Monday, 2 May 2016

BUDGET PROTESTS: CHECK THE BULL COMING FROM THE BULLHORNS

People are understandably outraged over the recent provincial Budget. Fiscal mismanagement and the debacle that is Muskrat Falls has kicked them where it really hurts; in their pocket books.

The Government of Dwight Ball is seeing the face of public rebuke. Public protests, angry calls to Open-Line Shows, and disenchantment exhibited on social media, depict government’s failure to meet public expectations. They include those which the Liberal Party created during the general election campaign, and an ill-advised Budget that hurts low incomers disproportionately, and the middle class, as it ignores bureaucratic bloat generated by a decade of over spending. 

Ball has not performed the job for which governments are elected. That is he has failed to define the problem, elicit public support, and make the tough decisions to resolve it. 

Still, the ubiquitous anti-Budget signs make no reference to a fiscal crisis. 

That is unfortunate because they mirror the Government’s own inability to articulate the sheer magnitude of our fiscal challenge. We can chant: “SAY NO TO AUSTERITY” as it pleases us. But, realistically, we waived even the mere possibility of avoiding painful change when so many of us cheered Tory fiscal madness. 

At the outset, the very fact the protests are happening is a source of relief. Protest is an integral part of communications between the Government and the electorate. I feared we had lost it to Facebook and Twitter; that our decade of contentment had robbed us of the ability to physically participate in a call to action. I still wonder if it has legs. It would be awful to suffer economically, and to be passive, too. 

There is one other point that deserves early mention.  People are angry the Liberals lied about their campaign promises. Didn’t just about everyone lie, the Liberals, the Tories, and the NDP? Didn’t the public willingly participate, too? Those, including Dwight Ball, who say they did not realize our finances were so desperate, may need reading instruction of a kind removal of the HST, on books, will not help.

The Government wants to reduce a bloated public service by attrition. It wants to keep individuals on the public payroll, even if they are performing superfluous functions or if poor management has five people performing the work of four. That inherently doubtful approach might have been possible with easy money from oil, or absent Muskrat Falls. But the additional debt the province must raise, whether the project proceeds or not, threatens to make the total debt unmanageable.

So, we might ask: when are we going to deal with the cause of the crisis at its core? 

The Government confuses the message of crisis by funding things such as full day kindergarten and more money for design of an impossibly expensive Corner Brook hospital.

The people behind the bullhorns won’t rebuke these initiatives. They would have you believe we can continue to have it all; that we can cut the levy, keep every person on the public payroll employed, and increase service levels, too. That is not just disingenuous; it is untrue. One of the few things on I agree with Pierre Elliott Trudeau is that people should stop expecting government to be Santa Claus.

This ‘holier than thou’ stuff doesn’t play well, anyway, when we have been unable to balance the books since 2012-13 and have recorded some massive $2 billion deficits during that time. The truth is that the cuts haven't even begun; they have merely been deferred.

Still, people are justifiably angry. What is there not to understand about cumulative new taxation of $6,000 or more annually for a two-income family?

Most everyone, except the Government, gets that. 

But, equally, what is it we don’t understand about the Minister of Finance having raised $860 million from all the new taxes combined, and still came up with a $1.8 billion operating deficit, plus borrowing for infrastructure, and $1.3 billion for Nalcor?

The arithmetic is not that complicated even if the process of paring the problem is.

NL already has the highest per capita debt in Canada and runs far ahead of any rival province once Nalcor debt is added.  The failure of the Budget to deal with the problem only means the levy may become permanent.

The public can be forgiven for not understanding the intricacies of Muskrat Falls, especially the financial risk associated with it and Nalcor's offshore ventures. But the problem is theirs anyway; no protest, however large or frequent, will make it go away.

That is why I suggest the protests needs focus. The appropriately named bullhorns will decry the levy, but they don’t tell pensioners and those on fixed incomes they are paying for bloat, like the Office of Public Engagement, whose sole function is to “spin” the Government line. 

Will the bullhorns choose bloat over the levy? Will they choose bloat over the HST on books? Or more profoundly, will they choose bloat over the closure of a hospital? That is coming, too. 

We can state the problem a different way, if you prefer.

As the Exhibit (below) describes, this province’s spending is higher per capita by 20-36% over other provinces.


NL Budget Speech 2016


NL has had five operating deficits in a row; six in 12 years.. Budget balance is forecast to continue until 2021-22; and this expectation is predicated on the price of oil.

Is this an issue of discipline or a problem of entitlement?

