“The Darkest Places in Hell are reserved for those who maintain their Neutrality in Times of Moral Crisis.” – Dante Alighieri
The citizens of BC had a front row seat to an election outcome that remains almost impossible to comprehend. After a determined push back of the much reviled HST, it appeared very probable that the Liberal Party would go down to a well earned defeat. It would have been a defeat, not so much because a better option was thought to be on offer, but more because enough voters had lost their trust in those who seemed divorced from contemporary economic realities and who were not serving the public’s interests.
Standard & Poor’s issued a public report dated 15 April, 2011, titled “Canadian Provinces Face Tough Choices in Restoring Fiscal Balance”. The report directed provinces to curb rising debt levels and to correct the practices of deficit budgeting. It also recommended operating expense savings to be found in the budgets for health care and education. “Rising debt service burdens further limit financial flexibility because as these burdens increase as a share of total spending, they crowd out other program spending,” claimed the report. “Debt service expenditures are contractually bound and as such cannot be easily cut.”
This was an unambiguous disclosure that provincial credit ratings were under negative scrutiny, over two years ago.
So what did the BC government appear to do, knowing this was like a warning shot across the bow? They did screw down on the budgets for education and health care. They did not seriously attempt to find more revenues but rather promoted the fiction that a natural gas industry would provide fiscal salvation, which it did not – nor is this likely to happen, despite election rhetoric. The government certainly did not curb its appetite for ever more debt.
At the end of fiscal 2012 (one year ago), total provincial liabilities reported by the provincial government were $70.358 billion, or 100% greater than when the Liberal government first came into power. What was even more distressing was the government’s deliberate non-disclosure of “Contingencies and Contractual Obligations”, which the BC Auditor General publicly reported to be $96.374 billion. This liability amount was separate from the $70 billion, as confirmed directly with the Auditor General’s office. These provincial liability values were directly supplied to the four party leaders just following the writ being dropped, so they all knew – but for what ever their reasons, they remained silent.
In a few words, BC voters were clueless about the province’s financial condition prior to voting because virtually all politicians and the mainstream media wanted to practice willful ignorance. It is not hard to understand why Premier Clark avoided this topic, but for the others to do so is a big mystery. A few people have suggested that the NDP avoided this issue because they did not wish to win the election and have to address the province’s financial mess.
Incoming MLAs will now be forced to confront BC’s fiscal and debt reality. There is no escape from the fact that global economic circumstances are not set to improve any time soon. More tax revenues will need to be found, along with a freeze on further borrowing, either directly or indirectly, via contracting (Public, Private, Partnerships). It is almost a certainty that BC is in for credit downgrades, which will add further to the difficulty of crafting budgets. Of course, selling public assets is another option the Liberals already have spoken of and doing that is, in effect, an admission of past poor management judgment.
Good luck, BC.
Tuesday, 28 May 2013 15:36 posted by Kevin Logan
Hey Derrik,
If we are going to enter into this realm with this debate, to to this link and fast forward to 40 minutes in.
http://www.youtube.com/watch?v=4z8rt-3a40I&list=PLnj_cm2kvBdGNatFJnHfpErI8h6qMClJf&index=3
Listen to this World Bank Whistle blower talk to commoners.
Tuesday, 28 May 2013 14:43 posted by Derek Skinner
Just to broaden the perspective – you must know that federal or provincial and municipal debt has two faces.
The bad face is the interest that has to be paid from tax revenues. The good face is that the debt is largely owned by investors as savings (GICs) and bankers, brokers, insurance companies and trust funds as a basis for private pensions.
The singularly bad thing is any deficit which increases the debt.
A solution to the increasing debt problem has been provided by Paul Hellyer in his proposal to use the Bank of Canada as it was originally designed to provide Government Controlled Money (GCM) from the Bank of Canada by selling Canadian Equity to the Bank of Canada rather than Bonds which entail interest payments.
