Monday, 13 March 2017

BUDGET SANITY: IF NOT NOW, WHEN?

During the Budget Update in October 2016, the CBC quoted the Minister of Finance saying that "the seriousness of the fiscal situation remains and needs to be addressed". Bennett added that the government is still projecting a surplus for 2022-23.


The target assumes the eradication of a $1.58 billion deficit —  just on the current account.

The province is forecast to borrow $2.9 billion in the 2016-17 fiscal year alone. 

The figure may go higher when the $800 million settlement with Astaldi is accounted for.

Debt charges and other financial expenses are just under $1.0 billion this year and climbing fast  a matter to which I will return. Nalcor’s champagne taste is not a separate issue, as many pretend. Nor is the Capital Account.

Debt servicing and related expenditures  including deferred pension contributions  constitute the second largest expenditure of the government, following health care.  That is serious biz.


Last fall the Minister substituted the government’s promise of a “mini-budget” with blather. She should have invoked the challenge for which the Jewish religious leader Hillel is credited: “If not us, who? If not now, when?”

But such an invocation is the stuff of real leadership  requiring both spine and a plan. The Ball Liberals have shown neither. The best they can muster is a PR document called “The Way Forward”. Stripped to its essence, it exposes a government with not a clue as to where they should begin.


Even Dr. Wade Locke, Nalcor acolyte and long-time apostle of solving budget deficits with hope  especially the hope of high oil prices  described “The Way Forward” as backward. Locke told the Society of Professional Chartered Accountants on February 23, 2017:




The Minister of Finance took a pass on tough decisions in the first year of the government’s mandate. Back then the pubic's short memory  the perfect political escape hatch  could be counted on. But in this, the second year, with no fewer than four 'familiar' fiscal freight trains bearing down  the deficit, Muskrat, health care, demography, and one 'new' one in the form of shrimp and crab depletion  the Minister’s steadfast flat-footedness is an assurance of an ignominious legacy.

Bennett cannot claim that she is a Cassandra ignored by the Premier, the caucus, and the public. They didn’t disbelieve her warnings. She didn’t offer any. The Minister only gave the assurance that the problems are manageable.

Bennett is beholden to a weak Premier, one who told a reporter recently: "I wish we had had better information going into the election campaign last year"  what amounts to a head-butt to literacy. Someone should have told Ball that budgets, by law, are published. It seems that, as leader of the Opposition, he had not read one. 

As the government dithers, galloping debt service costs replace a program or service or ‘something’ that the public needs.

If the burden of a doubling of electricity rates are reduced, taxpayers will have to give up another ‘something’.

How many ‘somethings’ are people willing to forgo?

The public can’t have it both ways.

The banks are not people, they are institutions. They neither cry nor listen. The bondholders want to get paid.

If the government fails to make a serious dent in its expenditures in the forthcoming budget, we will head into the next election with a fiscal crisis far larger than the mess the Tories left behind.

The government’s plan for budget balance signals the start of year two, and six more fiscal years to deal with a $1.56 billion shortfall. On an equal basis, that’s an annual expenditure reduction of $260 million  assuming no decline occurs in revenues.

The problem is, even if those reductions are achieved  which is unlikely  they won't keep pace with the rise in the cost of debt services and deferred pension contributions. This concern is represented by the record of the past three years: 

Fiscal Year      Debt Service and Deferred Pension Contributions

2014-15                                   $476.5 million
2015-16                                   $721.1 million
2016-17                                   $998.9 million

In short, between 2014-15 to 2015-16 debt-related expenses increased by $244.6 million, and from last year to the current year by another $277.8 million. The forecast for fiscal year 2017-18 will be larger again as the debt climbs. 

In this context it seems silly to discuss the "Current Account" deficit without dealing with borrowing for the "Capital Account" and for Muskrat Falls. The Capital Account is laden with items that are essentially administrative and others that justify a relatively brief period of depreciation. Yet the debt for long disused assets is rolled over and over. 

In addition, how can we even talk about budget balance when the government acknowledges that the electricity rates required to service Muskrat debt are unsustainable? The implication is that a write-down of that project is necessary even before it is commissioned. Yet everyone 
 including the Auditor General  carries on a huge pretense over what constitutes "Net" vs. "Gross" Debtas if the difference between the two is self-financing.

In case you're only mostly bored, let's take a quick look at the overall debt picture.

The projected “Net Debt” to the end of the 2016-17 fiscal year is $14.6 billion  which does not account for the debt of Nalcor. The “Total Debt”, which includes the debt carried by Crown Corporations (chiefly Nalcor), can be closely approximated at $18.57 billion at the end of the 2016-17 fiscal year.   

How is government going to deal with all that debt? How can it be given a human face that the mere figure of $18.57 billion does not? 

I don't have that answer. I do know that the Government, the Tories, the NDP, and the public sector unions are not telling the truth. 

