Presumably knowledgeable readers will conclude that such
writers are ill-informed and poorly read. The case of Mary Shortall is bit different,
however. She was not sharing her personal views: Shortall signed the letter in
her elected capacity, as President of the Newfoundland & Labrador Federation of Labour.
The Federation, like most labour Unions and professional
associations, has for years sought a voice in the formulation of public policy.
The President, no differently than her predecessors, is afforded space on the
public airwaves and in other media to state labour’s position on a plethora of
issues extending well beyond the collective bargaining space.
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| NL Federation of Labour President, Mary Shortall |
The practice speaks to the right of interest groups in a
society to influence both public opinion and public policy. The Federation is a
pedestal from which to impact social and economic directions — the purpose of
policy. For that reason, the position implicitly carries a weight of
responsibility unless, as Shortall’s diatribe suggests, the mission is one of
recklessness.
The Federation and other groups are adept at criticizing
government when policy changes are not to their liking or when it lacks an
evidence-based foundation.
Is there any reason that the Federation should not be held to
the same standard?
Shortall writes: “Once again, we’re hearing the steady
drumbeat of fiscal doom… It hasn’t been this loud since 2015 when global oil
prices plummeted. Did the sky fall, as predicted? No. Will it fall, as being
predicted again? No.”
The idea of an immediate economic implosion from the drop in
the price of oil — or for any other reason — is Ms. Shortall’s own invention. She
should be reminded that our fiscal nightmare did not begin in 2015 or even in
2014 when the collapse of oil actually had its most dramatic decline. Budget 2016-17 represented the sixth deficit Budget in a row. Insolvency
rarely happens overnight, and is more likely the result of a series of bad
decisions or fiscal laxity, which describes the case in NL.
Shortall continued: “The deficit is not crippling. The
government is forecasting a balanced budget by 2022, and gross domestic product
(GDP) growth sooner. The debt-to-GDP ratio will soon be heading in the right
direction, down.”
A failure to curb spending will negate the possibility of
budget balance anytime soon, if ever. Then, too, debt is a many-headed monster.
The cost of debt-servicing, for example, already exceeds spending on education.
It neither stays in the province nor is applied to public services.
The Government worries — or ought to — that a reversal in oil
prices (which are showing modest strength), or some unrelated global political
event, will cause the Bond Market to tighten again. Fiscal ‘precipice’ is a
constant. How is this not “crippling”?
The province’s GDP is in decline with only a very modest
turnaround (lower than all other provinces) forecast for the foreseeable future.
Debt levels are rising rapidly, due both to persistent deficits on Current
Account and the Muskrat Falls project. How does this suggest that the “debt-to-GDP
ratio” is headed in the right direction?
Shortall states: “Nor does Muskrat Falls cost overrun mean
that the apocalypse is coming. It would result in electricity rates of $0.22 to
$0.23 per kilowatt hour, an increase, but not the highest in North America.
Rates are going up faster than inflation across Canada; Newfoundland and
Labrador is not alone.”
Those comments contain all the wisdom of Kathy Dunderdale declaring
that the multi-day power blackout in 2014, known as #darkNL, was “not a
crisis”. The Government’s target of 17 cents per kWh — forgetting “rate
mitigation” — will constitute a grave injury to most members of the public. It
will rob people — including union members — of the basics of life. This is
what Ontario Premier Wynne recently discovered, forcing her to offer a mitigation
plan too… except Ontario can better afford to pay for it.
A cost of 17 cents per kWh will cause severe demand
compression for electricity — forcing a further rise in rates. Reaching 22 to
23 cents per kWh would be calamitous. But as to such consequences, Shortall is
dismissive. She refers to unnamed places in North America that are paying
higher rates. Shortall should tell us
where, and how those people are faring.
The Federation President continues: “The government is
considering electricity ‘rate mitigation,’ reducing rates by putting public
dollars into Nalcor. Bringing rates down to $0.17, the target when Muskrat
Falls was approved, would cost less than the revenues from the
federally-required carbon tax.”
The truth is that we do not yet know the impact of the “carbon
tax”. Likely it will be far less than the one associated with 17 cents per kWh
power. Whatever the case, “rate mitigation” of half a billion dollars (rising
annually due to the financial structure of the project and inflation) will gut
social programs of all kinds and cause massive layoffs for public sector
workers unless another solution is found. This is not a matter to take lightly,
especially when a reduction in program spending must concomitantly be achieved.
The misinformation continues as Shortall asks rhetorically: “What
about provincial spending? Is it really ‘out of control’? Sorry, but no.” She
suggests: “What the province can afford is indicated by the size of the economy
(GDP), not the size of the population. The province’s spending per GDP is
second lowest in Atlantic Canada.”
Ms. Shortall fails to acknowledge that the provincial GDP
includes the value of NL’s oil exports. Oil has a major distortive effect on
GDP because the metric of oil’s value to economic growth is far different than that
which applies to any other sector of the economy. (One former Finance official
called use of the indicator “laughable”.)
Though the Parliamentary Budget Office uses the same metric — which
makes sense in more balanced economies — it is smart enough to provide a
numerical representation to the sum of the change in expenditure cuts and/or
new revenues necessary to achieve fiscal sustainability. This is a direct
quotation from the PBO’s November Report:
“Current fiscal policy in Newfoundland and Labrador is not
sustainable over the long term. PBO estimates that permanent tax increases or
spending reductions amounting to 6.5 per cent of provincial GDP ($2.0 billion
in current dollars) would be required to achieve fiscal sustainability. This is
equivalent to a permanent 26 per cent increase in the tax burden (including
federal transfers) or a 21 per cent reduction in program spending.”
Shortall nevertheless uses the “debt-to-GDP” metric to draw
this conclusion: “None of this fits with the narrative of ‘it’s-a-disaster-we-have-to-cut-cut-cut.’”
It should worry the Federation, and the public, that her facts
— and her reasoning — are so demonstrably faulty.
Let’s be clear: Shortall is a poorly informed spokesperson
holding an important position. But she does express certain sentiments about
which all of us are of one mind. That is the concern over “job cuts” and the
assertion that “poverty levels are rising”. Only a fool would be dismissive of
this evolving tragedy.
Unfortunately, however, Shortall’s approach is to deny the
enormity of the situation. She joins the Ball Government, who can also be
euphemistically described as having their heads in the sand. Her narrative is
only a tad different than that of the St. John’s Board of Trade. Problem is, it
possesses the mindlessness of “La La Land”.
We might bear in mind that the NL Federation of Labour is one
of the best-funded organizations in the province, and ought to have undertaken
at least rudimentary research and analysis in advance of any public
pronunciation.
In their own interest, and that of the public, the Federation
might consider a public forum on the state of the province’s finances, possibly
even inviting some more open-minded and less ideologically-bent policy wonks to
offer analysis and to discuss solutions. The Federation could take the lead
where, so far, the Ball Government and public institutions have miserably failed.
The Federation describes its raison d’etre as “advancing the
cause of working people and promoting a progressive civil society”. It adds to
that roster the goal of “better labour laws and strong, accessible public
services”. The NL society with which I am familiar has a strong attachment to
the values those aspirations inspire – even if there is disagreement as to how
they should be advanced. I suggest, however, any argument that is less than rigorously
fact-based only diminishes their import. It undermines our capacity to build
the kind of society to which we all strive.