GCM would be distributed to Provinces and Municipalities to finance the needs of Health Care, education, public infrastructure etc. so that when they are financially stable they can buy back their debt or reduce taxes.
This proposal is fully explained at http://www.victoryfortheworld.net and the sub heading
Manifesto and Social Contract between the Government and the people of Canada.
It does not address the reason for B.C.’s immediate mess but it is worth a look.
Monday, 27 May 2013 13:21 posted by Alan Forseth
I would like to have posted this as a direct reply to “Sunday, 26 May 2013 16:47 posted by Kevin Logan
“The BC Conservatives tried to raise this issue time and time again” Really? … but there didn’t seem to be a way ?
Regardless, candidates, the party, and the party leader John Cummins did try to raise this issue on numerous occasions. I happen to know this because I worked on the Kamloops South Thompson candidate, and it was totally ignored.
Mine was very brief comment, and of course there is much more to it, however BOTH the BC Liberals and the NDP have shown themselves to be addicted to spending.
Sadly those responsible (BC Liberals / NDP) won’t have to pick up the pieces when this spending frenzy finally is ended because there is no more money available.
I’ll break this down to a piece people will understand — we spend $7 million a day just to make interest payments on the debt — never mind even making a dent in beginning to pay down.
What a waste!
Monday, 27 May 2013 11:59 posted by erik
Perhaps more context is needed for readers. A US economist recently referred to the financial sector as designed around the single purpose of extracting value, certainly not adding value to the economy.
The MSM and politicians seem unable to grasp this notion and craft effect public defences. Case in point. 15 years ago I determined the global value of Canadian new issue public securities for a 6 month period. 6 months on the trading prices were used to determine what value the market gave those same new issues. The discount from issue price worked out to be about 35%. Looking at it from the other end the bank owned brokerages managed to extract a 60% premium from retail clients and pension accounts etc.
The then Finance Minister, Paul Martin, was given this information but did nothing discernable about it. Nor did the MSM crowd.
Readers should understand that the financial sector has been and continues to merciously game the general population. THe BC government and Hydro folks have been enablers for the financial paracites who have been thick on the ground in BC for the past 10 years.
Monday, 27 May 2013 09:19 posted by erik
A second non-disclosure strategy used by your government is the categorizing of projects as “operating lease” contracts. According to both the federal Auditor General and the BC Auditor General there are two types of contracting methods available for reporting purposes. The “operating lease” contract is meant to capture short=term contracts and does not require disclosure beyond the current year obligations (principal and interest or a blended amount). The second type is called a “capital Lease” contract, typically for long periods as for IPPs and P3s. If government were to follow GAAP rules these contracts would be fully disclosed and the AG would not have needed to badger the government for the past 10 years.
It takes no imagination to understand why one would choose a “operating lease” contract method if one wanted to avoid disclosing this method of adding debt.
Perhaps now readers will appreciate why I selected the title above.
Prior to the election Jack Etkin made a video of our liabilities presentation and it was shown on community TV in Victoria. Several folks around BC asked their local station to feature it but Shaw folks all passed. Just an example of MSM behavior.
Monday, 27 May 2013 09:01 posted by erik
Given what seems to be a growing interest. sadly belated, in the discussion of provincial liabilities it might help the readers to know a little about some of the accounting trickery used by your government and their fellow travellers to fool citizens.
Like Enron, BC Hydro employs an accounting mechanisim that translates money spent that the current rates do not cover into “Regulatory Assets”. Because these current expenses are not immediately recoverable but expect to be once rate increases are approved (breakeven for Hydro right now would be achieved with an across the board increase of at least 35%) they are then treated as accounts recievables and make it into the asset category. A further fiddle this allows is to enable a fiction that Hydro has a net profit because Hydro transfers amounts each year from the Regulatory Asset category into earnings (not a cash event) which in turn allows the fictitious transfer of a “dividend” to the provincial general account hence the Auditor General’s remarks about an additionaal $520 million of deficit for that year.
Prior to 05 these regulatory asset accounts were brought to zero in each year. Now we are heading to $5 billion.