How much cost cutting is necessary this year? I suggest that, as a short-term objective, we should work back to the 2015-16 Debt Service cost level of $721 million AND insist on meeting current account balance within the period the Government proposes. An expenditure cut of between $350-400 million is necessary 
 just in this fiscal year.

It's seems nutty 
 but don't forget who the nuts really are.

Speaking of which, Muskrat threatens to undermine ANY plan of fiscal sanity we might attempt. An independent review of the project is essential, especially given that multiple engineers associated with the project now claim the cost is heading for $15 billion. 

Certainly, the job of cutting government spending is going to have to be taken on by the public  because Ball and Bennett won’t do it.

We can lament the human cost of cuts, and indeed we should. But when the government won’t act, the only alternative is for us to push them. If the cuts aren’t deep enough, the public will have to demand more.

If we think this idea is a tall order, we could remind ourselves of the fine words of the Jewish Rabbi: “If not us, who? If not now, when?” 


47 comments:

  1. Hi Des ... I enjoy your blog, but it seems like the province would be better served if people such as yourself offered some solutions as opposed to just complaining about the status quo.

    Respectfully,
    Mike

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    1. In case you missed it Mike this blog has provided research, analysis and a safe place for insiders to speak out in still a very feudal NL.

      Financial analysis of NL fiscal woes, largely ignored by the cozy and complicit mainstream media is well documented in this blog.

      Instead of wanting Des to also carry the red flag to Province House why don't you carry it high and lead the way?

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    2. I'm not saying that the information/analysis that Des provides is not useful, indeed it is invaluable. However, presenting the research and analysis in the context of solutions would better serve the province.

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    3. Mike,

      I believe Mr. Sullivan and many others have discussed solutions in general however ultimately it is up to the government to do the unpleasant. Premier Ball, Minister Bennett and caucus know what is to be done. Unfortunately neither has shown the leadership necessary to even discuss the perilous state of the provincial finances let lay out and implement a proper fiscal plan.

      That being said here are a few suggestions:

      1. Immediately start the process of reducing the public sector to the levels of at least 2004...perhaps even 1991.
      2. Implement a wage rollback of 3 to 5% with no wage increases for the next three years. If the public service walks out and goes on strike legislate essential services and eventually the agreement and back-to-work.
      3. Privatize all crown corporations. There are no crown jewels other than highly bureaucratic institutions that do not have any market discipline.
      4. Immediately start the process of opening the door to private health operators such as is offered in Quebec and other provinces.
      5. Negotiate with Quebec the sale of Muskrat Falls and possibly extend the Churchill Falls contract. We do not have any cards to play other than that.

      That's a few suggestions to start none of which are pleasant. If Ball and co. can't stomach it then they best get out of the way because I would suggest the alternative is much more severe.

      Keith

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    4. These are good suggestions Keith and are certainly worthy of discussion. Insomuch as Newfoundland has a spending problem (which your suggestions address), I think the long term solutions are as much about about finding new sources of private sector revenue. Newfoundland has relied far too long on Government bailouts and subsidies ... these are band aids and only address the short term symptoms. Real economic growth needs to come from the private sector, not Governments.

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    5. Mike: Thanks for reading the Blog. I usually refrain from injecting myself into individual comments. The usefulness of Blog is as much about commentary as it is about the analysis on which it is based. I want to say, however, that there is no magic to resolving the deficit/debt problem. There is no magic bullet. The best one is political leadership. When people find they are spending too much on household expenses, they cut back by eliminating those things least essential. If the problem is not fixed eventually they have to cut into the things they really would prefer to avoid. Yet, their financial circumstance compells them to cut anyway. We all do it at one time or another. Government is no different. The number of public employees are several thousand in excess of the number employed when I was a public servants in the 70s and 80s. We had a larger population then, too. Health care expenditures exceed the national average by a wide margin. We are not the only rural province in Canada though that spurious rationale is often trotted out to justify that poorly managed system. In short, Government has to curtail some programs and operate others with fewer people - as we did prior to the last decade. We can do. We have been there before! There is no magic. There is only good analysis and sensible decision making. I acknowledge it is hard to downsize. It will be painful. And it will require strong leadership and communications. We have public servants who can conduct that analysis. Most of us have a pretty good idea of the initial measures that should be taken. It's the second half that make us assess our priorities. We don't have politicians able to even begin the process or with communications skills to interact honestly with the public. If we don't find that leadership the the amount of retrenchment required will simply grow.

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    6. This makes a great deal of sense Des and I agree that having the political will to make the really tough (but necessary) decisions is absolutely critical. That being said, however, I don't have any expectations that this will change anytime in the foreseeable future. Placing our future bets on politicians doing what they say they will do has historically been a bad investment. The leadership we need is not going to come from politicians or Government ... it needs to come from private sector companies and individuals whose profit motives are aligned, not only with themselves and shareholders but with the economy as an whole. For far too long, Newfoundland industries such as the fishery have been cobbled by Government mismanagement. For the most part, the global capitalist market works and Governments need to allow it to do so. If projects such as Muskrat Falls make good economic sense, then allow private sector companies to assume the risk for future profits.