The Finance Minister crows about having achieved operational savings at Nalcor of $6.7 million. But neither she nor anyone else talks about the private corporations that protect members of the Muskrat Falls project management team who earn salaries far in excess of CEO Stan Marshall, and keep them private.

The protests don't ask if we should disband Nalcor and save taxpayers from the multiplicity of ways it is a sinkhole, not just Muskrat Falls. 

When does public policy get discussed in the context of choices and of risk to a small population? 

Are the protest organizers afraid or incapable of addressing major public policy issues that have been exposed, which threaten our economy and society? 

In inflation adjusted dollars, according statistics provided by JM in the Budget Colloquy Series entitled "A Decade of Squandered Opportunity", the amount spent by the government, on salaries, increased from $1.7 billion in 1997 to $3.8 billion in 2013. Based upon last year’s Budget, in real dollars (after inflation), the government spent twice as much on salaries as they did in 1996. 


Source: A Decade of Squandered Opportunity by JM

JM also noted that in the period 2007 to 2014 (oil boom) an amount of $8.5 billion above the historical norm was spent on salaries.Subsequent Budgets have only made the problem worse. Now fifty cents of every dollar is spent on salaries and benefits.

Reversing such an unaffordable human resources capacity is is akin to putting the Genie back in the bottle. It will strain the leadership capacity of Government. It will cause untold pain on the affected individuals and their families.We know that. Sometimes being a leader sucks. But past mistakes can't be permitted to beggar a whole population.

The protests seek an easy fix; except in the absence of a quick rebound in the price of oil, there is none. There are only better, more effective, and longer lasting options, than those proposed by the Finance Minister.

Unless we are prepared to consider public service layoffs and service cuts through a proper process of program review, and possibly wage roll backs, too, the new levy will be only one of the fiscal tools that will inhabit our lives for a very long time.

This is a Government that brought little to the table despite having been given an enormous mandate. It exhibits neither courage nor the ability to connect with a public confused by the bullhorns and by the Government’s own mixed messages.

The public needs to draw a line in the sand; they must demand fiscal decisions that reflect our priorities and can afford. 

That is why if those policy choices aren’t part of this protest movement, the protesters may as well put down the placards.

They’ll need those hands to greet the bankers and the guys from Ottawa who will make the tough decisions for us.   

21 comments:

  1. There is only one way for government to tackle this crisis. The number 1 expenditure (Salaries) must be rolled back. This includes 7% reduction in workforce, and a 7% reduction in salary (or some similar combination). There is no choice. The Salary should be implemented over the next several years (-2%, -2%, -2%). The workforce reduction should also occur over the next 3 years.

    As unpopular as this would prove to be, it has to be done.

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  2. Agreed. Along with that the levy has to go along with the gas tax and be replaced with income tax hikes to match other provinces. This distributes the raising of funds across all income groups more fairly while still raising monies.

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  3. It is not only that your civil service is bloated and needs a reduction. Your civil servants are completely whipped and are subservient to their political masters.

    The raft of government employees who gave testimony at the MF JRP had their presentations vetted by NL Justice (in some cases there were clumsy changes to the electronic presentation). The Justice lawyer presided like Big Brother over the overwhelmed bureaucrats who were not free to give their professional opinions. One testified on the record that if he testified about the significant impacts on caribou he would lose his job. Why pay any bureaucrat when they are not free to do their job?

    No one seems willing to attack the real problem. MF continues in a cloak of secrecy, with neither the contracts or engineering available for scrutiny. After another 10 billion is wasted dealing with the fiscal implications and engineering failures of the spur it will be too late. It will leave NL in a 15 billion dollar hole in the treasury and possibly no hydro power. It will be too late then to air the Nalcor dirty laundry.

    The contracts and engineering for MF must be made public now before NL goes of the cliff financially......and sadly, culturally as well.

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    1. Mr. Marcocchio, not surprisingly, has hit the nail on the head. If the secrecy continues we're no better off in the end, regardless of what's being done with spending or taxation or any other detail. We've bought a pig in a poke, and we don't know whether it's alive or dead.

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  4. Nice to hear a voice of reason amid the cacophony.

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  5. It is worth noting that if Public Service Salaries had grown with inflation there would be about 1.2 Billion spent less each year. Combined with about 250 million less in debt servicing, we would be running a more respectable 300 million deficit. The public service is too large, and paid too well.

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    1. The workers, ie. clerks are getting very poor wages but Communications Directors are getting over 100K. Way to high. If wages are rolled back, baseline the low incomers and red circle them. It is middle and upper management getting too much and they should have not gotten the across the board increases of 30% during the Williams Administration.

