Nfld. & Labrador

Boom, bust and elections: The politics of Ross Wiseman's budget

Massive hiring seemed like a good idea when oil was in the triple digits, but the PC government is now dealing with years of increased spending, writes David Cochrane.
Finance Minister Ross Wiseman laid out a financial plan on Thursday in which the provincial government won't return to surplus for five years. (CBC)

The Progressive Conservatives were having a pretty good budget week, right up until they got to budget day. 

The government used a series of pre-budget announcements to set the news agenda and spell out some clear policy direction. It's as if the Tories woke up and remembered they were still the government.

But on budget day, an endless series of grim numbers took over the news agenda, telling a story of financial hardship that most people thought was in the past. The PCs hoped that spelling out a five-year plan to return to surplus would raise questions about what the Liberals would do.

Unfortunately for the Tories, the biggest question it raised was "How did things get so bad?"

Largest deficit in history

After a decade of unprecedented revenue growth this budget raises fees, hikes taxes, grows the debt and projects the largest deficit in the province's history.

The Liberals need to tell the electorate what they would do if they form government. The Tories need to explain why they deserve to stay. 

Less than two years after former Premier Tom Marshall referred to Newfoundland and Labrador as being in a "golden age," the province is facing five straight years of real GDP decline and projecting net job losses until 2019.

From the premier on down, the Tories have blamed all of this on the sudden plummet in oil prices and other commodities that have stripped more than a billion dollars out of the government's revenue streams.

There is a lot of truth in that statement. But it conveniently ignores the role the government's own spending has played in their current fiscal misfortune.

From 2007 to 2010, oil prices exploded into the triple digits and the public sector expanded at almost the same rate.

Dwight Ball came out swinging against the government's plan to hike the HST. (CBC)

As well, by the time record oil revenues hit the province, the Tory caucus had bid farewell to any MHA who could be described as a fiscal conservative. Loyola Sullivan and Beth Marshall were long gone. There was no voice for restraint at the cabinet table … at least none loud enough to do battle with a powerful and populist premier.

The civil service was given a record pay raise of 8-4-4-4. That was followed by a hiring spree so large the government had to buy new buildings and expand the Confederation Building parking lot to handle the new cars showing up each morning.

The contract and new hires not only bloated the payroll, they also added to the government's future pension and severance obligations. The end of mandatory retirement encouraged civil servants to delay retirement to get every single cent of that raise and enrich a pension entitlement that was based on the employee's best five years.

When money seemed endless

It all seemed like a good when oil was in the triple digits. The government's thinking got soft when the economy was booming and money seemed endless.

And now, nearly 12 years after winning power, the government is forced to raise taxes and run a record deficit, just months away from an election where the PC polling numbers are as grim as the 2015 balance sheet.

The PCs goal this week was to put the Liberals on the defensive. That was apparent on page 2 of the budget speech when Ross Wiseman dared the government's detractors to explain what they would do instead of offering blanket condemnation.

The Tories are frustrated with the Liberal game of policy peek-a-boo. The opposition knows just enough about the province's books to criticizes government decisions, but not enough to offer specific alternatives of their own.

They may have to cut and do layoffs. Or they may not. It depends on what they find when they get control of the finances. They are Schrödinger's Opposition.

More red than a Liberal election bus

To one degree the PCs got what they wanted this week in Dwight Ball's immediate condemnation of the HST hike. Ball slammed it as a job-killer and promised to repeal it and run larger deficits for more years rather than increase the tax from 13 per cent to 15 per cent.

It's a popular promise. But an expensive one that punches a $180-million revenue hole in a budget that already has more red than a Liberal election bus.

The Tories cite the HST promise as proof that the Liberals are making up policy on the fly. They view it as further evidence of the luxury all oppositions enjoy of hypocritically slamming cuts while at the same time decrying large deficits.

But at the same time, the record deficit and ballooning debts that the Tories are projecting feed the Liberal narrative that the PCs have squandered the oil boom, and that — despite infrastructure upgrades and program expansion — Newfoundland and Labrador is back to square one and facing a new era of austerity.

You can see the battle lines being drawn for the official start of the upcoming election campaign.

The Liberals need to tell the electorate what they would do if they form government.

But the Tories need to explain why they deserve to stay.

Thursday's budget has made that a tougher sell.

About the Author

David Cochrane is a senior reporter in CBC's Parliamentary bureau. He previously wrote for CBC Newfoundland and Labrador.

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