      Its time to stop looking to Government for answers or long term economic growth.

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    7. You can discount the private sector with regards to "risk for future profits" on Muskrat. What Emera/Fortis and the like are doing is obvious. Let the ratepayers, through the Government pay all the risk, absorb the construction cost, and let the private sector home free on the operating side, thus insuring long and deep profits for their shareholders. That is what they did in NS. The private sector utilities, as elsewhere in N. America, do this all the time. Some refer to this as "Letting the market free, reduce the regulation, lower corporate taxes, etc. and all will be well".

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    8. Hi Robert ... the Government signed these bad deals (as with Upper Churchill) and left taxpayers on the hook. Any good company (i.e. Fortis/Emera) will take advantage of Government ineptitude. Any prudent investor will ensure the upside is worth the risk. I'm not suggesting that we let free markets run without any Government oversight, regulations, etc but unlike Governments, private companies don't last long if they can't make a profit.

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    9. Thanks Mike. What oversight and regulation would you consider appropriate when our Federal Liberal Government, (Prime financial partner), decide to give the muskrat to it's chosen private corporation? Remember AECL hand off to SNC-Lavalin by CPC.

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    10. Robert, this is just another example of Governments making bad business decisions. If you or I make a bad personal business decision (i.e. get a payday loan or carry a balance on a 28% credit card), we are ultimately accountable for that decision. If a CEO of a publicly traded company consistently makes decisions that drive down the price of the stock, they are ousted. Governments make bad business decisions all the time with very little accountability. Part of this is due to the fact that we have created a society that depends so much on Government subsidies, bailouts, etc. If the business decision don't make long term economic sense, its the wrong investment.

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    11. Mike, Let me try.
      Emery/Fortis step up to the deal of the century. $1Billion, payable over 2 years, Muskrat asset offloaded from NL, Capital loss estimated at $14 Billion taken on provincial debt, guaranteed by Federal Gov. Would you not say that shareholders would think that a good deal for the elites? Ratepayers, (most of us peasants on low or fixed incomes), get competitive, (Canadian average power rates into the future. How am I doing so far?

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    12. This is an interesting discussion but it misses the point. Des the formula you propose is reasonable and well thought out and needs immediate action. The problem is not properly framed however and will not pull NL back from the brink.

      The way forward is not only a leaner civil service and or applying neoliberal economic "free market" principles. The feudal nature of NL politics is the elephant in the room everyone is afraid to address. Neoliberal globalism will accelerate the social and cultural demise.

      Chris Hedges, former middle east war reporter and seminary graduate has an interesting take on this.
      http://www.truthdig.com/report/item/the_dance_of_death_20170312.

      His thesis rings true for our failing civilization “The ruling corporate elites no longer seek to build. They seek to destroy. They are agents of death. They crave the unimpeded power to cannibalize the country and pollute and degrade the ecosystem to feed an insatiable lust for wealth, power and hedonism.”

      The solution first requires that elephant in the room gets destroyed and the urge to let the “free market” continue to savage your culture is resisted. The solutions are small and beautiful on both the micro and macro scale. But first about that elephant.............

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    13. Mr Sullivan keep up the good work I don't view your words as only complaining....Its very informative and telling it how it really is for a change...

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  2. There are no solutions other than radical political change and for that to work, we would need a new political party run by competent, non-sociopaths. The new party would have to fire all the deputy ministers, ADMs, directors and managers and hold competitions for competent people. Even this may not be enough as financial default may be required with some debts eliminated as "regime debt" or "odious debt". I don't see this happening - we are mired in a two party system where the "leader" is pre-selected by the power base and journalism is dead. You can be shot in the head for a tweet, arrested for covering a protest and those in power are above the law. I can only hope that this blog helps people wake up and be willing to vote for something different if that opportunity ever arises.

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    1. This sounds like a Commission Government idea, with Canada providing the Governance and Commissioners, one NL Commissioner, etc. It put NFLD back on financial balance, leading to a Referendum in 48.

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    2. The truth right there. All controlled still by the merchant class.

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  3. Muskrat is our NL government's/Nalcor's version of "fake news". See www.vision2041.com for Nalcor's latest 'fake news' version of its peak demand forecast.

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  4. Thanks Mike. The only thing I would disagree with would be..."Newfoundland has a spending problem." The correct term we should be using is "The problem Newfoundland has IS government". The symptom is excessive spending, bureaucracy and inefficiency.

    I would also question whether or not we have the private sector leadership necessary to say what needs to be said. Was it not the ST. John's Board of Trade that stood up like trained seals every time a certain former premier spoke and fully endorsed Muskrat Falls?

    The only one from the private sector who really stuck there neck out was Bill Barry and he quickly realized the jig was up because he was an imminent threat to the power base of the PC party.

    I still remain to be convinced.

    Mike...Your points are well made and need to be said. I just wish more people would come forward and speak.

