No Rock is an Island

Sometimes one could be forgiven for feeling that Newfoundland and Labrador is an isolated economic miracle that defies the normal economic rules of gravity. To listen to Ms Dunderdale or Mr Marshall is to be swept up in a feel-good-fest that only the crankiest of naysayers would dare challenge. An island economic boom that need not be burdened by its own structural weaknesses or outside turbulence.

A simple gaze to the East should shatter these flights of fantasy. The European Union is at a tipping point. A real tipping point that has the potential to dramatically shift the proverbial financial axis of the world in one big bang. Not unlike the Canadian federation, the European community is grappling with not so much a financial crisis as an attitude problem. Sure there is a financial crisis, but the bigger problem for the Unions future is the attitudes that created the crisis. Germany holds steadfast in its position that the spend thrift states must release their sovereign right to budget. It maintains that only a supra-national mechanism of control, which can veto any nation in the Unions overspending, can maintain the credibility of the Euro.

Germany argues that simply turning to the European Central Bank for bail out after bail out just forestalls an inevitable collapse. That the real demon is over spending by states that quite frankly can not back up their relatively lavish lifestyles anymore. The insinuation, on a grand scale, is that economically prudent and disciplined states would be left to give their hard earned returns to those countries that would not sacrifice - even for their own economic survival. No doubt Germany is 100 % correct.

And so we have the Canadian federation. Burdened as is Europe with those members who show financial prudence and discipline and those that do not. On the one end of the spectrum you have Quebec, and to many degrees Atlantic Canada. In Quebec's case the provincial government deliberately suppresses the value of its hydro sales to show a loss. It expends on social programs, such as its $7 a day child care program as if it were a constitutional right. It has the highest per capita debt levels in the country. It has a rapidly aging population that can never pay back the debt it has now, let alone any further accumulated debt. It plays the game of spend so as to remain a "have not province". In other words, Quebec deliberately spends far more than it ever makes so that it not only does not contribute in a net sense to the federation, but in fact is a constant financial recipient of "bail out funds".

Where do those bail out funds come from? They come from the equalization formula that aims to ensure services across the country are relatively equal. The problem is the provinces paying into the fund, and receiving nothing back, are the well disciplined ones. Alberta and Saskatchewan are tackling their own balance sheets in a fiscally prudent way. They are both either debt free or on their way to being so. They have made choices, sometimes tough ones, to ensure their province is on the right track. They do not have massively reduced electrical rates for their citizens, or fanciful daycare programs. They are in fact subsidizing the irresponsible provinces unsustainable lifestyles in many cases.

Unlike Germany, they have not been able to put the brakes on and demand financial sense from their fellow confederates. Well, maybe they will in 2014. The equalization program comes up for review in 2014. Already we have heard rumblings from Ontario that they want more. The positioning is, and has been, going on for some time. The big question is will the financially responsible members in Canada, say like Germany in Europe, be able to alter this devastatingly unfair program? Will they be able to insist that member provinces pass legislation banning deficits - like Germany is trying to do in Europe? Will the federal government, with a distinctly western outlook, take on the role of requiring fiscal responsibility of the provinces?

Seems to me the time is right. We should not wait until the federation gets torn apart by selfish and foolish spending. We should be looking at Europe and seeing the inequality and lack of justice that an undisciplined financial arrangement can create. Currently in Newfoundland we are a have province. Our government fought tooth and nail to be exempted from paying its share in the equalization scheme. That exemption runs out in 2011. Next year there are no offset payments to compensate for oil revenues going to the equalization fund. Next year we really become a have province. The joy of funding Quebec's $7 a day daycare becomes ours. Will we now be joining Alberta and Saskatchewan in demanding the other provinces become fiscally responsible?  Or will we try and take Quebec's tact and spend to the point we revert to have not status so we don't have to pay? History suggests we will spend.

It's at moments like these in history that we should be looking at others and seeing ourselves in them. Rather than increasing our civil service by 25% in four years we should be seeking massive efficiencies. Rather than trying to drive our economy by state driven mega projects like Muskrat Falls we should be directing all available dollars to the debt. If we just looked around the world today -  whether it be the US, Europe, or even the rest of Canada - the answer is so clear. Fiscal discipline. Fiscal discipline. We may be the Rock, but in the financial world there are no Islands.

The Problem with the Liberals is...

The problem with the Liberals is we've become the PCs of old. Remember those guys? Circle the wagons and fire inwards. Eat your young. Air all your dirty laundry in public. Forget about the silent majority and try and convince others your dogma is where it's at. That was the old PC mantra. The "permanent Opposition". The Liberals were the opposite. We were inclusive, almost to a fault, realizing that people have differing agendas and passions. That the Party was the big tent under which these many diverse voices could be heard and reconciled. That the only requirement was to keep descent within the Party, and remain loyal to the Party and its leadership in public - at all times. Party discipline in other words. The "Natural Governing Party".

Things have changed. The world has changed. The Liberal Party has changed. Ever since Paul Martin began his not so private push to replace Jean Chretien things have gone to hell in a hand basket. It is as if a cardinal rule had been broken - honour thy Leader. Or at the very least, don't push out a sitting Leader until he is good and ready to go - unless you are say Dalton Camp and the other guy is Dief. It does seem though that since that internal battle the Party has lost its discipline in a sense. That great Party discipline that allowed for differing opinions and input - just not public disloyalty.

A great deal of navel gazing has been done lately, at the federal and provincial levels of the Party, about what to do next. Where do we go from here? Who do we need to get rid of? Who can we bring in to change everything, and put us back into the place where we decide the budget? What do we need to change about ourselves and how we operate? Who gets burnt at the stake first: the Old Guard or the New Guard? Does the Party of Pierre Trudeau and Canadian nationalism need to adopt a US primary system to elect its Leader to be meaningful in today's Canadian political system? And so it goes.

The same type of chat is happening on the provincial level. In Newfoundland and Labrador the CBC cranks out endless stories from Dean MacDonald on how the Party needs to "clean house", and how it needs to be credible - as if all those involved for so many years, and the recent additions, were somehow not credible. Perhaps the bigger question is who does he think he is to refer to all those volunteers efforts in such a disrespectful way? Perhaps he is overly confident that he can take the Party at any time and do with it as he sees fit. Perhaps. After all, Danny Williams is a corporate guy, and we know how they like to own the competition as well. Let's see: Jerome becomes the new PC leader, and Dean becomes the new Liberal leader. Nice and tidy. No way to lose when you control both right?

In any case, the problem with the Liberals is frankly they've become the Conservatives of old. You may have noticed the Conservatives have now become the Liberals of old. The movie has changed. The times have changed. It is not the first time this has happened. It won't be the last. The ability to maturely deal with the execution of power is what defined the old Liberals. The ability to eat its own publicly defines the new Liberals. The answer for the Liberals is not all sorts of silly, and in many ways injurious contortions - publicly no less. The answer for the Liberals is to go back to what made them the "Natural Governing" Party in the first place - go back to the future.