Russell Wangersky: Our ship’s coming in soon, honest


Published on January 23, 2017

Former premier Danny Williams addressed the St. John’s Board of Trade at a luncheon at the Sheraton Hotel in St. John’s Thursday.

©Joe Gibbons/The Telegram

So, former premier Danny Williams was at the St. John’s Board of Trade last week, saying people who are negative about economic issues in this province need to be answered. I applaud him for his positivism: after all, every carnival sideshow needs its barker. Sorry, that sounds a little harsh.

Russell Wangersky
File photo

What I mean is that optimism, sometimes even blind optimism, is needed to keep the proletariat spending their scarce dollars, so that the economy keeps turning over. People don’t go out and spend money on property, for example, if they are convinced that property values are in mid-fall. They don’t buy new cars if they fear for their jobs. Pummelled by new taxes and fees, they may go into the consumer equivalent of the fetal position. But if someone they trust tells them things will be OK, that the darkness will pass, maybe they’ll go out and buy.

But every carnival sideshow also needs someone watching the books and questioning whether the latest sideshow addition is covering its costs. If you lose money hand over fist on the cotton candy stand, you’ve got to figure out where the money’s going, or you’ve got to shut it down.

Saying, “don’t worry, the stand will bring in $500 million sometime in the future” and leaving it at that, doesn’t really cut it.

That’s sort of what our former premier said on Thursday about Nalcor, the energy warehouse that he conceived of and set up; that sometime in the next five years, the energy warehouse will cough up $500 million in dividends.

I would certainly hope so. After all, if current budget projections hold true, by the end of this fiscal year we will have invested $3.576 billion in cash in Nalcor, and have never once seen a return in its nine years of operation. (That’s not counting the money borrowed to build Muskrat Falls — that’s a completely different, and even more potentially catastrophic, problem.)

Getting a “dividend” of $500 million somewhere over the next five years would mean 14 years of investment in Nalcor — if not one more dollar of taxpayers’ money goes into it — bringing a return of pretty much one per cent per year. You could do better in a savings account.

If we had invested that money at the rate we’re paying for the loans we’ve taken out for Muskrat Falls, for example — 3.8 per cent — $3.576 billion would be bringing in $135.9 million a year, or, over 14 years, $1.9 billion instead of a paltry $500 million.

So, $500 million is a start — and if everything goes well, it’s a start that will continue to grow. At this point, though, we’re nine years in and only deeper in debt, at a time when the last thing this province can afford is more debt financing.

But, admittedly, that is a pretty pessimistic and negative view.

It would probably sink more boats than it would float.

The investment is made — better to hope for a return, though none has appeared yet.

The real issue is that there are serious and fundamental problems in our economy right now: we are spending far more than we are making, and the only real saviour would be a significant increase in oil prices. Closing our eyes and passing all the debt to our kids isn’t an option. Drastic cuts in services have problems, too — they will shrink spending, and then, the carnival will be in real trouble.

Members of the St. John’s Board of Trade know there’s trouble because they are seeing the impacts on their bottom lines, even if they would rather clap for a more optimistic view. Heck, they have to clap for a more optimistic view. I get that.

But I know something else as well.

You can put lipstick on a pig.

You get a pretty pig.

It’s still a pig.

 

Russell Wangersky is TC Media’s Atlantic regional columnist. He can be reached at russell.wangersky@tc.tc — Twitter: @Wangersky.