    Keith

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    1. The St. John's Bored of Trade supported Muskrat, yes, but they also supported the Williams-era bloat in the public sector, both the civil service as well as the arms-length "ABC" (Agencies, Boards, Corporations) sector.

      It's not as if no one warned the public what Danny was doing, so for anyone complaining now who ever supported the PCs since 2003... too friggin' bad.

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  5. The NL govt can either choose to do it themselves or ultimately have it done for them. Neither is a good option, but you can be certain that you sure won't like the latter option.

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  6. We are at the point where taxes can not be raised further.

    We need to cut spending. But we can not cut in the conventional sense. The union agreements need to be thrown out, and we need to fire the lazy, and incompetent within the ranks of the public service. A 15% reduction, targetted on performance rather than seniority, would likely improve the service to the public.

    Unions bring workers to the lowest common denominator. There are many good people in the public service. We need them to work to their potential.

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  7. There is currently a purge ongoing to reduce the number of directors across government. Transportation and Works is eliminating eight directors for example. New positions are being created and the current directors will be playing a game of musical chairs to see who gets saved, and who gets asked to leave tribal council. Meanwhile, directors and managers are engaging in an embarrassing circus to see who can demonstrate that they are the most loyal, boot licking sycophant in advance of tribal council.

    I have had a chance to ask several directors and ADM's leading questions and offer advice but it usually ends with them stating "that is above my pay grade". With an attitude like that it is no surprise that the executive is left in a vacuum.

    You cannot expect public sector workers to be more productive or implement performance metrics when the organization above them is incompetent and generally politically appointed as past favors. I've personally seen lives endangered and personally overseen the waste of many millions. Protesting is futile. You will be told that your sphere of influence is limited to the useless wasteful task at hand, however immoral.

    NAPE has been very good for the clerical staff when you consider that if they left government would be luck to find minimum wage work. For professional staff, unions have been terrible. Senior level professional positions pay entry level wages for kids right out of school. The problem was that professionals were lumped in with the clerks. By comparison, teachers earn far more than government professionals and MUN professors do well with MUNFA. This sorry state of affairs for accountants, economists, statisticians, engineers, architects and IT workers is a real problem for the operations of government. They collectively have far more knowledge, ability and intelligence that elected corrupt politicians but are beat down with oppression, bureaucracy, low pay and miserable working conditions. Many good ones leave, recruiting positions like a bridge designer can be very difficult and the remaining good ones become cynical. Especially when their work is outsourced for $180/hr as ministerial gifts.

    A final random thought. If a professional remains in a non-management position, they are at least difficult to fire without cause. If you take a manager/director spot thinking that you can help the province you set yourself up to be fired when the political winds change or you address something along the lines of what regularly gets written here in this blog.

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    1. Yes! Totally agree. Well said. :)

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  8. Indecisiveness, dithering, not taking a strong or clear stance on the economy - all 3 NL political parties are guilty of this. PCs are now winning in the polls yet they have provided literally zero policy (fiscal or otherwise) since being defeated nor are the showing any signs of doing so in the future.
    Overspending $2-3 billion annually for a decade straight will have financial consequences? One does not need to be an Economist to have figured this out yet the media has been pretty slack on holding politicians feet to the fire.
    Putting one time oil revenue in the general coffers to bolster the fragile Trump-like ego of NLs Dear Leader.
    Nalcor the great Crown Corp that has yet to provide a single dollar divined to NL but has taken hundreds of millions annually, totaling billions in expenditures. Investing that money at prime interest rates would have done NL better in the short and long term. $100 million in export revenue on a $12 billion project is not even 1% RoI

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  9. I think everyone can understand the series of actions and bad decisions that have resulted in the financial mess we are in today. As Des and others have articulated very well, independent and thoughtful analysis of past actions is valuable and does provides insight into the current situation so that incorrect choices are not repeated in the future. However, if we are to make a brighter future for the province, we need "all hands on deck" striving for new solutions. The blame game is the easiest one to play since it requires no action on the part of the participant. I can offer up my opinion and just leave it to others to do the actual work. If you want to see this in action, just look up the #nlpoli hashtag on Twitter ... https://twitter.com/search?q=%23nlpoli 99% of the content is about individuals blaming someone else (the present and past Governments usually) for pretty much everything under the sun. We are all guilty of playing this game to some extent, but it achieves nothing. Our collective time would be better spent doing rather than complaining.

    As Margaret Mead eloquently said

    "Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."

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    1. Mike...some more suggestions if I may.

      1. The private sector must be unfettered by government regulation and restriction. Ask anyone who is greatly affected by such.
      2. Eliminate the minimum wage and let the market determine what is reasonable. For example how is a starting salary of $22,000 per year (based on 40hrs @ $10.50/hr) going to stimulate the private sector in high unemployment areas of the province. It is a barrier to entry I might suggest. Many people such as myself in small business view the minimum wage as a maximum wage.
      3. Let the fishing industry manage the fishery. The fishery is great for DFO not so much for the people that prosecute it. The market is a great equalizer not government regulation and bureaucracy.

