Don’t shoot the messenger

Russell
Russell Wangersky
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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.

Geographic location: Canada

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Recent comments

  • thiago daluz
    May 02, 2013 - 15:01

    A courier in Toronto may be able to rise from the ashes of this wasteland, able to shape the world...for better, or worse.

  • Jim Williams
    July 26, 2011 - 08:51

    The problem is there is no emotional attachment to the future, politician's cannot see past a four year life expectancy and the business sector cannot see past the next quarter !

  • Eli
    July 25, 2011 - 09:12

    Great to read some "tell it like it is" comments as depicted on this page. Perhaps what DON neglected to add is the silence from the so-called intelligentsia in our society. Why? Because they're all scared as hell their dependence on government handouts and appointments will dry up if they speak out. Speaks volumns about the fighting Newfoundlander.

  • baieboy
    July 24, 2011 - 21:43

    Stanley. The $4 billion plus in dept reduction was really just a bail out of the pension plans. $3 billions for the teachers plan alone. From what were hearing more billions will be needed to keep these pensioners happy. Most of these thousands of pensioners spend 10-20 years drawing pensions before they reach 65. Look for a "dust up" after the election

  • David
    July 24, 2011 - 07:35

    Everyone loves a good party, and Newfoundland's just started. No one wants to think about the mess that will need to be cleaned up afterwards....here's a "sobering tought" for those willling to put down their glass for a second: when the oil is gone, and the fishery is still in tatters, all this place will have is a city with a zillion empty hotel rooms at the edge of the nowhere. Picture St. John's between about 1975 and 1990.....that's "self-sustaining" St. John's. So enjoy the fire truck giveaway, the government-jobs-for-everyone, and reminisce fondly of the halcyon days of Danny's tantrums.....with the spending and short-term bribery ideas coming out of Confederation Building today, we're squarely headed for one vicious hangover in 15 or 20 years. That sounds like forever to 18-year olds and politicians, but it isn't ---- the first group will then be in mid-life and looking for non-existent jobs, while the other will be the ones enjoying the only Hibernia-financed legacy of any significance: a quite comfortable pension and retirement.

  • Ed Hollett
    July 23, 2011 - 19:24

    The counter-argument you present would be reasonable, Russell, if it were actually true. But it isn't. The current administration has not reduced the public debt by the amount claimed. What they have is a pile of cash that is earmarked for one bit of spending or another. When the accountants look at liabilities (what the government owes) and what it has on hand at the moment in assets (including the cash) the result looks wonderful. But since the cash is actually all but spent, you really have to look at the total liabilities. And once you do that, the tale of the miracle starts to unravel. You can see this most clearly, by the way, in that the government drained those cash reserves to cover deficits in the past couple of years. The debt went up accordingly, even though they didn't borrow a penny from the banks to cover the shortfalls. What the counter-argument you gave also misses is that the annual spending increases are built on volatile, unreliable and unpredictable. They may be okay in any year where there were cash windfalls, but when oil prices drop again - as they inevitably will - the government will be caught short. That is what makes the whole thing an unsustainable house of cards waiting to fall in on itself and us. Once you realise that, adding something more than $6.0 billion on top of that doesn't seem reasonable either. Stay the course, Russell. Don't be dismayed by the hecklers. Your arguments are well founded and you have the greater good in mind. People will look back on this time and wonder how people ignored you.

    • stanley
      July 25, 2011 - 09:00

      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.

  • DON
    July 23, 2011 - 11:46

    As a come from away who has lived for years and established considerably deep roots in Newfoundland, Mr. Wangersky has been eligible for some time to be conferred with the title of honorary Newfoundlander. Mr. Wangersky must know by now that Newfoundlanders are a very opinionated lot despite the fact that they have not taken the trouble to become educated in the facts and figures of what their unshakable opinions are about! Newfoundlanders are a tribal and feudal bunch and they don't take kindly to those whom they think disparage their God like leaders or their all nature belongs to me way of life. If the economy or the environment is harmed by the way things are done here, so what? If some individuals have their jobs, freedom or property stolen from them by the Government, so what? The Newfoundland attitude is and has always been, I'm all right Jack, too bad for you! In the past, well intentioned people like Mr. Wangersky, like Harold Horwood, like Ray Guy and good folks like that, have tried, mostly in vain to warn Newfoundlanders about corrupt politicians, large majority Government, unjust convictions, Mount Cashel, Eastern Health breast cancer testing mistakes, Sprung Greenhouses, cover-ups, wasteful spending and poor economic planning which would ultimately come home to roost. Nobody listened until these problems exploded and big trouble came home to roost. So it is here, Newfoundlanders will deride you, laugh at you, insult you, ignore you, punish you and if you persist, will even threaten or assault you until you take the hint and shut up. Newfoundlanders don't care. Newfoundlandes don't know and don't want to know. Newfoundlanders don't want to be told anything.Newfoundlanders want Uncle Ottawa or Daddy Confederation Building to look after them with no questions asked. The Government has at least one snitch living in every town and village in Newfoundland and Labrador who is willing to rat on his neighbors,blank strangers, his own family or his mother. This is a wink and nod society. So, when the bottom falls out of the Newfoundland economy, as it will, and all hands are headed West or North or straight to H.E. Two Sticks, at least you can say you tried to tell them so. A small consolation, but at least it will make you feel better. Good try Mr. Wangersky, keep up the good work!

    • David
      July 24, 2011 - 09:04

      Standing O. I have made a copy of this post for my files, thank you.....an honest, embarassingly accurate summary of this place.

  • Graham
    July 23, 2011 - 09:16

    Some people just cant handle the truth about this government, Kep up the good work Russell.

  • baieboy
    July 23, 2011 - 09:16

    Oil money not the property of just this particular generation, but of all residents of the province, including our children and grandchildren. So far the bulk of "our oil money" has been spent on raises & pension bail outs for our civil servents.

    • stanley
      July 23, 2011 - 21:59

      over $4 billion has gone towards the provincial debt. Home heating rebates, income tax cuts, new long-term care facilities, more police officers, higher wages for nurses and doctors, money for aqua culture, etc, etc, etc. Yeah, more can be done baieboy. Maybe someday we'll all get a million dollar check in the mail.