Of late there has been much hoopla surrounding the announcement by newly minted Minister of Finance, Jerome Kennedy, that NL’s deficit is ballooning to surprisingly high amounts.
How high? $4 billion high.
That is a gigantic burden for this province. Ed Hollett compared the supposed current mess to the string of deficits which led to the collapse of responsible government in Newfoundland and Labrador in 1934.
Pretty heavy stuff. The proverbial sky appears to be falling.
Let’s just take a breath here for a second though. We’ve seen this sort of thing before. It was not that long ago when we heard that there were going to be 3% cuts across the board and hundreds of layoffs for government employees in 2012. Then the budget came down and despite it being generally a ‘bad news’ budget, the PC’s came out looking okay because hey, it could have been worse. There were no layoffs.
Another example is the long anticipation for the Decision Gate 3 numbers on Muskrat Falls. In the long wait, it was apparently “leaked” to known PC Shawn Skinner (who was the Minister of Natural Resources not long before) that they would be around $8.5 billion. Again, everyone was buzzing. The final numbers came in at $7.7 billion. Still a sizable increase from DG2, but hey, it could have been worse, right?
This is not unique to NL either. A three second Google search revealed this article, which details the usage of the tactic by former US President George Bush.
The Administration announced last week that the federal deficit will reach a record $445 billion this year. Self-proclaimed “deficit gladiators” immediately threw garlands at their own feet, hailing the new numbers as proof of victory over budget busting deficits predicted earlier this year. The White House had earlier estimated a $521 billion budget gap, and the Congressional Budget Office had opined that the deficit would be about $477 billion. Viewed in that light, these new numbers are an improvement, but, lest they overvalue their accomplishment, we must whisper into the conqueror’s ears: “So what?” The new deficit numbers are more than $700 billion worse than the administration projected for this year in its first budget from 2001. (emphasis added)
The White House attributed this year’s “improvement” to the collection of $82 billion more in revenue, reflecting stronger economic activity.
It’s a pretty nifty political strategy. Public servants are nervously biting their lips province wide wondering how much of a cut they’re going to have to take, and this will serve to make them more anxious. By framing the climate in such a dire way, the government can potentially take advantage of that anxiety and coax them into concessions that perhaps they would not otherwise take.
Not to mention, this news from Kennedy essentially undercuts the main message in the opening salvo from NAPE in the public campaign on collective bargaining which asked, “Have province? Have people?”. Welp… say buh-bye to have province now.
PC MHA for Mount Pearl South, Paul Lane, gave us a glimpse into the party’s thinking with a recent call on VOCM Open Line. He tried to calm everybody down by saying, at about two minutes in, “I see on the VOCM news stories (they) talk about a $4 Billion deficit in three years. Y’know, nobody is saying the deficit is going to reach $4B in three years, what we’re saying is if we don’t do anything about it that’s whats going to happen.”
Enter the PCs, the knights in shining armor to save us from this imminent doom which they ultimately presented us with.
To be clear, this $4 Billion dollar deficit talk is a worst case scenario and has almost no chance of actually happening. It assumes annual inflation and zero cuts. Cuts are coming. Randy Simms floated a rumor that there will be 12% cuts across the board of government departments (I’ll believe that when I see it).
I’ve already shown you one reason why Minister Kennedy would willingly trot out such doomsday numbers… because they won’t be that bad and he will come out better when the budgets actually come down. The fact that the opposition parties have bit on this hook, line and sinker helps this cause.
But, there are other reasons. While I believe these numbers are in part smoke and mirrors, we have definitely lost our way fiscally. Not $4 billion bad, but the sun is not exactly shining out of our rear ends anymore. Government probably will need to make cuts in some capacity. By shocking everyone with these drastic figures, it’s a ploy to get everyone to buy in.
And, of course, let’s not forget the fact that over 50,000 workers in Newfoundland and Labrador are waiting on a new Collective Bargaining Agreement. This news is probably an attempt to get the non-unionized Newfoundlanders and Labradorians to rally around the government to make the unions cave.
The first part is not a difficult feat. I remember from past strikes, and just conversations with people in general, that people feel that government workers have it too good. Many consider them “lazy” (which is totally untrue, by the way). Getting support for cutting their pay and benefits will not be difficult. Public servants generally get a bad rap from the public at large, generally out of jealousy.
The latter though is another thing. A lot of people are saying the unions mean business this time around. By all accounts the they are ready for war with an apparent $25 million saved up for the battle. The trick will be to keep the picketer’s spirits high, as I know for a fact that many do not want to be on the picket line for six weeks like last time. Public servants are worried and some are considering retiring sooner rather than later due to suspected changes to their pension. Such rumors were given credence in a recent update from NAPE president Carol Furlong when she said the following here:
“Comments in the media and elsewhere on the issue of pensions have created confusion and concern about the status of your pension plan. We caution that retirement decisions should not be made based on these musings by Government. We plan to continue to meet with Government with a view to ensuring the public services pensions are secure.”
You would think that the the union would try and avoid putting apparent signs of weaknesses among the ranks so wide out in the open, but it may also be a sign of strength on the part of the unions where they’re saying, “hey don’t worry, we got this”. It is almost like they are pointing to a supposed chink in their armor saying, “just try it.” The pension issue will be hotly fought over, I think.
One thing’s for sure as far as the government goes. What was once the crown jewel of the PC’s list of achievements is now a stain on their record. They were credited with getting the provinces to historic economic highs only a few years ago and now we’re talking about momentous deficits; quite a turn in such a short period of time.
Smoke and mirrors are short term fixes for the political image but they’ll carry this negative baggage for a while yet. This bait and switch will likely lessen the blow on budget day, but the broader picture does not bode well.