      These ideas need to be discussed on there own merits as opposed to the kneejerk half-hysterical rhetoric of those that do not create jobs and wealth.

      Keith

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    2. Keith, with respect to the minimum wage, I am not sure that eliminating the minimum wage would help grow the economy and would most certainly lead to exploration of workers. That being said, the minimum wage laws are outdated and I am not so sure a $ or two either way would do much to stimulate the economy.

      Most people work hard if they have a stake in the game. Its hard for me to swallow being paid $10 an hour when I see the CEO making millions off my broken back and sweat. I don't think we are going to be able to change the fact that executive management of companies will continue to be paid exponentially more than the worker bees.

      Maybe what could change, however, at the small business level is how employees are compensated. Maybe instead of a set minimum wage, small business owners allow employees to "buy into" the company via taking a lower wage with a component that allows employees to share in the profits and growth of the company? I know this is not a new concept but by "auctioning off" the jobs to those who really want a stake in the game, it could help small business owners like yourself.

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    3. Mike...you are saying exactly what the propaganda says re. exploitation of workers. That is utter nonsense and has little to no evidence to back it up.

      The empirical evidence says otherwise and artificially increasing wages beyond what the market can bare leads to job loss. In this province we have the highest wages for the public sector and the largest public service per capita in the country by a longshot. This has inflated the cost-of-living, especially on the Northeast Avalon.

      The Government of NL, under the Williams administration, started a program called "Poverty Reduction Strategy". They used minimum wage increases of over 50% in a short time period as its' primary way of moving people out of poverty. The only problem was it was utter BS. The evidence showed that over 60& of minimum wage earners were young people going to school. These jobs are entry level primarily in the service sector. The next largest group was those that worked in jobs that provided a second income for the family. The smallest group was those identified as working to support a family. I spent considerable time isolating the numbers and it worked out to something in the neighborhood of less than 500 people.

      It was motivated by politics and I might add Lana Payne, the great friend of business, was a signatory to the press release by the government of the day. In fact as a member of various business bodies such as NLEC, CFIB & Restaurants Canada I was privy to submissions to government re. the effects of minimum wage hikes that were proposed and implemented. The response was..."while we agree with everything you are saying we are going to do it anyway" as it was politically popular.

      In that time frame, I might add, we saw a net loss of over 2000 jobs in the service sector.

      If you are using the "CEO making millions off my broken back and sweat" as your reasoning I would suggest you know little of those that run small retail stores, convenience stores, bar and restaurants. We are the ones that hire these workers and take considerable risk to do so and often mortgage our own homes to take the chance of owning our own little enterprise.

      If you are going to make a generalized statement you should be able to back it up with facts. I also worked with a large multinational firm and saw great talent at high levels and would argue they were a rare breed indeed.

      Let the market do its' work. You might be surprised at the outcome.

      Keith

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    4. Your formula Keith, more money for capital, less for labour is exactly the wrong direction to go. To get the economy going more money is needed in the hands of labour. Labours' share of GDP has been falling steadily since the 1980. It has created the gross inequality in income we have today.

      More of the same is going to help how exactly, except to enrich the 1%.? Neoliberalism is a failed and decadent philosophy. Please read the above mentioned Hedges piece.
      http://www.truthdig.com/report/item/the_dance_of_death_20170312

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    5. Low wages tend to have the effect of discouraging capital investment in productivity improvements. Canada is a classic example of this: our poor record of capital investment leaves us a laggard among industrial countries when it comes to productivity growth. In Ontario it is cheaper, and easier, to hire new Canadians at low wages than it is to invest in new manufacturing equipment. Couple this with a low Canadian dollar w.r.t. the US dollar and we find our manufacturing sector falling further behind not only America, but European countries such as Switzerland, Germany, France, and Italy. Thinking low wages lead to conomic growth is a mistake, only giving gains in the near term, and dooming future generations to economic stagnation and declining living standards. If you want this country to look like China eliminate the minimum wage altogether. If you want it to look like Switzerland, bring in living wages and appropriate living standards. Real gains come from human and capital investments that drive productivity, not poor wages.
      Anyways, the real topic of discussion here is Muskrat Falls. The money that has been spent is non-recoverable. There is nothing we can do to get it back. Gone. A sunk cost. But why are we letting this continue? Everyday we hear about how the Nfld govt has limited resources yet everyday they pour millions of good money after bad. How are they justifying this? The 5,000 jobs involved with Muskrat Falls is probably the main argument they will make but do the people realize how much money is being made by those 5,000 people? What of the 500,000 not working with the Muskrat Falls project? The only conclusion I can come up with is that the power structure of the govt and Nalcor is continuing this project because they and thier friends are benefiting substantially from ts continuation. Look at the day rate billings featured here on this blog not long ago. Our govt is allowing a select few to steal from the people to give to the rich. This is Kleptocracy. It is the way much of the developing world works and it is going on here, has been for years. I hate to say it but in a few years we will be looking at a commission of govt because it will be the only way to force spending into line and remove the kleptocrats from power.

