Thursday, 7 April 2016

What is Austerity and Do We Need It?

What is Austerity and Do We Need It?

By: Ryan Young

Webster’s Simple Definition:

Austerity: a simple and plain quality : an austere quality
§  a situation in which there is not much money and it is spent only on things that are necessary
§  austerities : things that are done to live in a simple and plain way

Does anyone remember when the word “austerity” started showing up everywhere? It was in 2009, during the global economic crisis. The country of Greece was the first to implement drastic austerity measures and the term quickly caught on as a buzzword in the mainstream media. With the economic crisis putting the crunch on many of the worlds developed economies, the “austerity-doctrine” soon began to be implemented, especially in the Euro zone. The problem in Greece, however, was quite unique. After a decade of record prosperity, the Greek economy foundered in 2008 with massive debt holdings left over from financing the 2004 Athens Summer Olympic Games that left the country dangerously close defaulting. The austerity measures that the Greek government were forced to implement were a condition of an agreement with the Euro zone to provide a massive bailout to stabilize the country. The Greek economy had become unsustainable and drastic measures were needed to get it back on track.

But what is austerity, and what does it mean for us? By the very definition of the word, austerity is a situation where there is not much money and it is spent only on things that are necessary. In terms of government austerity, it means the cutting of government expenditures to only programs and services that are deemed necessary. But that is where it gets tricky. What is considered necessary spending can differ greatly from person to person. As we saw from our own government’s renewal initiative, there is a very wide variety of fiscal ideologies in this province. We know there will be serious short-term economic problems involved whenever government cuts jobs, but what we elect our leaders to do is balance those problems against the bigger problems such as skyrocketing debt and decreasing revenues.

One idea that was a common theme throughout all of the government renewal consultations, is that we spend too much on our public service. About 30% of our provincial work force is employed in the public sector. That is twice as much as Alberta or Ontario and well above the national average which sits at about 18%. According to Stats Canada, out of about 240 000 employed workers in the province, over 70 000 work in the public sector. The total amount spent on public sector wages is now approaching $4 Billion. To put that in perspective, in 1997, the total real amount spent on salaries and employee benefits was $1.7 Billion. In just twenty short years we have seen the size of our public service double. By 2013 the government was spending 47% of its expenses on wages and benefits. Add to that the $500 Million we spend each year in professional services and the unwise tax cuts of the Williams era, and you start to see where our fiscal problem came from. Our expenses are currently more than 50% more per person than the average of all other provinces. The simple truth is that the public service is too big for our tiny population and it needs to be adjusted before it implodes.

So why then, with all of this knowledge, do we have groups still waving the anti-austerity flag? A planned anti-austerity rally is being organized by the Social Justice Co-operative for next weekend and The Independent continues to publish articles that suggest that we do not have a spending problem at all. I understand the view from the left. Nobody wants to see job losses, and public service cuts will definitely have a temporary negative effect on our economy. But as much as we don’t want that to happen we have to address the reality of our fiscal situation. We can’t continue to bury our heads in the sand and hope that Newfoundland and Labrador will find some magical new source of revenue to lift us from despair. I find it ironic that many of the people who oppose spending cuts are the same people who oppose our offshore oil industry. It’s easy to see how the left often gets painted as a “crowd of dreamers” who write and talk with no grasp at all on the realities of fiscal solvency. The fact that organizations like The Independent are funded by the NDP, which are funded by the labor unions, might offer some clue into why there is such a push from the left against cuts of any kind to the public service, but no matter what they tell us, the real numbers about our public service expenditures do not lie.

I will agree with the fact that 30% across the board cuts are a bad idea. This blogger has already stressed the need for independent audits of each department to eliminate dead wood and free up employment for younger generations of job seekers. Across the board cuts based on seniority will not change the culture of inefficiency within government and will only further destabilize the labor market for the young families that we so desperately need to keep here in the province to grow the tax base. Each and every department is overspending while the quality of programs and services they provide is declining. There seems to be no accountability, and despite Premier Dwight Ball’s promise to clean out inefficiencies within government, for the most part it has been business as usual.

I don’t believe that the anti-austerity people have too much to worry about right now. I expect that this year’s budget will not contain too much shock value for most people. Most likely we will see some new fee and tax increases and some elimination of peripheral spending that will not ruffle too many feathers. The real shock won’t come until next year when the Liberal’s officially wrap up their Government Renewal Initiative. That’s when Dwight Ball’s government will have to make the choice between continuing to sit on the sidelines or tackling on the problem head-on and leaving a real mark on government that will carry them into the next election.

That was the path that led Clyde Wells to a second term despite “Clyde Lied,” and if this government wants to be there when the dust settles after the next election they have to do the dirty work now and show us that a stronger tomorrow really is within our grasp. We can only hope that this new government will at least use this year’s budget to let the public in on the direction they are planning to take with our fiscal future.

As for austerity, we need it whether we want it or not. The real question is: Does this government have the guts to make those hard choices? I guess we will have to wait and see.

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