      Wayne R. Bennett
      Howley

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    2. Absolutely correct. For anyone paying attention the economy in the Northeast Avalon was signicantly driven by the expansion of the public sector. The numbers were there for anyone to see...in fact I paid Stats Canada back in 2012 for the numbers and was left speechless by the staggering increase; an increase of some 10,000 from the period 2006 to 2011. Factor in the large pay increases plus benefits it's no wonder there was nar a disparing word of discontent from the public sector unions.

      I've said it before the St. John's Board of Trade was complicit by giving former Premier Williams standing ovations and the public by putting faith in this demagogue.

      We all wear this one and to cry foul only now shows how little the public is really engaged. What a shame.

      Keith

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  6. Des, while you make many valid points you also miss the biggest mark. I am one of those behind the bullhorns. I was there for our children and to speak out about cuts to their future such as 54 closing libraries. All fiscal challenges aside Mr. Sullivan, I thought that such action was well worth my time and not beneath me because I have a little more knowledge than many people when it come to our actual situation. I don't know if you ever read my blog but I have written many times about our public sector bloat and the need to get it under control. I read about politics and spend my free hours going over fiscal information. I know why we are where we are. But the common person does not have the time/want to do those things. They want to live life and not have to worry about what the crowd at Confed are doing. If you had come and walked around the crowd and talked to people you would see that they were not there just because of the budget. They were there because they were fed up. Fed up with lies, fed up with arrogance, and fed up with revolving door party politics in this province. They were not the union rank and file. They were regular people. There were hundreds of intelligent people there talking about the need for cuts. They know we need them. But they want them done right and they want a government that tells the truth when they are going to cut. Many of these people were foolish enough to believe that Dwight could follow through on the promises and they are some of the maddest people of all. What they are protesting against is not austerity, despite the signs. it is our arrogant autocracy. Maybe you are too far on the other side from all your years in politics, but for me the fact that people are mad enough to march in numbers of Confed is positive, even if they are waving austerity signs about a budget that increased spending by 12%. The public has been silent for far too long and this movement is about so much more than one bologna budget. This is not about coming together with any future goal, although I hope it leads to that. It is about real people getting out to show the government they are pissed and they have had enough. A true grassroots movement of the people does not happen overnight and many people protest for many different reasons. You covered none of that in this post. All you did was down the people who have the guts to stand up for themselves and their children. I have to say it is the first time I have ever been disappointed by an Uncle Gnarley piece. You really missed the point on this one...

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  7. Ans what about those of use who did NOT cheer the fiscal madness? Those who spoke out from the first mention of a huge hydro project in Labrador that it was merely a pissing contest designed to aggrandize the then premier -- just one more way in which he appeared to be gutting the economic well-being of Newfoundland and Labrador in order to build a "legacy". I'm not some johnny-come-lately to the fold, I along with a handful of others have been protesting from the start that we were in danger of becoming a petro-state with far too much reliance on volatile oil prices while at the same time snubbing that industry by appearing to embrace "green" energy (which hydro actually isn't) at the same time. It was a confused position, and it was easy to see for one who wasn't dazzled by the supposed acumen of those in office that it was the road to financial ruin. There is absolutely no joy in having been proved right.

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  8. There is no easy way to reverse government bloat and attrition won't do it. As I look around from within the government department I work for, I see next to nothing of value to the public. The whole department could be eliminated and nobody except those who were laid off would notice. In order to clean up a department, you would have to start from scratch and identify the services to be provided and verify that citizens are willing to fund them. Many services and products sound nice when there is no price attached to them, but would be absolutely repulsive if there was a price tag on them. The second step would be to hire competent, non sycophantic management who could implement these services. The organization structure under these new directors would likely bear no resemblance to the current organization chart. Management would also need to be able to do their job without political interference or at least have permission to raise public objections.

    I believe that if we were to focus on areas of value, hired competent workers for every position, eliminated most professional service outsourcing and tracked key performance indicators like you would in a well run business of any kind - that payroll costs could be cut in half or more.

    In the case of the department I work for, the few services of value should be performed by other departments because they don't belong here. The rest of the services should be eliminated. Staff could be cut by 90%.

    I do not believe that wholesale changes to the status quo are possible without a full scale revolt.

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    1. Some depts were created just to give an MHA a cabinet posts and all the perks that go with it.

      I like what John Savage did when he became the Liberal Premier of NS. He want to change the long practiced patronage system. Savage bought in an independent consultant and reviewed every dept and agency of the NS govt. Savage accepted the consultants recommendations without reservation and enacted them. His own party turned on him for ending the gravy train and he only last one term in office not due to the opposition but his own party.

