Promise Made, Promise Broken

On Wednesday April 4 economics professor, Dr. Wade Locke of Memorial University, presented the findings of a study into the new federal equalization program and it’s financial impacts on Newfoundland and Labrador.

In the study Dr. Locke examined the 3 options currently available to the province under the revised equalization plan:

1. Maintain the Status Quo as set out in the 2005 Atlantic Accord contract;

2. Adopt the new equalization formula with 50% of non-renewable resource revenues excluded but capped at Ontario’s fiscal capacity;

Or

3. Adopt the new equalization formula with 100% of non-renewable resource revenue included, also capped at Ontario’s fiscal capacity.

According to Dr. Locke the best direction for the province to take under the new regime is to remain under the Atlantic Accord contract until about 2009 and then switch to the 50% revenue exclusion option.

The report states that under the 50% exclusion option the province could potentially pick up an additional $5 billion in the next 13 years over and above continuing on its current course under the Atlantic Accord. But the story doesn’t end there.

This improvement in financial capability is apparently why Stephen Harper, Loyola Hearn and others have been saying the province is better off under the new plan, but Dr. Locke's study also shows that this doesn't mean there is no adverse impact to the province.

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He goes on to say that had Stephen Harper and his government actually changed the equalization formula to exclude 100% of non-renewable resource revenues and not included a cap, as the province’s of Nova Scotia, Saskatchewan and Newfoundland and Labrador had expected Ottawa to do based on Harpers previous promises, it could have meant a further $5 billion dollars for Newfoundland and Labrador over the same 13 year period. $5 billion dollars that will not flow to the province under the new plan.

Dr. Locke based his findings on $51 dollar oil and the projected revenues for existing oil and mineral projects already operating in the province. This means there is also a potential that new discoveries and developments, or a higher average oil price, could inflate those numbers beyond the $5 billion estimated on either end of the equation.

Dr. Locke noted that he conducted his study with the intention of clearing the air and cutting through the federal and provincial political rhetoric surrounding the issue. While he was acting strictly as an economist and did not wish to involve himself in the political debate, I on the other hand have no problem charging into the battle.

Dr. Locke’s study shows that the province will indeed be better off under the new equalization plan, than it would have otherwise been, but that was never the issue from a political perspective was it? The issue was whether or not Stephen Harper lived up to his word or not and if not, would that have a negative financial impact on the province. The answer to those questions are clearly No and Yes. No, he didn’t keep his promise and Yes it will have a negative financial impact on Newfoundland and Labrador.

The study shows that while Newfoundland and Labrador may make some gains under the new forumula, it will still be far worse off than if Stephen Harper had done what he had led the people of Canada to believe he was going to do, worse off to the tune of $5 billion dollars or more.

If you are anything like me, wrapping your head around a number like $5 billion is not an easy task, so let me put it in perspective.

For years Canada was, and to some degree still is, involved in a major dispute with the United States over softwood lumber. In fact it's been the biggest and most contentious single trade issue between the two Countries for quite some time. Court cases have been fought, tribunals and panels struck and the government of Canada has essentially fought tooth and nail with its neighbors to the south over what is considered a major wrong doing on their part.

The financial impact of the softwood lumber dispute to Canada was approximately $5 billion dollars. The very same amount identified as the shortfall to Newfoundland and Labrador between what Stephen Harper said he would do and what he actually did. Yet Harper, Hearn and the entire Canadian government simply expect the province to accept this fact without argument.

If $5 billion dollars is worthy of occupying the massive resources of the entire federal government for years in an attempt to secure it for the people of Canada, imagine the impact of denying the same amount to a small and economically challenged province like Newfoundland and Labrador. Imagine what $5 billion dollars could have done to move the province forward and ensure it a stable and bright future.

Harper Propaganda Machine Swings into High Gear

Today the patchwork Federal Conservative government, formerly known as the Canadian Alliance and the Reform Party, has launched an advertising campaign intended to portray Newfoundland and Labrador Premier Danny Williams's recent newspaper ads as incorrect and misguided.

Premier Williams’ ads, which appeared in papers across the Country, highlighted the broken promises made by the Harper government in its all out pursuit of vote rich Quebec at the expense of other parts of the Nation.

In response to the ads Harper, taking a page directly from the play book of the U.S. Republican Party and current President George Bush has launched ads of his own.

Harper’s propaganda campaign now appears to be in full swing and includes telling the Canadian public that provinces like Newfoundland and Labrador are actually better off under the new equalization plan. These ads, while intended to undermine Mr. Williams credibility instead serve to provide further evidence that the truth simply doesn’t matter to Mr. Harper or his elected officials.