      John D Pippy

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    6. John...I'm not sure where I said low wages is the solution to any of our problems. I said quite clearly let the market make the determination. For example in Alberta during the oil boom the minimum wage was about $10/hr however in place such as Fort Mac the real minimum wage was closer to $15/hr because it was what the market determined it to be. Even here on the Northeast Avalon, at the height of the boom economy, many restaurants and retailers were paying above minimum wage rates because they were competing for scarce employees.

      Please feel free to refute.

      Keith

      A arbitrary minimum wage set at a certain rate has consistently been used by pro-labor and governments as a tool to inflate entry-level employment under the guise of things such as poverty reduction, working poor, etc.

      If $10/hr is not high enough then what should it be? $15/hr or $30k+ per annum? What about $20/hr or $40k+ per annum? As long as you are prepared to pay the highest prices for basic necessities and entertainment.

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  10. Who is Mike Parsons.......I like to know the professional qualifications, if any, or the nature of their interests.....of those than post often. I google for info....there is a Dr Mike Parsons, another who has posted a very lovely photo of a iceberg that looks like Batman, and then I found a Mike Parsons that had passed away.....so I quit that search.
    Winston Adams

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    1. "another who has posted a very lovely photo of a iceberg that looks like Batman" ... that would be me :-)

      https://twitter.com/mikeptweet

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  11. Mike`s initial comment says it would be better if people offered solutions rather than just just complaining about the status quo.
    I have done both. My field: electrical engineering (and mechanical and civil engineering interests)and economic interests.
    I have interests in the alternatives to our energy needs that was ignored by Nalcor and the power companies here: Low cost efficiency measures for customers.
    I have been researching the effectiveness of current technologies that were and are intentionally ignored. These in order of importance are heatpumps, wind and solar. I get a bit frustrated when Mother nature is slow to dish out the severe weather that puts these systems to test. What can be evaluated in a month may take a full winter season or longer. The recent wind storm and outage was a great source of data and opportunity for monitoring and evaluation under extreme conditions. Indeed , even what was identified 2 or 3 years ago, the slowness of getting heat back on for customers , due to Cold Start Pickup overloads with power line fuses and transformers damaged when outages are long, can be analysized as to heatpump effectiveness. These opportunities are rare and very important learning times.
    Needless to say , power companies are avoiding importnat analysis and measures to improve on this.
    Power outages are expected to be 2.8 hrs per year. Our test house in Mount Pearl was out of power for about 32 hours. Some do not yet have power back. Our power reliability has seriously declined, and saying thank you to customers patience at these times is insufficient, and frankly an insult and cover for some mismanagement. We need to be prepared for Mother Nature, not taken off guard with more and more Dark NL.
    Winston Adams

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    1. Hi Winston ... you make some good points and I agree that alternative energy sources warrant further exploration. Countries like Denmark and Germany have certainly been able to take advantage of wind power with considerable success. These infrastructures, however require massive investments and if mismanaged like Muskrat Falls could turn into yet another giant sink hole for Government money.

      With respect to recent #darknl problems, even the best laid plans can be twarted by Mother Nature.

      I am certainly not an expert on energy but maybe the solution lies not in generating more power (most of which is wasted on our consumption greedy lifestyle) but incentives that save power. For example, maybe customers get additional rebates based not on the power they consume, but the power they save. While the high cost of electricity has made many of us aware of leaving the extra lights on or using energy efficient appliances, this makes up for a very small portion of the population. Drive around St.John's at 2am in the morning and just look at how much energy is wasted!

      Maybe part of the solution for energy needs, as well as overall fiscal prudence is to educate and reward constraint as opposed to surplus? With respect to energy needs and consumption, this is something every single Newfoundlander can take action on.

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    2. Mike
      Indeed , incentives for the power saved is the basis of Efficiency and Conservation practiced elsewhere and very effective.
      If each new kilowatt of supply costs $2000, this amount should be given as incentives to households to reduce each kilowatt.
      Big houses have as much as 35 kw of electric heat, that can be reduced by more than 50 percent, while most houses have 5 or 6 kw that can also be reduced by half.
      This is so straightforward that it boggles the mind that little is done via : high insulation standards, air sealing . triple pane windows , heatpumps, and passive design for new house. Generally 1/3 the cost of new generation, reduces energy bills instead of increasing them. Criminal that this was intentionally avoided, as so effective everywhere.
      WA

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  12. Charlie, I mean Dennis Browne, our Consumer advocate is a guess on with VOCM Pete Sucey at 3 PM. today......readers might tune in as to his opinions.