      Wayne R. Bennett
      Howley

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  9. The Sir Robert Bond Papers blog has raised an excellent point today, that being the govt has saved $1M by closing libraires in outports yet has chosen to spend $750k on a feasability study of a tunnel from Labrador to the island. We all know that neither shutting libraries nor cancelling feasability studies will save us from the fiscal cliff but I can't help but think that this simple example highlights what is really going on. We are witnessing a de facto crime against the people of Nfld: the govt. is stealing from the poor to pay the rich. Sounds extreme but we are in a rapidly worsening situation that calls for extreme language. Not only does the govt. need to stop MF it also needs to stop the constant paying of consultants, lawyers, engineers, and architects, and a multitude of other "professional services" that we cannot afford. The fact is that we cannot afford to build a new hospital in Corner Brook, a new Waterford, a new court building, a new jail, and a new hydro electric facility, and further, we cannot afford to continue to fund the study fo these things regardless of how much we "need" them. It simply serves no practical purpose and further impoverishes the majority of the people of Nfld. For those readers who think we are talkng peanuts, it is not. We are tlaking tens if not hundreds of millions of dollars being spent, untendered, on sevices we cannot afford and do not need in the near-term. I think the media should be all over this, get the ATIP forms out and show the people what is going on. Taxes are being raised to pay "professionals" not civil servants. If anyone thinks they can get us back into the black by laying off civil servants and rolling back public sector wages, show us the math. In 1933 we lost our fragile democracy becuase we could not stop the spending by politicians "on our behalf". Will we have to go that far again? Close a library in rural Nfld and pay $350 and hour for a lawyer. How can this end well?

    John D Pippy

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  10. The level of self-deception, delusion and wilful blindness in NL is absolutely staggering.

    There has been ample warning, for more than a decade, that this crisis was coming. It came from the Auditor-General, it came from the "known critics" in the blogosphere and twitterland, it came from a handful of commentators in the papers and on the open line shows.

    And what did the naysayers get in return? A steady rain of shit on their heads from the likes of Danny Williams, his cronies, his hangers-on, and his ample public fan club.

    How ANY of these people can look themselves in the mirror is beyond me.

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    1. Psychopathy may account for some of that.

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  11. The Guardian (British newspaper)yesterday had a story about a South American country (Veniswela ,..about to shut down its electricity supply. 70 percent of their power is from hydro. The water level is so low as soon needing to shut it down completely. Civil servants is down to a 2 day work week, school is closed on fridays,and they moved their clocks half an hour to conserve electricity. The country is almost broke. 95 percent of their foreign income was from oil exports. They blame El Nino for low rainfall, but apparently the rainfall is only marginally low. Power sales are down dramatically, despite rainfall not being that low. Some blame too much new energy used including air conditioning. Some say the water reservour is not managed properly.
    It appears to me that if the water level is feeding the turbines is very low (referred to as the `head` ), the pressure is low and you can actually drain the system quicker but produce less power.Perhaps some hydro engineer can comment on that point.
    Now they are in their peak power demand season, like our winter heating demand problem, but for the opposite reason. That country is being ruined. There is no electricity for industry... but the rich need their their air conditioning. To me it seems the same with the big houses here adding to our winter demand problem, to be solved with the 10 billion Muskrat Falls (yet 85 percent of our energy here is island hydro). And the rich here needs their heated garages and using 10 times the power at peak demand as an average house. We are not as bad off yet as that country, but we are headed there. Came across one blogger there who has been writing on their problems for 14 years, and one critic says the blogs are vanity works, as most people are not tuned in. It reminded me of Des, Ed Hollett, Maurice Adams etc, Others argue that the blogs do make some difference. Some say only by demonstrations in the street is what can make a difference. I follow our bloggers here,but too few do. But it does seem few people really know the depth of our problems.
    Winston Adam

