How Bad is Our Financial Situation?
In a line? Interest payments on debt is our second biggest expense right now. We owe over 14 billion: that’s the highest level of net debt in the Province’s history. And it’s going up.
All these taxes, trimmings, fees, and streamlining-layoffs in governmental departments haven’t been for nothing. We’re knee deep in crippling debt, and the interest payments are preventing us from marching forth in to a good future.
Wrap your mind around this: the second biggest expense for our government right now isn’t healthcare (like a new mental health institution!) or fabulous employment initiatives, nor anything approximating services to improve our collective joie du vivre — instead, it’s interest payments on debt. . As a taxpayer, that should outright depress you.
Presumably, we’re here because of our history of electing politicians who made poor financial decisions, and for putting all our eggs in the oil basket. Or if you’re open to accepting the blame, we’re here because we force our politicians to focus on short term gain, by only electing candidates who promise you everything NOW (even if that means austerity measures later).
A population wouldn’t elect a candidate saying “we’re screwed you all have to pay for it!” But that’s the truth of it: we’re screwed and we all have to pay for it. Because money doesn’t grow on trees. It comes from taxpayers’ pockets, fee revenues, and efficiently streamlined industries.
What’s the Plan Again?
When the austerity budget dropped last year, we were told The Liberals were handed a deficit of $2.2 billion from the PCs, and if they did nothing, that number would jump to $2.7 Billion.
The deficit was largely attributed to manic overspending when times were good + a steady decline in offshore oil royalties we were expecting (with crossed fingers as much as hard logic). So Cathy and Dwight dropped some big truth bombs and austerity measures on us last year. Some of which stunk more than others, like their justifying the pittance saved of closing libraries in a shockingly illiterate province.
Their end goal was to increase annual revenue for government, and reduce its expenditures, with the hopes of being out of debt by 2022–2023.
Is the Plan Working?
Well, yes, if the goal is running a government like a business. The deficit is down from 2.2 billion to a revised 1.1 billion.
“I am happy to announce that we are currently ahead of our forecasting in terms of deficit projections,” Bennett said an hour ago, “and are on track to return to surplus in 2022-23.”
To meet her own targets for the year ahead, Bennett had to lower the deficit to $800 million-ish this year, and the final figure for the 2017-18 deficit is projected to be $778 million.
They attribute their success to “focussing on a stronger economic foundation and a more efficient public sector.”
But is the goal to run a government like a business, and to get us out of debt, or is it to come up with brilliant innovative ways to make us make money, have jobs, and a self-sustaining economy?
Some Good News from the Budget Announcement:
The Gas Tax is Cut
“Beginning on June 1, 2017, gas tax will be reduced by 8.5 cents per litre; on December 1,it will be reduced by a further four cents per litre, for a total reduction of 12.5 cents per litre by the end of the calendar year.”
The Budget Had No New Taxes or Fees
Not really a surprise, because what was left to tax? “Good news” might have been a lowering of more fees and taxes, but hey, this is working, and the end of debt is hypothetically near.
Good News for Seniors
The Provincial Government will invest $120 million to maintain the Newfoundland and Labrador Income Supplement and the Seniors’ Benefit.
$ 3 Billion Infrastructure Plan for the People
“Through a $3 billion multi-year infrastructure plan, government will invest in education, health, buildings, as well as transportation and municipal infrastructure. These investments, which leverage federal, municipal and private sector funding, are expected to generate an average of $560 million in annual GDP and the equivalent average of 4,900 full-time jobs annually over the next five years.”
But Have the Minded Their Spending?
There is still some muttering from intelligent, rational people about government spending. Namely, that since dropping their 2016 austerity budget, some say there’s been no significant change in their spending. Without reductions in government spending, there can’t be as much in the way of tax and fee reductions. Math is a balancing act. And it was, after all, years of unchecked overspending (exasperated by drops in oil’s value) that got us here.
But HOW CAN an NL Government Mind Their Spending? It’s a Pickle
Newfoundland needs its rural communities to be less financially dependent on it, or else it’ll always bleed financially. Saying so makes everyone uncomfortable. And we’re not willing to confront it for fair reasons. It’s a gushing expense no one’s been able to solve because we all want a Newfoundland & Labrador that looks like the one we currently have.
But so long as we’re running things like expensive roads and electrical into countless tiny communities that generate little money, we’ve got a unique spending problem. Naturally, creditors are warning the government about its spending right now, but we live on an island where most of our communities rely on government spending.
Expensive actions, like putting jobs and services in remote towns, benefit a community, not the province’s bank account, making it near impossible for the government to be a moneymaker. Per capita expenses in NL are the highest in Canada, by a lot.
If We Freak Out Credit Lenders, We’re Over
If creditors look at government’s actions and see gross financial negligence, naturally, we’re unlikely to get another loan. But we need more loans, no matter what course of action we take. We’re so in debt, we have to keep borrowing, big time, for years to come. So, as much as no premier and fiance minister wants to piss off the people, it needs to act in a manner that, first and foremost, looks good on paper to the money lenders. Or it’s all over.
With regards to borrowing, it was announced today that borrowing requirements have been reduced by $2 billion, to $400 million.
One Year More Graceful:
Government Did a Better Job of Reassurance and Communication
The tactless and poorly communicated manner in which government dropped its austerity budget shocked people into protests and panic last year. There was no plan communicated, just “The Sky Is Falling! We’re Coming For Your Money! Run!” It left people petrified, and pinching pennies to the point of slowing the economy.
Seems they learned a lesson. Today, we’re still paying the same fees and taxes (minus the soon-to-drop gas tax), but there’s certainly less outrage, and far more hope and understanding from the populace, now we know there’s a plan and we’re told it’s working. Cross your fingers, I guess. It’s the Newfoundland tradition for long-term planning.
Still, Austerity: Even If “It’s Working” It Lacks Innovation
While it’s all sounding like positive news that the austerity budget it working, it still is what it is: an austerity budget. With no mitigation beyond the gas tax.
“There’s no plan for growth, and no job strategy unless you count the projection of an 18 per cent unemployment rate by 2021,” NDP’s Earle McCurdy said today. “They haven’t just slowed the economy with this budget; they’ve put it in reverse. Look at the indicators they provide: housing starts going down, disposable income down, population numbers down. The Liberals are showing a remarkable lack of imagination. Worse, they’re showing no signs of learning from past mistakes. Once again, we’re relying on an increase in oil prices to save us. People were expecting worse, so they’re inclined to think of this as good.”
I mean, we are still taxing books and closing libraries. It’s pretty embarrassing.