly troubling, and not just because weighty decisions are delayed.

The idea of asking people to participate in an exercise, in the first place, without offering them the tools (and I don’t mean colouring books) perquisite to a meaningful discussion of ideas to deal with the problem, is inconsistent with a legitimate claim to and desire for public engagement.

The perilous state of our finances should have been met with a Stage I, the "no brainer" list of decisions; crisis needs an immediate response.

A full analysis ought to have accompanied a consultation process later, one held when the government had its footing. It ought to have included an enumeration of some of the options reflecting government’s own thinking.

The short financial preface to the three questions put to the public, on the government’s web site, is at best simplistic and incomplete. The questions are not accompanied by either a full or accurate appraisal of our financial position. They lack proper context, and besides, early indecision robs the issue of urgency.

In addition to a Stage I and Stage II approach, a discussion of the Muskrat Falls project, in a crisis “context”, is essential.

And, no one should think that Municipal Budgets are disconnected from the crisis, though not a view shared by the leadership of the City of St. John’s.

These are issues which will preoccupy this Blog in the coming days.

My intention, however, is not to re-analyse how we have arrived at this grim state (JM has done some excellent work on this subject and on the broader financial issues, too). I want to focus on the immediate crisis and on a process for dealing with it.

Beyond the discussion around how the measures are best taken, a larger conversation is warranted, one that reflects the huge demographic problems we face and with sparce populations and more remote communities in the province. But when public engagement is little more than a dart game as a means of finding solutions, there is a greater likelihood that fundamental change will be imposed from "outside" rather than arrived at by intelligent discussion conducted in our own bailiwick.  

An important concern is that, like the new Ball Administration, the public does not understand the full measure of the fiscal crisis. People seem to be aware the government has a big financial problem; but, perhaps like Ball and co., they are unclear about the magnitude.

The eras of Brian Peckford, Clyde Wells, Brian Tobin, and the early years of Danny Williams recorded tough budgetary times. They revolved around economic slowdowns and, in the case of Wells, the cod moratorium.

The low end of an economic cycle is notorious for industrial decline and lower government revenues. Public sector lay-offs, programs cuts, and increased taxation, are the common response. When the economy picks up, the fiscal brakes are removed, spending is increased, programs are expanded, and new ones proposed; the public service is allowed to swell, again.

Those earlier times in NL surely represented challenges, especially for the people affected by retrenchment. Except for the cod moratorium, which justified and was met with a significant response from the Government of Canada, the others weren’t crises. They could be dealt with by belt-tightening.

Concern over the Province’s fiscal future dissipated in 2007, as oil prices shot up and Brian Peckford’s Atlantic Accord showered on the public treasury a gush of offshore royalties.
Notions of wealth, bolstered by politically driven hyperbole, prohibited any consideration that so recent a past could ever be revisited.

The risk, therefore, is that now, people see only a “problem”, as in earlier times, and not a full blown “crises”.

And, why would they think otherwise?

Only in the past few days has the Finance Minister reluctantly acknowledged that “everything is on the table”, that Departments have been asked to consider cuts, over three years, amounting to 30% of their budgets.

So, why would people not see our circumstance as requiring anything more than a few nips and tucks?

But a far greater concern is that the Ball Government, naïve and trying to hold on to ill-considered campaign promises, will use any opportunity, like the fifteen month public engagement process, to ‘kicked the can down the road’. The fear is they will hold onto indecision, and wait for a lucky horseshoe (as Dr. Wade Locke counsels) in the hope critical decisions will become unnecessary.

$2 billion deficit on Current Account, $1.4 billion more budgeted for the Capital (infrastructure) Account, undetermined cost overruns on the Muskrat Falls project, combined with declining revenues, and declining prospects for major new projects, all suggest a situation with gravitas.

The “perfect storm” threatens the solvency of the Province. It threatens our very viability as a society.

Yes, people will get hurt as government eventually attempts to resolve this nightmare; many more will be harmed the longer the Ball Administration delays.

But crisis isn’t resolved by indecision.

1 comment:

  1. Laying off middle-class families, who will then move out of province will further erode our tax base and make our province even older. We are already the oldest province in Canada and health care costs are higher as a result. Out migration due to massive layoffs would be very bad.

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