A STORY OF POLITICAL CHAOS: PUBLIC SHOULD DEMAND NEW BUDGET

The Government’s first Budget, one entitled “Restoring Fiscal Confidence and Accountability”  will do nothing of the kind. It is, in brief, something akin to a “sick joke”; except the April “fools” are the ones the public just elected.

This is a Budget which the Liberal Government’s PR builders assured would reflect the beginning of some political leadership, absent so far; the kind that would rectify Tory incompetence.

What the province got, instead, was the blunt artistry of a clique of deceivers.

The Government has confirmed, again, Nalcor CEO Ed Martin is firmly in charge.  

It takes no great mind to figure out the singular agenda of Finance Minister Cathy Bennett, even if it is lost on union leaders of NAPE and CUPE, that the Province took a very retrogressive step, yesterday. Instead of stepping back, this Liberal Government has actually advanced our collective march over a very steep fiscal cliff.

Let’s begin here:

      -          There was no progress made on the deficit

      -          Operating and borrowing expenses have actually increased, not decreased, from                  almost $8.1 billion to $8.5 billion.

      

      -          Government went deep into the pockets of taxpayers, reportedly to the     

              tune of around $3,000 annually; higher for others.

      -          Nalcor gets $1.3 billion (after getting $760 million in 2015/16); the new sum is the        

              equivalent of the total tax grab estimated at $863 million plus another half billion 

              dollars.

      -          This $1.3 billion is added to the $1.8 billion operating deficit, and to $570 million for      

              Capital Account; all of which will have to be borrowed.

The Government has to be absolutely stark raving mad!

Possibly, the public will come to that conclusion, too.

Still, taking those Budget outcomes on their face isn’t enough; the public needs to know their implications beyond the immediate loss of the purchasing power they will suffer from higher taxation.

Let’s take a short walk, not through what the hundred or so PR people have written, but through the fiscal realty behind the Government’s numbers and how those decisions, likely, got made.

It is a picture that starts as a $1.3 billion “ransom note”, in the form of a demand to the Government, from Nalcor.

The timing was not accidental. The Nalcor CEO, seeing hundreds of millions of dollars melting like a June snow, in Goose Bay, the Muskrat Falls project near broke, and with Astaldi ordering plane tickets to Milan, Martin would have painted a stark image for the Premier. It would have contained plane loads of workers returning to the Island, hundreds of pissed-off contractors, some of them Liberal donors, a government on the hook for hundreds of millions, a Federal Loan Guarantee in jeopardy; then there’s Nova Scotia…

Martin would have laid it on thick. The Premier is no match for him!

That is why the script that the Minister of Natural Resources blurted out on Tuesday, was so disjointed. Siobhan Coady, in the rush, forgot (or didn’t know any better), that Ball’s decision ought to have been linked to the $1.6 million EY Interim Report.

Coady could only remember the threat to contractors, and our commitment of cheap power to Nova Scotia. 

It didn’t matter. By then, Ed Martin had the assurance of the $1.3 billion, anyway.

Now, for Part II.

Likely, the reader is not aware how Budgets are created. Indeed, why would they be familiar with such an obscure process, especially how specific decisions get made? 

You will recall, however, the Finance Minister’s reference to Cabinet’s involvement; “line by line”.

Bennett was confirming Cabinet’s singular involvement. Historically, proposals for Budget expenditure reductions go to Cabinet for approval. In contrast, revenue generation measures do not.

That is because those decisions may have a bearing on companies listed on the stock exchange, and for reasons relating to “leaks” and confidentially. 

Hence, revenue decisions are made almost exclusively between the Finance Minister and the Premier.

Notwithstanding any “line-by-line” diligence they might have contributed, the Cabinet gave little to the Minister in terms of expenditure cuts. The facts are easily summarized:

      -          The current account deficit, again, is unsustainable at $1.8 billion.

      -          450 positions outside, and 200 positions within the “core” public service, have been 

              eliminated – not people – but positions, some currently unfilled; a rounding error in 

              relation to the public service “bloat”, which has been created since 2007.

      -          The Capital or infrastructure Account, is $570 million even though the historical   

              average, prior to 2007 and oil fever, is around $300 million. So, infrastructure, is still 

              double the historical norm.

       -          Heath and Education which, combined, represents 70% of spending on operations, 

               was virtually untouched; the few cuts minor relative to the size of the budget for those 

               services.

       -          The “Sunshine List” comprising all the people living off the public teat, earning 

               $100,000 to $800,000 annually, the ones with political clout, who work in and meet in 

               the same circles as those of influence, are untouched; there are no wage reductions, 

               virtually no job losses.

The overpaid and the bloat remain.

Do those decisions not seem peculiar to you, in a time of fiscal crisis?

There is only one conclusion; one that seems to exist whether due to, or in spite of, its newness: this Government is in a state of chaos! 

Even as the Province’s bankers threaten to turn off the money supply, the Premier was unable to achieve consensus over virtually any expenditure reductions!

The Cabinet, uncooperative, is signifying the Premier carries far less weight than their commitment to his election promises.

Ball is a ditherer. Cabinet Ministers know he pales at any hint of disagreement.

But, there is a bigger elephant in the room; one  not nearly as expendable as the Premier. That’s the bond rating agencies.

They represent the lenders; the very people on whom borrowing for Muskrat Falls, and deficit financing, depends. The Premier understands that much.

This dilemma takes us to Part III of the saga unfolding inside the new Government.

The Premier, having capitulated and agreed to pay the $1.3 billion “ransom” to Nalcor, and finding himself with a Cabinet unwilling to take the political “heat” for Tory malfeasance, is left to consider his options.

There aren’t many. In fact, there is only one: sock it to the taxpayers.

And that is exactly what the Premier did: a gas tax increase of 16.5 cents per litre, a “temporary” deficit reduction levy (aka the Muskrat Falls Tax), 2% increase in the HST, and a veritable register of hundreds of additional taxes and levies; all adding up to $860 million.

But, the Premier and his Finance Minister had a problem. $860 million was not enough for the lending agencies, when an equivalent sum, plus another half billion, had gone to Nalcor.

Ball had to offer the lenders more. 

His solution was simply to buy time to get Cabinet on side; offer the Lenders a “supplemental” Budget later this year, when cuts could be made without Nalcor in the room. Promise them something, next year, too. Make it a problem for, yet, another day.

As a result, what the Finance Minister delivered, yesterday, was harsh. Very harsh. Rather than tackling the fiscal crisis, Bennett has only made it worse:

The financial impact of all those taxes has been equated with an annual cost of $3,000 for an “average” family; for some, the cost will be even higher.

What the public has to digest is that this financial “hit” is just a beginning. It is not the end. It is not even the beginning of the end.

Before it is too late, the public needs to ask: how much more can we take. Will I have to pay another $3,000 in taxes this Fall? On top of all those additional taxes, how deep will public services be cut? Those questions might now get asked. 

Yet, Ed Martin, having gotten another $1.3 billion, will state with even greater authority, next year, 'there can be no going back, the province has too much into Muskrat'.

So, the public is stuck between a rock and a hard place; first, by a Government held to ransom, by an incompetent and out-of-control Crown Corporation; second, by a dithering Premier, and a Government out of touch with realty. 

They cannot even count on an elected Opposition to represent them, the Tories having created the problem, and the NDP too small and ineffectual. 

The public can take this fiscal assault and do nothing, in which case they will have signed on for more.

Or, they can draw a line in the sand by taking one single large step:

The public needs to tell the Premier to fire his Finance Minister and to craft a new Budget.

Else, we will all be broke.