Outside of a dog, Groucho once said, a book is a man’s best friend.
Inside of a dog, it’s too dark to read.
Outside of Newfoundland and Labrador, you can read what is going on.
Like the story from the Hill that Jersey Boy Paddick’s plan with Ottawa to raise electricity prices every year, guaranteed for 50 years, came together in a mere three-week rush just before Andrew Furey and his Brain Trust crammed the announcement on top of a planned pre-campaign event with Justin Trudeau.
Plenty of people thought it looked rushed at the time of the announcement in July. They said the same about the Muskrat announcement in December, too. Now there is both that bit of gossip about the Three Week Scramble as well as an access to information response from the province government that looks pretty convincing.
The suggestive ATIP came when someone asked the energy department for copies of briefing notes on rate mitigation they produced up to the end of June. Nothing to give you, came the reply.
Not “we’ve got stuff and it is secret”, which you would hate but understand.
Nothing to give you as in “we didn’t produce anything ‘cause no one asked for anything”, which is what you fear.
Not undeniable proof, mind you. Not crystal clear. There are other possible explanations.
But if you put everything together, you get a clear enough picture that is more likely than the alternatives.
And it is not good.
Just like the clear picture you get if you read the credit reports from Standard and Poor’s and DBRS. You likely heard about the DBRS one, which changed the long-term trend on public debt from negative to stable. S and P kept the negative trend.
Both gave the provincial government a break largely because Ottawa’s electricity rate deal signals that it will bail the provincial government out, no matter what. The implicit guarantee and things the provincial politicians cannot control – like the return of high oil prices – let the bond raters tell the market it is okay to buy bonds from the Newfoundland and Labrador government again.
That hasn’t been the picture the local crowd running the place want to you to see but that is what the bond raters have done for the past couple of decades. They do not exist to keep the provincial government in financial line, by the way. They never did.
Bond rating agencies don’t get anywhere putting companies out of business or governments into trouble, even if that is what the cold reality says should happen. They enable borrowing, which is just as dysfunctional a job as it sounds. They enable debtors to go more heavily in debt. Look at it this way: all the big American rating agencies said ENRON was an investment grade business until a mere four days before the company folded in on itself and sucked tens of thousands of people and tens of billions of dollars down into a muck hole behind it. No company goes under *that* fast. For Newfoundland and Labrador, the bond raters were just looking for Ottawa to wink so they could tell investors it was safe to buy provincial bonds again. Took a while but once they got it the debt enablers were winking to their clients again, too.
To know how the whole thing works look at the guy who used to own DBRS. While he ran it, DBRS enabled both chronic overspending and Muskrat Falls despite the obvious signs either was foolish and the two together were idiotic. Once Newfoundland and Labrador started to circle the drain, the guy started a front group not to save the ordinary people of The Rock and The Big Land but to make sure his former clients didn’t lose money on his investment advice. He insisted Ottawa had to bail them out, which is what they did.
The jerk lured a couple of locals to front the front group that he eventually called the Responsible Policy Group. Wink. Wink. Not a hint of irony, humour, or anything approaching shame or self-awareness or self-consciousness in any of it. You cannot make money in the bond rating business if you have any of those qualities and this guy is worth more than some countries. You can see why.
True to form, the latest reports from the bond raters ignore more than even your average Muskrateer could in 2012. The most obvious is that the Paddick scheme will fall apart under its own weight within a few years. Ed Martin’s only job was to build Muskrat Falls at all (your) costs, which is what he did. Paddick’s only job was to cover his buddy’s ass in the short-term, which is what he did. Paddick and his buddy will be gone by the time the cracks appear, so it doesn’t matter their deal will spin to pieces.
The earliest crack should show up as the federal money starts to run out in a couple of years’ time. It is that half-assed a deal. Within five years, the seams should be well split if the arse of it is not dragging the floor entirely. Da current political b’ys will be long gone by then but Uncle Ottawa will have to open the purse again thanks to the guarantee.
Meanwhile, the Responsible Policy Group of Stooges is nowhere to be seen. A couple of years is all Paddick’s buddy needs so it is good enough. Just like all Danny needed was a pile of concrete called Muskrat Falls. He got it, even though it will never make money. Never made *any* financial sense for the people of Newfoundland and Labrador. Only made sense to the people who loaned the money to build it, the folks paid obscene amounts to build the thing no matter how often they shagged it up along the way, and the politicians from Danny to Andrew who made sure the townies and baymen alike got stuck with the bill.
The less obvious thing wrong with bond raters’ forecasts is the oil money with which the politicians and bond raters make up their fairy tales. The most optimistic forecast shows oil production falling by two thirds within the next decade. Oil revenue will drop the same way, starting in a couple of years. That’s because oil prices will not rise so fast to make oil three times more expensive than it is now and stay there. We have heard *that* nonsense before from Muskrateers and overspenders. Only fools would believe it again.
The thing you may not have seen is that the Premier is still looking for both a deputy finance minister – the current, temporary one is rumoured to be gone already or going soon - *and* someone else to show up on television every now and again to tell people how things are going with the government’s finances. We don’t need yet another smoker generator on full tilt aimed at our collective arses but the Premier wants it anyway. Danny used to say there is no greater fraud than a promise not kept. Hold my beer, said Andy.
The turmoil in the finance department in the last few years is like the constant change at the top of the civil service since Kathy Dunderdale’s days. People ignore stuff that goes on all the time but this is different. This is more than the usual shuddering and lurching of government.
Politicians these days don’t stay in politics long. For the time they are around, they seldom think beyond what happens tomorrow. That’s okay as long as somebody can look ahead a few days, weeks, and months. The problem comes - like it did starting a decade ago in Newfoundland and Labrador – when the public servants who can keep things going are either busy changing chairs or looking for the door out of the building. That’s when you cannot count on anyone being able to do much of anything. The politicians and the bureaucrats were having a hard enough time figuring out how much of Moya Greene’s report they won’t implement. Now they have to try and keep the water from slopping over the gunnels in the meantime.
Outside of Newfoundland and Labrador, you can read the goings-on like a book:
Electricity rates are still an unsolved problem.
Provincial government income will drop as costs continue to rise.
The public servants we need to keep things steady are moving around or heading out the door.
No one seems to have noticed this and the politicians are definitely not going to tell you.
Inside Newfoundland and Labrador, it is so dark you gotta squint to see.
Don’t worry. I’ve got a flashlight.