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  12. Further to my comment, the discussion on the electricity problems in Venezuela, that blogger referred to how Voltaire managed to cause the revolution in France, and I wondered how come Voltaire, without internet, could succeed yet our bloggers here have failed.
    Not knowing much about Voltaire, I discovered that in his lifetime he had written 20,000 letters (Maurice has written 50 he says as to Muskrat Falls). Voltaire had written 2000 books and phamplets. Voltaire aimed to enlighten people, and on this Des, Ed Hollett, and Maurice have similar aims. So why have they failed,(actually the process to enlighten the masses seems to take time).
    And I discover the main influence on the masses(which can work quickly) is rhetoric (the use of language),which is the art of politicians. That rhetorical language can deceive and also effect and change culture (take Donald Trump and Cruz).
    On the local level we have the rhetoric of Danny Williams: Muskrat Falls is still a great investment he says(as the Nova Scotia audience applauses, and who could blame), and then explains to them that asshole in not the proper Nfld way to pronounce vulgar word. Nflders say arsehole (as the audience laughs all the more).
    Now that is the use of rhetoric, is it not. How can our local bloggers here compete with that. He gets CBC coverage for this, which is probably part of the Nfld dictionary from the 1970s.
    Now I have heard Des on VOCM Open line, and he is a good speaker in that format, but lacked the colourful touch of Danny. Ed Hollett, I think his analysis is great (but Des is a better writer, and at times witty), Maurice has a lot of technical information and charts and links to everything Muskrat.
    Now Martin (the good one, Cabot),the North Spur guy, he has passion. He seemed ready to bite the other Martin`s (the bad one, Ed) head off at one of the Nalcor annual meetings.And has written a book on Muskrat Madness.
    But who among us naysayers has mastered rhetoric. Where is the Obama for Nfld that can save our economy.
    Voltaire died before the French Revolution. And I beleive he would not have approved of the revolutionary methods.
    As to the poor, the Queen said let them eat cake. And that did not go over good.
    Did I hear our Finance Minister say we need to prepare for our supplementary budget by September. Neither Ball nor Bennett have great rhetorical skills, but a little seems to go a long way, or how else could they be where they are. They were all believers in the Nalcor spin on world class expertise, now debunked as imprudence leading to power blackouts, and now looking to Fortis Stan to somehow save us.
    Does our culture need changing I wonder. Can we speed up the enlightenment process.
    In two days Fortis plans to borrow 16 billion to take over its latest target (10 billion plus 6 billion of debts of that company) Is it a bridge too far. They are paying more than 30 percent premium of the market price. There seems to be substantial risks. This is not big news in the Telegram, with Fortis headquartered here!


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    1. Outstanding! I never expected Voltaire and the French Revolution to come up in this discussion but am glad it has. What will it take for us to think about violent change? Hunger would be a big part of it, and plenty of rhetoric to go with it. Judging by my own waistline and what I see around me we are in the early days yet. However, with each passing fiscal year our standard of living will decrease and we may start to hear rumblings of riot and discontent aling with empty bellies. I hope that much like 1932-33 we can avoid mass violence but I am not so sure Canada has any real appetite for creating another large and very dependent territory. Egalite, fraternit, liberte!

      John

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  13. Ed Hollett today says the government could have raised 172 million by increasing the electricity rate by 1 cent per kwh. I beleieve Nfld Power revenue is about 650 million per year. Increasing the rate by 1 cent, about 10 percent , would appear to be about 65 million extra revenue, not 172 million. Have I missed something.
    He also says that electricity demand management should be brought into affect. He suggests that offering off peak rates can be beneficial. Yes, but very little compared to demand reduction from efficient space heating and efficient hot water heating. What loads would Ed think can be deferred that can be cost effective. Has he read the report on the pilot study of delaying hot water tanks use. A $600,000.00 study says it is not cost effective ( which one can calculate the result in 15 minutes without wasting the 600,000.00. Perhaps Ed should have presented his ideas on what loads he would time shift, to the PUB. Usually Hollett gives good analysis. He is right on the need and benefit of demand management, but not so much on very minor off peak benefits of time shifting. For Nfld, Permanent winter peak reduction is needed and cost effective for space and hot water use rather than minor shifting time of use.

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  14. When Premier Ball says WE asked for this budget I wonder can he substantiate WHO the who is? I'd like to know ho asked for gas to go up? Who asked for a levy? Who? Those who asked for these extra taxes, and I have to think in the minority, got what they asked for. Yet, the masses asking to put a hold on MF and full-day kindergarten got ignored. Maybe Mr. ball is not listening to who put him in office. Maybe next time around, we'll all say who cares about what the Liberals will have to say.

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  15. The salary and expenditure plot from "JM" is very interesting. It is inflation adjusted, so if I read this correctly if wages had only increased with inflation we would be spending 2 Billion a year less right now. So can I concluded that if wages from 2000-2016 had only increased by inflation then we would currently be in a balanced budget situation?

    If we are spending 45% of our expenditures on salaries, that is where we need to tackle.

    What have we done in this province? Was Danny asleep at the wheel, or were these conscious well thought out decisions from 2006 to 2010 to increase salaries by so much?

    The media's, arts, and elite's love affair with Danny William's (Wangersky aside) has done this province significant harm.

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