In a few corners there is increasing concern over the solvency
of the province. A weak government is asked to provide leadership, but can’t
get up the nerve.
As if to magnify the weakness with which the electorate perceives
all the political parties, the Dwight Ball Liberals maintained a lead in the polls
as 2017 ran out: CRA reported that 44% of voters preferred the Liberals against
33%for the Tories and 19% for the NDP. Yet 63% of voters are dissatisfied with
the performance of the Liberals, begging the question: if the Premier provided
some leadership, would not the Liberal Party’s numbers be higher?
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| Finance Minister Tom Osborne |
In time the province will be forced to assess its debt burden,
but likely only when the ‘Demand Notes’ come due. NL is in an odd space where,
on the one hand, an unfinished MF project allows Nalcor to continue
capitalizing the interest on the sum borrowed (after commissioning, operating
and interest costs will have to be met from power sales and/or subsidy) while,
on the other, Bond Ratings Agencies ignore the fact that the debt is not within
the province’s capacity to repay. Those Agencies’ unwarranted assumption is that,
however high the debt may grow, it will be supported by the Government of
Canada.
The effects of over-indebtedness won’t be felt until the full
cost of “rate mitigation” is calculated and Nalcor realizes that a basic
economic consequence of higher costs — demand compression — is underway.
The President of the Federation of Labour will then discover
that the half-billion dollars per year required for rate mitigation — just to
keep rates at 17 cents per kWh — won’t come out of thin air. Mary Shortall’s
name, not surprisingly, can be added to a long list of politicians (and others)
suffering classic denial syndrome.
As it stands, the time given to the charade of solvency and MF
viability will sap the province’s flexibility to respond to the crisis.
A dynamic (and courageous) government would have — months ago
— begun to define the province’s position on contractual agreements with Emera
and the Federal Government with respect to the Muskrat Falls project; they
having been complicit with Nalcor in the fabrication of agreements that made
neither commercial nor economic sense.
Aren’t aggressive measures to protect the public treasury the
first obligation of the government, the Tories having vacated this role?
As it stands, precious time is being squandered. Left uncontested
much longer, the MF debt — and the fallout it will cause — will be solely ours
to bear.
Additionally, the province’s huge debt cannot be passed off as
an irritant. Besides, the calculation of “net” debt is not accurate given the government’s
admission of the need for “rate mitigation” or subsidy. In short, the “gross”
debt (which includes the debt of Crown Corporations including Nalcor) is closer
to the “real” debt figure.
Finance Minister Cathy Bennett delivered the sixth deficit
Budget in a row in 2016. The “Current Account” deficit, which stands at $850
million following Tom Osborne’s Update, hangs precariously over an even deeper
abyss, balanced on some combination of oil prices and oil production. Borrowing
for “Capital Account” receives no notice at all, but the Bond Market piles it on
top of the monies borrowed for programs and operations, called the “Current
Account” — as it must.
The Liberals, like the
Tories, have married the fiscal strategy advanced in the “Wiseman Plan” (as in former
Tory Finance Minister Ross Wiseman, whose Budgets offered up expectations as
one might from a lucky rabbit’s foot): “hope” and a spike in the price of oil. So
far, Finance Minister Tom Osborne has heartily embraced this fiscal approach.
The NL Auditor General has described the “net” debt as
“unsustainable”, as has the Federal Parliamentary Budget Officer. Imagine if
either had used “gross” debt numbers in their analysis!
While the concerns about the debt have been submerged under
the weight of rhetoric, the new “we are not in a crisis” Minister of Finance — taking
his cue from NL Federation of Labour President Mary Shortall — seems to have
been given a mandate to secure labour peace, at any price. An election looms
and the government has a sale on collective agreements. Yet, the Minister is prepared to acknowledge that "drastic measures" were need in January 2016 else the Government would not have been able to meet its payroll.
The public sector unions exhibit none of the concerns of the AG
or the PBO. Nor are they preoccupied with the vast unfunded pension liability —
as if the Government’s IOU will count for something when the Bond Market
awakens. Strangely, government’s ability to pay has never attracted notice from
the Public Service Pensioners’ Association either.
The government has not made the case for the sufficiency of
the terms of reference for the Muskrat Falls Inquiry. It has not given Judge
LeBlanc specific direction to search for wrongdoing. There is an unfortunate consistency
here. While the Ball Administration states that the Liberals did not support
the MF project, the truth is that they only feigned opposition at the fringes;
the same goes for the NDP. The record is in Hansard, the verbatim record of the
utterances of Members of the House of Assembly. In constructing the Terms of
Reference as it has, the Liberals continue to exhibit conflict with their
obligation to the body politic, giving cover to the perpetrators.
In 2018, the selection of issues on which this Blog focuses
will likely broaden. Health care, the fishery, rural NL and others will be
explored. Muskrat is guaranteed to proceed for as long as it takes, and
certainly while there is a government able to borrow one more dollar on Nalcor’s
behalf.
Our seven Federal MPs are chiefly noticed by their photo-ops.
Otherwise, as some say, they are as remote as Ottawa.
One housekeeping matter: I want to better manage the comments
section of the Blog. The Posts are enhanced by your comments and contributions.
However, far too often, commentaries tend to stray just a little too far. This
year I will apply Blogspot’s “Review” option which, while causing some small delay
in posting, affords me the ability to screen out those “comments” that are
repetitive or off-topic.
Finally, it is hoped that this Blog brings reasoned and
unbiased perspective to the issues that threaten not just our solvency and
standard of living but also rural NL (again) and our constitutional status too.
Not everyone is interested in politics or political analysis but, like it or
not, none can escape its importance to their daily lives.
Your feedback will help everyone who writes for this Blog to
better tailor their topics of interest to yours. Readership grew significantly again
this year. Your “Shares” on Facebook and Twitter were critical to putting our
stories in front of more eyes.
We all
have a role to play and, most importantly, the right to express it in whatever
way we choose… which, I suppose, also affords us the right to deny certain grim
realities and to rely on the Finance Minister’s lucky rabbit’s foot. Taking
that approach is not without risk however. NL could wind up no luckier than the
rabbit!
