In two weeks from now the provincial government will roll out its budget for fiscal 2016-17. In what can only be described as a political and economic nightmare, the government is facing a budget deficit of about $2.4 billion from last year, and likely higher for this year. Key factors in calling the deficit higher this year are: a continuing decline in oil prices well below even the Liberals preliminary projections for the year just months ago; recessionary pressures caused by global economic slowdown and localized economic implosion; increasing unemployment; and curtailing of discretionary spending in the economy as a whole. Not a pretty picture.
So how to tackle the budgetary crisis? Well, the first step is realizing that it is not a spending problem or a revenue problem - it is both. That means the budget solutions need to come in both areas. In effect, the government needs to go into a defensive shell in order to preserve what financial integrity is left of the province. To show how difficult and painful that will be I've drawn up a rather draconian plan, illustrated the dollars saved, and hopefully give a sense of just how radically we must transform ourselves in a very short period of time - just to survive.
The plan goes like this:
NEW REVENUE:
1) Drivers Licences - renewed annually at a rate of $50 per year - $19,000,000.00
2) Gas Tax - 20% increase in gas taxes - $37,150,000.00
3) Tobacco Tax - 20% increase in taxes - $31,415,000.00
4) Alcohol Tax - 20% (new tax) $31,575,000.00
5) HST - 2% increase $200,000,000.00
CUTS IN SPENDING:
1) 4 day work week for all government employees $192,800,000.00
2) 10% cut across all government operations (incl health care) $826,000,000.00
3) 20% cut in all professional service contracts $96,375,000.00
4) 20% cut in all purchased goods $63,501,000.00
5) 20% cut in all MHAs salaries $1,000,000.00
6) Dissolving meaningless government offices/bureaus $60,000,000.00
7) Suspending the Muskrat Falls project $600,000,000.00
TOTAL REALIZED $2,160,191,000.00
PROJECTED DEFICIT $2,400,000,000.00
DEFICIT AFTER THESE MEASURES $239,809,000.00
So, there it is. A very draconian set of measures that would deal with both the deficit and the bloated size of our government's operations. One is an immediate tool for an immediate crisis, and one is a tool for surgically re-sizing our government for the future. A budget such as this is bound to create a deeper recession for the short term, but we are heading into one in any case - if we aren't there already. As painful as it is, in this type of plan everyone suffers. The 70% who don't pay any income tax at all are forced to share the burden with those that do. That's key, because there are far too many people in the province sitting back in the weeds, and surviving on black market jobs, etc. These people need to pay their fair share - especially now. It also forces business to take a hit by reducing professional service and supply contracts as well as sustaining the effects of an increased HST and diminishing disposable income.
Now everyone will argue they can't take the hit, but the reality is that everyone must take the hit. There is no longer a choice. But, and it's a huge but, the government can't even think of implementing an austerity budget without suspending the Muskrat Falls project. To ask the people to suffer in this way while allowing the completely irresponsible expenditure of funds on Muskrat Falls is beyond the pale, and would likely result in large scale social unrest - as if we don't have enough problems as it is.
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