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  13. Well, the most interesting hour of discussion of Muskrat and our energy problems I have heard in 5 years.......I salute Charlie(dennis), Pete Sucey and especially the last caller.......who was he, i misses his name.
    WA

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  14. It little profits that an idle king, matched with an aged wife, I mete and dole unequal laws unto a savage race that sleep and hoard and feed know not me!! I cannot rest from travel... I must drink life to the lees...alas the end must be near!

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  15. My take on our Consumer Advocate (with Pete Soucey)
    He was very critical of MF and says that the critics were ignored.
    To mitigate going forward; he says solar panels are expensive but once you have them they are there forever to produce energy. But this is the case; for 52 thousand dollars you get insuffieient capacity for electric heat or electric hot water. Warranty is typical that they deliver 80 percent of rated energy after 20 years, so some decline in output. Also in low light conditions they produce less , maybe 25 percent less. Also if they are snow covered. And what of with winds like this past few days....streets may be littered with glass. A solar panel at 100MPH wind could be subject to about 450 lb of force . How well are they fastened to the roof for this? Not a great idea for cost effectiveness.But has some benefit.
    Wind energy....he says Nalcor said it was no good and dismissed Skinners proposal. However, Skinner seems to way over estimate the volume of energy our island grid can handle. He proposed 5oo or 600MW, where 200 or so is reasonable. Brown nor Skinner does NOT understand the technical limits on wind for our island grid,and Nalcor way underestimated it.
    He said Bruneau's proposal for a gas line to feed Holyrood would cost only 400 million. This seems rather low balled. |Some say liquified gas makes more sense. My take.........with robust energy efficicncy, little energy is needed from Holyrood , but certainly emergency capacity is needed .
    Brown said municipalities should not allow occupancy of any new house unless it had a heat pump. Bravo....very important first step to curtain demand growth. Fully agree.......but what of existing houses? Some 100,000 installed in NS, here 15.000. They give incentives ...here .nothing.
    That if MF line goes down it could be out for 30 days, meanwhile our Bay De Espoir reliable power goes to Nova Scotia, free power.
    That as to energy conservation is counter productive, means rates may go higher......he says.that we should not be held ransom on rates by Nalcor's mistakes. Conservation was ignored and should be stepped up.

    The last caller, an insulation contractor who had once run for council at Mount pearl, said people with a vested interest promoted MF.
    He asked two questions, which neither Sucey nor Brown could answer
    1. what is the lowest cost energy source in Nfld or anywhere in the world. Brown guessed maybe ocean or tidal.
    Answer : Energy Efficiency. That is correct, about 1/3 the cost of any source , and 1/10 the the cost of MF power.
    2. What is the Greenest source of power now in Nfld. No one guessed
    Answer: our existing source we've already built. Meaning our present island hydro.........if properly used it would satisfy our energy needs.

    This guy know his stuff.

    Both Brown and Sucey agreed with his statements.

    Unfortunately , no one proposed we need a Energy Efficiency Corp, to avoid the conflict of interest of the power companies.

    Brown says he is having trouble geeting an applocation before the PUB for the Net Metering issue, which in itself is of mnor help to rate mitigation . Makes one wonder if the PUB is on the side of the public, and the Consumer advocate has no clout?
    Brown did not mention the great work done by Efficiency measures in other jurisdictions........and one wonders if he has in depth understanding of this (as he could not answer that question No 1) Brown seems sincere, I guess
    Winston Adams

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  16. For those that follow energy efficiency and Conservation, and know that Nfld Power now inform customers that mini-split heat pumps can save energy (you are informed 24 years after they were first introduced to Canada), this is what their web site says
    They can save 40 percent on electricity for heating energy.

    ALTERNATIVE FACTS AND FAKE NEWS.

    I have been monitoring this winter an installation in Mount Pearl

    Savings is usually referenced by COP (coefficient of performance)
    A saving of 40 percent means a COP of 1.67. Take 1 and divide by 1.67 =0.5988, so 0.60. This means you use 60 percent of the energy of baseboard heaters, and therefore save 40 percent . This may sound pretty good, but how factual is it?
    We have measured a COP of 2.5. meaning a saving of 60 percent not 40 percent. But this is under humid conditions with RH typical 80 to 97 percent most of the winter.
    When the outdoor unit is protected from high humidity, which can be done, we measure a COP of 3.71 , and this at -6C outdoors. This gives a saving of 73 percent instead of 40 percent. Of course best practices of sizing and installation is required to achieve this.
    Nfld Power, as you can imagine, is very excited by this research result, as customer satisfaction is number 1, and you should see mention of this in your next bill flyer. If not the next, then the next , or the next ........subject to other priorities.
    And peak demand reductions benefits...... they are literally jumping up and down with excitement, as to how soon they can quit burning fuel at Holyrood. My phone has been ringing all day, wanting to aid my further research.
    Winston Adams

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  17. Government is making smart meters dumb.

