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Our squandered pride and prosperity

By: | May 7, 2015

After reaping upward of $20 billion in offshore oil revenues in a decade, we have little to show for government’s reckless spending. After years of great promises wrapped in fierce pride, the PCs have placed us in worse fiscal straits than before they took office.

Shannon Reardon
Politically Speaking addresses political issues in Newfoundland and Labrador.

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In its first budget speech the Danny Williams administration warned Newfoundlanders and Labradorians that despite entering an era of unprecedented wealth from offshore oil revenues, "a period of restraint would have to be endured to turn the deficit momentum around." As announced in the 2015 budget last week, and after more than a decade of governance by the PC Party, the province is running a roughly $13 billion debt. Photo: Andrew Spearin.

The people of Newfoundland and Labrador got quite the rude awakening and reality check last Thursday, budget day. Or, rather, it was a doomsday for us, as we will face the next six fiscal years, at least, hemorrhaging red ink. And shockingly—or not—the Paul Davis Tories proclaimed this budget to signify a “promising future.”

Yes, a promising future of consecutive deficits and mounting debt.

Now, let us travel back in time for a moment—11 years to be exact—and look back on some rather prescient words from the finance minister in Budget 2004, then-Premier Danny Williams’ first budget:

When we came into office less than five months ago, our government fully expected to find a serious fiscal situation for 2004-05. But the more fundamental, and unexpected, problem was the magnitude of the deficits projected for the coming years, which would cause the debt to grow to a level that would compromise the fiscal integrity of the province.

It became clear very quickly that the deficit could not be eliminated by revenue growth alone as stated in the 2003 budget speech and that a period of restraint would have to be endured to turn the deficit momentum around. Mr. Speaker, no responsible government can ignore the stark arithmetic.

It was equally clear that we would have to refocus government to deliver enduring public services at lower costs. To be sustainable, government will have to become affordable.

The people of Newfoundland and Labrador understand that we have reached this critical point in our history as a province of Canada and that government must act now to put its fiscal house in order.

But that was the furthest thing from what Danny Williams and company did.

Instead, they began a years-long bonanza of overspending, complete with bombastic and self-serving nationalistic rhetoric every time Williams opened his mouth.

Muskrat Mission

Concurrent with this grossly unsustainable overspending, Williams tried for years to strike a deal with Hydro Quebec on the Lower Churchill.

Then, finally, in November 2010, after years of unsuccessful negotiations with Hydro Quebec, the Williams government and our Crown energy corporation, Nalcor, inked a deal with the Nova Scotia government and Emera Inc. to develop a hydroelectric dam at Muskrat Falls in Labrador at a cost of $6.2 billion — then.

And we spited the Quebec “bogeyman” that Williams had us strategically pitted against. And, like that, Danny hightailed it out the door, to the shock of the province.

Today, Muskrat Falls, a megaproject rammed through with no Public Utilities Board oversight, is projected to cost in the ballpark of $9-10 billion right now. “Lowest-cost option” indeed.

Pride and “Treason”

To have spoken out against Williams during his tenure—on anything really, such as the case of Grand Falls-Windsor lawyer Mark Griffin—was to put yourself out there as a “traitor“.

This “treason” was essentially not sharing in the Williamsian pride that he had, as some say, given us as though we had never had pride as a people. Demagoguery at its finest.

As Dalhousie University historian Jerry Bannister noted: “Like the Smallwood era, the [Williams] period of Conservative government has also seen a palpable fear of retribution for speaking out politically in St. John’s … Such fears [were] fuelled by a toxic mix of nationalist rhetoric and talk-radio politics. Accompanying this patriotic correctness was an optimistic correctness that viewed public skepticism towards government policy as unhealthy negativity towards the province’s future.”

So, if you expressed concern about Muskrat Falls, the December 2008 Abitibi mill expropriation and its subsequent financial implications for the province, oil deals like Hibernia South (just ask Randy Simms; click ‘play’ below) and virtually anything else Williams and his government was doing, you were effectively persona non grata.

You had no “pride” in what Williams was doing for us.

During the Williams, Kathy Dunderdale, Tom Marshall, and now Paul Davis years, our province reaped upwards of $20 billion in one-time offshore oil revenues. Today, we have virtually nothing to show for it and we are now running a billion dollar deficit, as well as an approximate $13 billion—and growing—debt.

It begs the glaring question: Where did all this money, all this prosperity, go? And what, exactly, was it all spent on?

Well, here is one key expenditure: It is obvious that the money earmarked for Nalcor grows year after year, as does their spending of it. This year, while the province runs a deficit of $1.1 billion, in the budget Nalcor received some $760 million. Are these “strategic investments,” as this money is referred to, all related to Muskrat Falls?

If so, we are essentially into this billion dollar deficit, and our growing debt, to keep Muskrat Falls chugging right along. Certainly seems that way, and for years now.

I can’t say we should feel “proud” about being a place where we have seen billions upon billions of dollars in a relatively short period of time—of one-time funds, no less—recklessly overspent with nothing that inches us any closer to being a sustainable economy and society, that which we were promised time and time again since 2003.

 We are in a recession…that was utterly avoidable if our money had been prudently managed by true fiscal stewards.

Nor should we feel “proud” of the $1.1 billion deficit this fiscal year and the staggering $13+ billion debt this province of 500,000 people — and dwindling — is currently saddled with.

It is frankly shocking.

Nor should we wear with “pride” the reality that most Newfoundland and Labrador families are struggling more to keep everything going, to merely afford the essentials.

I cannot imagine the hardships faced by lower income families in this increasingly more expensive province, now complete with an economy that has hit the skids for the foreseeable future, thanks to tremendous government fiscal mismanagement over many years now. Mismanagement that was entirely preventable.

We are in a recession now in Newfoundland and Labrador, according to at least one economist. A recession that was utterly avoidable if our money had been prudently managed by true fiscal stewards.

For after the nest egg that was totally blown, primarily by the very person who consistently trumpeted Newfoundland and Labrador as a booming province with boundless prosperity and who was all about a deep, unabashed pride in our province, it is quite a bitter and crushing irony for us all to swallow. And to pay for.

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