Adding to the stench of his latest tactic, the Harper government has paid for these self serving ads with tax revenue gained from the people of Canada, including the people of Newfoundland and Labrador, Nova Scotia, Saskatchewan, BC and New Brunswick, provinces that all feel hard done by under the new equalization plan.

While the ads may indicate that Newfoundland and Labrador is better off under the new Harper equalization regime, what they conveniently do not mention is that in order to pick up a few million dollars in short term equalization gains, provinces like Nova Scotia and Newfoundland and Labrador are required to give up any future hope of reaping the full benefits of offshore oil and gas reserves.

If anyone can recall the fuss caused when the government of the day tried unsuccessfully to foist the National Energy Plan on Alberta a number of years ago they will likely have a full understanding of where Danny Williams and others are coming from over this issue.

The option presented by the Harper government, rather than truly improving the lot of these poorer provinces, would instead see them sell their future for the few dollars they need to survive today.

While oil and gas revenues are indeed protected in the short term by the Atlantic Accord, these accords are set to potentially expire in just a few years and signing onto Stephen Harper’s new equalization plan will mean trading away future benefits that could be used by the provinces to pay down debt and diversify their economies.

The ads also fail to inform the public that the new system includes an accounting of the property values in each province when calculating equalization. In other words, regardless of how much revenue a province does or doesn’t have available, no matter what the economy is like at any given time, if property values are high or even slow to drop the provinces can kiss millions in equalization funding goodbye.

As BC premier Gordon Campbell noted recently, “Property values in BC went up by 24% recently but our ability to pay taxes didn’t go up by 24%”.

While continuing to pour billions into Quebec to prop up business interests like Bombardier (nearly $1 billion dollars was announced for the aerospace industry yesterday) and to be used for tax cuts for the people there, Harper has essentially gutted any chance smaller provinces have of building strong, self sufficient economies and becoming fully contributing partners in Canada.

Harper may well be willing to flip the proverbial finger at smaller provinces in pursuit of his ultimate goal, a majority government and an iron fisted grip on Canadians, but where will that leave the nation long after he is gone?

Already since taking office Stephen Harper’s neo-republican party has gutted federal funding to the poor, women’s groups and more. He has refused to recognize native agreements. He has forced provinces like Newfoundland and Labrador and Nova Scotia into a lose/lose choice on equalization. He is unrelenting in his attempts to destroy the Canadian Wheat Board and he has cost Canadian investor’s billions of dollars by not keeping his word over income trusts while leaving these companies vulnurable to foreign take over bids.

The judgment of whether or not Premier Williams and others are misguided in their complaints rests solely in the hands of individual voters across Canada, but it appears Stephen Harper is not willing to let that decision happen without an all out attempt to distort the facts in his favor. If this latest attempt by Harper to increase his power of Canadians and the damage caused in just a single year of a Harper minority government doesn’t make people stop and wonder about the future then it may already be too late.

Time will tell.

Harper and Williams Play He Said, She Said

Much has been said by federal and provincial leaders regarding the latest budget out of Ottawa and its handling of equalization. While the Prime Minister claims to have kept his word to the people of Newfoundland and Labrador, Nova Scotia and Saskatchewan, Premier Danny Williams believes he and his people, and by extension, the people of Canada were lied to and deceived in some way. Perhaps even that the Prime Minister perpetrated some sort of fraud on the Canadian public.

The result of this has been a back and forth game of "He said, She said."

No matter what sort of spin might be placed on this by various government spokespeople, analysts and the media there can only be one truth in any situation, but what is it? Perhaps the following can clear the issue up.

Why should Newfoundland's possibility of achieving levels of prosperity comparable to the rest of Canada be limited to an artificial eight year period (the atantic accord)?

Remember in particular that these are in any case non-renewable resources that will run out. Why is the government so eager to ensure that Newfoundland and Labrador always remain below the economic level of Ontario?

The Ontario clause (cap) is unfair and insulting to the people of Newfoundland and Labrador, and its message to that province, to Nova Scotia and to all of Atlantic Canada is absolutely clear. They can only get what they were promised if they agree to remain have not provinces forever. That is absolutely unacceptable.

What is at stake is the future of Atlantic Canada, an unprecedented and historic opportunity for those provinces to get out of the have not status that has bedevilled them for decades.

- Stephen Harper, Nov. 2004

I believe the answer is clear.