    Why else would Nalcor hire Navigant to study how and to what extent smart meters could and should be used in Newfoundland and Labrador?
    Smart meters were designed with a 21st-century, creative, open-access energy paradigm in mind (not Nalcor’s inflexible, take or pay, power purchase agreement).
    While government (and the Liberal party) both support the use of smart meters to reduce energy use and to increase outside energy sales, Nalcor’s non-competitive, monopolistic Muskrat Falls power purchase agreement (PPA) neuters the benefits of smart meters — and Nalcor knows it.
    The Muskrat Falls power purchase agreement states, in part, that:
    “Notwithstanding any other provision of this Agreement ... until the date on which the initial financing is paid in lull, NLH’s obligations to make the base block payments shall be absolute, unconditional and irrevocable, and shall not be subject to any reductions under any circumstances whatsoever.”
    More than anything else, Nalcor’s forecasted increase in energy use has been, and is, the basis on which Nalcor has been able to claim that the Muskrat Falls’ debt payment obligations will be met.
    However, if increased energy use is necessary to meet debt-payment obligations, then smart meters (which will facilitate a reduction in energy use) are incompatible with the Muskrat Falls power purchase agreement.
    Debt-payment obligations must be met. Period.
    Without electricity rate increases, Nalcor’s loss of revenue from its own N.L. ratepayers will far exceed any revenue from the out-of-province sale of such excess energy.
    Nalcor recognized this fact when it stated, earlier this year, that “going forward the business case (of a conservation program) would be assessed based on the value conserved energy that could be sold into export markets.”
    In other words, how much real support can Nalcor give to an initiative that replaces 18 cent per kilowatt-hour revenue (from N.L. ratepayers) with four or five cent per kilowatt-hour revenue from Nova Scotia?
    Such a loss of revenue (through the use of smart meters) could only be mitigated by a significant increase in electricity rates for N.L. ratepayers.
    While smart meters would allow some businesses and high-income ratepayers to produce their own energy and to use less energy from the grid, those ratepayers who cannot afford to produce their own energy will thereby have to pay an even greater share of the revenue Nalcor/NL Hydro will need to meet its Muskrat Falls debt payment obligations.
    Smart metering, in Nalcor’s monopolistic/Muskrat Falls power purchase environment, is not good news for low and middle income ratepayers.
    If those who can afford to take advantage of smart metering use less energy (paying less revenue to Nalcor/NL Hydro), then rates will have to go up (and the remaining, mostly low- and middle-income) ratepayers will have to pay more.
    While Liberal leader Dwight Ball argues that smart metering can reduce N.L. ratepayers’ energy use, that argument applies almost exclusively to businesses and to higher income ratepayers.
    Those who can afford to make full use of smart meters will indeed pay less, while low and middle income earners will pay more.
    Clearly, the rigid legal requirements of a power purchase agreement which has been expressly designed to push through an uneconomic, 19th-century Muskrat Falls hydroelectric project not only constrains the province from transforming its electricity generation, transmission and distribution system into a 21st-century, open-access/
    decentralized model, but also demonstrates how deficient government and Nalcor has been with respect to the development and implementation of a cohesive, rational and strategic project planning process.
    The effective integration of proven and new technologies such as smart meters in a way that will benefit low- and middle-income earners has all but been eliminated.

    Maurice E. Adams, Paradise (full article first published in The Telegram, September 29, 2014

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  18. Muskrat West

    https://thetyee.ca/News/2017/03/15/Site-C-No-Return/

    Once committed by a provincial power, it is difficult to get stoppage of dam projects.

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    1. Thanks for the link Robert. Site C is more of a nightmare than MF. It too is built on shifting sand, using take or pay contracts, after a deal by politicians that ignore advice from staff, after their PUB equivalent is shut out (leaving rate/taxpayers twisting in the wind, no markets for the unneeded power and absolute secrecy about the contracts.

      Yes once again SNC Lavalin has seduced another provincial government into another fiscal death trap. They got even more creative with the financing at site C, amortizing the debt over 75 years!! to make the cost look reasonable.

      When will these convicted corporate criminals be held to account for undermining democratic oversight and these vile deals that benefit only politicians (in mysterious ways) and destroy provincial treasuries and cause untold hardship?

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    2. At my late life stage, I would hope that younger Canadians wake to the fact that all regions of the country have become a playbox for corporate interests to have various governments pursue this mega project corruption. I recall the Heavy water plant boondoggle in Cape Breton, Westerly Mine, Ocean Ranger, Ontario Neuc. Alberta, Sask NS Thermal coal, CC Boundary Dam, etc.

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  19. Maurice is correct on his above comments. If a well off person installs solar panels, he takes less from the grid and then expects compensation for when he has some excess to put back into the grid. In effect the low and middle class subsidizing the wealthy to reduce their own power use, and cause the need for higher rates.
    Cost effective conservation and efficiency should have been an option, as it benefits all, especially the low income families. In some jurisdictions, a 30 percent premium in evaluation of cost effectiveness must by law be considered in the formula for low income customers. Here we do the opposite ,we have policies that benefit the wealth as a priority.
    WA

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