Wade Locke, Professor of Economics at Memorial University, came out to the people of Newfoundland and Labrador last week. The evening meeting dubbed “A Prosperity Plan for Newfoundland and Labrador” was anything but what its name suggests. It was not so much a plan to deal with all of our financial success, but rather a call to arms to avoid financial catastrophe - which was long overdue. In that sense, Dr. Locke showed courage and leadership - to the province, and its politicians.
Dr. Locke projected the costs of declining oil production, heavy taxation, massive debt, and declining population on our future prosperity. He concluded that oil revenues, which currently fund a third of the province's annual operating revenues of roughly $7 billion, are on a steep decline. He concluded that government spending was unsustainable, and irresponsible. He emphasized that if nothing is done to sharply reduce the debt, before oil revenues decrease further, our province will be in a position that is beyond help. The Telegram's story on the evening started with:"Economist Wade Locke tried to scare people a little bit Wednesday night." Nothing could be further from the truth. What Dr. Locke was trying to do was wake people up to the fact that our provincial government's economic policies are unsustainable.
What surprised me was Dr. Locke's refusal to include the costs of the proposed Muskrat Falls hydro project in his debt/economic projections. He told the media that he felt uncomfortable including the project's costs in his forecast as he had done work on the subject for Nalcor. That excuse is not really believable though. Consider that he has worked on behalf of the government on many economic issues throughout his long career. Using his reasoning, would he not therefore feel professionally obliged to refrain from any comment on government economic activities and practises? Perhaps the truth may be that Nalcor required Locke to sign a confidentiality agreement? Mr. Locke also gave Finance Minister Marshall a preview of his talk the morning of his speech. Did he have the Muskrat numbers in that initial brief, but was "requested" to remove them? Unless Dr. Locke comes forward with a logical and professionally consistent reasoning for not including the costs of Muskrat in his dire projections we can only speculate.
However, the one thing we can do is read between the lines. Dr. Locke is projecting annual operating deficits of close to $2 billion within ten years. He's projecting a debt of $30 billion by 2030. The cost of the Muskrat Falls project is estimated to add 50% to the current debt of the province.
The message between the lines: The province of Newfoundland and Labrador is going broke even without Muskrat Falls numbers included, and should we proceed with the project, our financial end will come much sooner.
It is a clear message if you simply, and logically read between the lines.
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