What a difference a year makes

Russell
Russell Wangersky
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Today is July 24. Yesterday, then, was the 23rd.

And on the 23rd, Premier Kathy Dunderdale called the media together to tell them that, with the continued low price of oil, the provincial government is suddenly in a fiscal jam.

We may not stay on deficit targets this year, and the government is talking about tightening belts.

Worse, the province is also looking at the potential for a $1-billion current account deficit as early as next year if oil prices stay weak.

Not unexpected

It’s not surprising: at times, oil money makes up as much as one out of every three dollars the provincial government brings in.

That makes us, whether we like it or not, oil speculators.

Without as much as a major oil stake in a project, our fiscal performance is tied, not to the commodities market, but to one single commodity.

It’s something that, during the good years, the provincial government has, well, blithely ignored.

Old news

It’s also something that has been pointed out for years.

Precisely one year before Dunderdale’s warning, I wrote in this space: “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 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.”

Ever-growing spending

Why was I writing about it?

Well, during the first eight years of the latest Tory government, provincial government spending had risen by 83 per cent.

The increase in provincial spending was outstripping the national rate of inflation by some 400 per cent. It has been a regular topic of mine.

Also in 2011, I wrote, “For several years, the province’s auditor general has written about the same thing. There’s only so much oil, and we’re overdependent on it — when either the price falls or the supply dwindles, we’re in for extremely tough times, and, the auditor general points out, we’ve done little to mitigate that. … But there’s no sign that the mindset is changing. It is fiscally irresponsible to keeping doing this. We have to lower our expectations and our expenses — and if we don’t do it now, circumstances are going to do it for us. Truth is, that’s old news. But there’s no sign the provincial government has ever heard it. Another trip to the bank, another withdrawal. Good thing money grows on trees.”

I’ve been writing about it for years.

But enough of the “I told you so’s.”

Instead, ask yourself one simple question: if, when oil prices are high, you repeatedly pat yourself on the back for your strong fiscal stewardship, whose butt are you going to kick when those same prices fall?

Russell Wangersky is The Telegram’s editorial page editor. He can be reached by email at rwanger@thetelegram.com.

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Recent comments

  • Too late
    July 24, 2012 - 23:48

    Anyone who still believe in the 'fiscal stewardship' of The Williams government needs their head examined.

  • Eli
    July 24, 2012 - 14:13

    Yes, Winston. Those greedy CEO's cost whole countries to pay a price. What's happening in NL is up close & personal. God, are Dunderdale and Martin at Nalcor nuts? Stay on their cases Mr. W.

  • Winston Adams
    July 24, 2012 - 11:26

    I wonder. Nalcor is spending 15 million a month on a project strongly tied to oil prices going up, but the reverse is happening. Can he be held personally responsible by continuing to push this project in light of unreasonable risk? Shoud leadership include acting on strong signals of increasing and probable unacceptable risk at this time? To not take corrective action seems like the tunnnel vision a lot of big bank CEOs had a few years ago that helped destroy the world economy. In this case , it's our economy.