A couple of weeks ago, I wrote about the way the provincial government is spending beyond its means. That point raised a lot of complaint, right down to suggestions from some quarters that I was “bloody hateful” for even making that suggestion.
Why? Because with revenues where they are right now, the 80 per cent increase in government spending in the last seven years is sustainable — why, we’re even running surpluses most years and we managed to pay down something like a quarter of the province’s debt before the recession struck and we moved back into deficit budgeting. (And before the plan was to shoot that deficit to brand-new heights with the construction of Muskrat Falls.)
That’s a reasonable point — with the revenues we have, government spending (while rollicking along and creating more public service jobs than any other part of the economy) is sustainable.
And perhaps I should have been a little bit more clear about what I was talking about.
I wasn’t primarily disappointed with the government’s year-to-year performance when it comes to the sustainability in revenues.
Most years, we’ve been making more than we spend — the problem is that we’re spending hand over fist.
And the question is whether or not that spending will be sustainable in the future.
More to the point, are we growing accustomed to a standard of public service that will be impossible to maintain? And are the revenues we’re enjoying now even close to sustainable?
To be clear — are we spending more than we are taking in? No, we are not.
But when it comes to current account spending, between one-third and one-quarter of all of the money we’re spending is coming from offshore oil revenues. From
a finite, non-renewable resource. Think of it this way: oil is like a great big bank account, a provincial inheritance, and every year, we drain a huge chunk of that account — even though it’s not the property of just this particular generation, but of all residents of the province, including our children and grandchildren.
We’re spending the nest egg by buying roads and new schools and other depreciable assets.
Have we saved it? No. Have we invested it? No. Have we kept any little bit of it aside for those who will come along in this province after we’re long gone? No.
Have we even had the decency to put our noses to the grindstone
and do our best to eliminate the province’s debt, rather than simply paying down a chunk of it? No.
I’m not alone in pointing out that the province is facing a serious reckoning, and in the relatively near-term.
Vic Young’s royal commission on this province’s place in Canada outlined in great detail the coming decline in oilfield production from the province’s producing fields, and managed to warn government about that danger even before the windfall days of high-priced oil began to catapult government spending ahead.
Auditor general John Noseworthy has pointed out the dangers of depending on oil for a third of the province’s current account spending, citing the risks of either diminishing supply or, less likely, a dramatic fall in oil prices.
Economist Wade Locke has forecast not just a large increase in the province’s deficit spending in the next few years, but the possibility
of a massive one. Recently, Locke argued the government’s debt could be up to $10 billion within the next 10 years. By 2020, current account surpluses could end up as annual $1.6 billion deficits.
“If we don’t start dealing with it, it will become quickly unmanageable. … I hope not only government heeds this message, but the rest of the province does as well,” Locke has said.
Heck, even the province’s finance minister, Tom Marshall, has pointed out that we can’t keep spending like this — except that, well, we have.
And yes, I’ve certainly been nasty about politicians and their refusal to take the bull by the horns and spend considerably more time investing a one-time non-renewable birthright in this province into more than just next year’s mega-paving-economic-stimulus effort.
At the same time, I do recognize those same politicians are merely doing the knee-jerk bidding of the constituents who elected them — and that the current government is playing catch-up with public services that slipped when cash was short and cutbacks were the norm.
But what happens when cash is short again?
What do we expect to fall back on?
I’m harder on the politicians because they’ve been elected to do a job — and that job is not just to look after the well-being of residents of the province this year and next year.
When you’re using a one-time source of revenue as a backstop, you have responsibilities beyond this year’s budget and whether you can pay for the latest spending increase.
Maybe I’d rather be a curmudgeonly ant than a starving grasshopper.
But I forgot — that’s just hateful talk.
Russell Wangersky is The Telegram’s editorial page editor. He can be reached by email at rwanger@thetelegram.com.
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Ed, these comments are shockingly incorrect. Just completely over the moon. Even for someone's who's analyses and comments are always biased, 10 time out of 10, these statements are amazingly incorrect. Goverment bonds (debt) has been paid off for several years. Billions has been paid towards provincial maturing bonds, with no new borrowing as in prior years. This is the debt that interest payments are made on. Just simply have a look at the financial statements. As for the accrued pension liability, yes, it is still unfunded, and changes based on how people think the markets will do. But remember the whole $2billion cash payment for the federal goverment went completely towards this fund. You also made incorrect comments about assets and liabilities and bascially, budgeting. You only look liabilities, andd say cash is really ear marked for spending so it doesn't count. You conveniently ignore revenuse/income. If government thinks there will be no revenue, then they can't really ear mark cash for spending now can they, unless they borrow, which they haven't. You also say they used cash to eliminate deficits in prior years. I don't think you understand what a deficit actually is and what debt actually is, but of course that doesn't stop you from lecturing about it. You can't "drain your cash reserves" to reduce a deficit in prior years. Either you have less revenues coming in than expenses - or you don't. And extra revenue from this year, doens't go towards a mythical deficit bank account from two years ago. So basically, 1. you can't "just look at liabilities", and 2. Those liabilities have been going down. Pure, simple, fact. Even your "power of persuation" you like to lecture about can't pull the wool over the eyes of people with your confusing sentences on this issue Ed.