IS IT POSSIBLE TO ELIMINATE THE DEFICIT IN NL?

Guest Post by PlanetNL

PlanetNL33: Deficit Elimination? NL is Too Far Gone

A Pessimistic Interpretation of the Greene Report 

Moya Greene’s “Big Reset” Report, the final product of the Premier’s Economic Recovery Team, has done a dashing job of showing exactly where and how to eliminate this Province’s deficit plague.  Well done, let’s get started, right?  Not so fast.

Upon consideration of the underlying issues, the prescribed budget cuts and taxation increases will face insurmountable challenges.  It is clear upon second reading that Greene chose her numbers despite their improbability - she has developed a plan on paper that is impossible to deliver.  If this were a business plan submission, she has failed because there is no consideration of the many execution challenges.

The Report is not a failure, however, in the sense that it now makes our problem much clearer to see.  The financial state of the Province is well beyond any remedy that can be devised independently as a Province.  The Report does successfully show that insolvency is indeed at our door and there is no solution other than for the Federal Government to step in and help clean up the mess. 

Self reliance or Commission of Government? The choice is ours.

Guest Post by Ron Penney 

I don’t really think we will have the second Commission of Government, it will likely be some faceless federal bureaucrat in the bowels of the Confederation Building managing our finances. We may retain the fiction of responsible government with none of the powers. 

The Greene Report has for the first time added up all our debt and busted this artificial construct of net debt, mandated by the arcane rules of the accounting profession. The amount is staggering: $39 billion, $12.6 billion added in the past 12 years. And when the unfounded pension liability and other exposures are added in, it goes up to $47.3 billion,  $215,000 for each household in the province. 

Cash deficits have averaged $1.9 billion over the past 7 years. 

Who’s to blame? 

THE "BIG RESET": TIME TO WAKE UP. TIME TO ACT.

Summary

The PERT Report, titled the “Big Reset”, authored by Moya Greene, has been already greeted with derision by labour and others in denial. A public debt of nearly $50 billion seems still insufficient proof that the economy can never thrive by “spending our way to prosperity”. 

Let's face facts. NL is effectively insolvent. Greene’s proposal to lower spending by around $1.4 billion is a best case scenario - not the likely one; the likely one is far worse. When the challenge is so large, and the options so few, any plan of repair is devastating. 

Moya Greene can't be faulted for this; any deficit of her making lies in the fact that she wrote 338 pages and another 67 pages of executive summary to convey the team's ideas. Five pages of straight talk might have been more effective. As it is, the focus of the Report is diverse; some important issues are not addressed clearly enough.