Monday, 27 May 2013 00:03 posted by Sandra H
Hugh,
yes the debt is $50.2 billion but that is just a small part of the whole picture. Page 41 of that same link is a more inclusive picture of the total liability of $70.4 billion, representing debt and other liabilities.
On page 77 it shows the total contractual obligations of $96.4 billion, which is the real killer.
All told that sums to a total debt of $167 billion.
I am incredibly disappointed with the mainstream media for not covering this. If skyrocketing debt that all BC citizens will be burdened with is not newsworthy then I don’t know what is. I think media has a responsibility to inform the people but I realize that is far too idealistic considering who owns the media.
Sunday, 26 May 2013 21:31 posted by Hugh
Kevin, I was looking at p. 126 of the link for Public Accounts for Fiscal Year ending Mar 31,2012:
http://www.fin.gov.bc.ca/ocg/pa/11_12/Pa11_12.htm
Actually it says $50,193 million, or $50.2 billion.
Fifty thousand $million. Yikes.
And if and when interest rates go up?
Sunday, 26 May 2013 18:26 posted by Kevin Logan
Patrick lets be clear,
When a person does not vote the “right” way, calling them clueless is unacceptable, however when you do as Erik has done and point out that voters were deprived of vital and valid information, clueless is the only way to explain it.
Given that only 52% of eligible voters voted, I am positive everyone one of them felt their decision was an informed decision. However I would bet that 95% of them do not know about these debt figures, the “Toll Shadow” or the pipeline agreements I have written about on these pages.
Is it there fault they are “clueless” about these things?
Is it the fault of politicians? In part, absolutely it is, however, the lions share of the blame rests squarely with mainstream media, who has abandoned journalism in favour of executing corporate communications plans.
They present overtly bias information and “narratives” as if they were neutral observers performing journalism versus communications hacks spinning.
Erik’s work and the other examples discussed here are evidence that permeating the veil of deception and deceit, with solid and professional analysis supported by the facts is an impossibility.
There oughta be a law, I say.
Sunday, 26 May 2013 17:26 posted by erik
Dear Patrick; Yes it is a shame to have to describe citizens as clueless but what is one to think. Numerous articles have been writen about the affairs at BC Hydro starting at least 5 years ago. It was blindingly apparent the government had a different role in mind for Hydro than to simply serve the public interest of citizens. The narrative starting about 06 was to contract for new power that was not needed in BC. You should ask yourself why and why were there no MSM articles challenging this strategy. It was evident then to a number of us that our government stepped away from the business of serving just BC interest. By taking the BCUC out of the process, something that was publized, the government emasculated the one agency other than the AG that could look out for the public interest.
All of this and more was and is avialble in public documents but for those who want only a sound-bite life then clueless they will always be.
Do you have any knowlege of what form of financing was used to improve the Sea-To-Sky highway? Probably not but if you are paying BC taxes you should know. It is a “Shadow-Toll” contract.
Sunday, 26 May 2013 17:08 posted by erik
Hugh; You need to look at the statements prepared by the Controller General; “Public Accounts” for fiscal 2011/12 dated March 31, 2012. Scroll to page 22 where Total liabilities are presented. The amount outstanding as of a year ago was $70.358 billion. If you wish to be even more accurate please add another $520 million to the total which is the amount the Auditor General stated was fictional, paper transfered income. When deficits are the norm short-term liabilities become long-term debts. Please also remember there is not much system integrity when self-auditing is the practice. That is precicely why there is the need to have an Auditor General.
What seems to be eluding some readers is that this narrative is not about a government system but about individuals who arranged matters to effectively steal from the many for the benefit of a few.
I wish the penny would drop.
Sunday, 26 May 2013 17:01 posted by Patrick Smyth
Thank you for the humour. I really needed a good laugh this afternoon.
Seems to me the electorate send a message, and to call the voters clueless really is an affront to our collective intelligence.
