Tuesday, December 11, 2007

The Budget and Equalization

Some of my first posts provided a bunch of neat graphs about the oil industry in Newfoundland.

This strikes particularly close to home in the wake of today's budget news. The province is now projecting an $882m surplus, which in percentage terms is something like Ottawa running a $50b surplus. Completely on the strength of commodity prices. This is going to cause some real headache for government. Four years ago, striking government workers agreed to a fairly harsh pay deal. Something like 0%/0%/3%/3%? In that neighbourhood. Nurses also. Perhaps some other groups. There is going to be a massive union move to grab hold of some of this.

Plus, it's temporary. We have maybe six years of decent production, and then it falls off a cliff. All Hebron does is make the cliff a little less perilous. But good luck telling that to anyone. Personally, I think denting the debt makes sense, remain amazed the government is willing to use all this cash on such long-term goals, and hope they've got the political capital to stay the course.

We also conceded the equalization fight - kinda - by utilizing the new plan, which counts nonrenewables. The argument does remain from the provincial perspective that there should be another deal on the table, but there's no chance of that ever happening.

News worth keeping on eye on, but there's little to analyze.

1 comment:

Greg said...

The union demands for a greater cut certainly can't be far off, if experience has taught us nothing. But fortunately, I think people have finally grasped at least some basic comprehension that "paying debt = good, more debt = bad." The election results spell out the new dawn of rationalism - the entire body of Liberal/NDP legislators can now commute to the House of Assembly in a Toyota Yaris hatchback with space to spare. I took that as a good sign that people are responding to the logic of debt reduction and fiscal responsibility. Plus, Open Line hasn't been burning up with incensed public-sector union cronies wondering why Danny didn't cut them a big cheque, which may be most surprising of all. I guess now that those 3%s are kicking in, they're content to see raises after having gotten used to the 0%s.

As for equalisation, at least it brings some peace to the fedprov relationship. I never liked being displeased at Harper over it.