Sunday, 26 May 2013 16:47 posted by Kevin Logan
“The BC Conservatives tried to raise this issue time and time again”
Really?
Your leader could have done so at the televised debate if it was such a priority, and when he raised the issue he only said, ” The NDP doubled the debt during their time in office, and the Liberals doubled the debt during their time.”
Leaving voters with the impression that somehow the fiscal management with respect to debt was the same. When clearly there was no comparison, even when you do not consider the work or Erik Anderson and the “Contractual Obligations”
This line “that both parties doubled the debt” was repeated over and over again by the conservatives.
And a very misleading line it is.
While it may “true” to make such a statement, it is also true that the Liberals were responsible for filing TWICE AS MUCH debt, during their time in office than the NDP.
Indeed Christy Clark filed MORE debt during her two years office than the NDP did during their entire time in office.
And this of course is just the debt she and the BC Liberals were willing to acknowledge pubilcly.
No such hidden debt, or “Contractual obligations” existed under the NDP and when they left office they left a surplus.
Sunday, 26 May 2013 16:16 posted by Steve Schafer
I could have sworn I brought this up a few times prior to, and during, the election…
Sunday, 26 May 2013 15:53 posted by Alan Forseth
I hate to say I told you so, but I know BC Conservatives tried to raise this issue time and time again… and as mentioned, the mainstream media ignored it — and YES the Liberals certainly had no wish to bring it up.
STILL … the fact that BC voters were, as you say, “Clueless” is who’s fault in the long run? Do voters not have an obligation to make an informed choice as to who they are going to vote for.
The bottom line is there is a lot of blame, to be spread out, amongst several areas
Sunday, 26 May 2013 15:53 posted by Alan Forseth
I hate to say I told you so, but I know BC Conservatives tried to raise this issue time and time again… and as mentioned, the mainstream media ignored it — and YES the Liberals certainly had no wish to bring it up.
STILL … the fact that BC voters were, as you say, “Clueless” is who’s fault in the long run? Do voters not have an obligation to make an informed choice as to who they are going to vote for.
The bottom line is there is a lot of blame, to be spread out, amongst several areas
Sunday, 26 May 2013 15:19 posted by Kevin Logan
High, can you provide a link that works?
That one does not, or maybe it just doesn’t work for me, that is fairly standard apparently!
lol
🙂
Sunday, 26 May 2013 15:15 posted by Hugh
According to this link, the total BC provincial debt is $56,111 million. Can you explain?
thanks
http://www.fin.gov.bc.ca/PT/dmb/ref/debtSummary.pdf
Sunday, 26 May 2013 13:50 posted by Kreditanstalt
Wow! This is a really “progressive” blog you’ve got here…the answers to all difficulties are always solvable with more planning, more government action, more coercion, more state interference in private affairs.
This is not about “corporations”. Nor about “unfairness” or “inequaity”. The problems were not caused by “banksters”. Nor were people “robbed” of wealth that existed before “the 2008 financial crisis”.
We’re in a crisis of (lack of) productivity. Living standards are falling, and personal debt levels are rising to attempt to compensate for this.
Why? Perhaps there are now just too many people pushing paper from person to person, retailing, speculating, selling services or shuffling money. Perhaps that paper money itself is depreciating. Perhaps Canadian wages, benefits, pensions, taxes, and similar costs no longer permit a business to earn a reasonable profit here…
My suspicion is that most “jobs” in western economies aren’t jobs at all: they’re “misallocations of capital” which would fold up and die without the subsidy of cheap money and government-manipulated interest rates. Rates which have impoverished many people.
Keep on spending & borrowing…
Sunday, 26 May 2013 12:51 posted by Kevin Logan
Erik,
Well said sir.
An unexplored aspect of the circumstance which gave rise to this vile situation BC finds itself in, is the role of those who helped facilitate the success of it. Namely prominent enviro’sih figures, who boosted IPPs and have paved the way for imposing the Massive LNG agenda.
Tzeporah of course is the most prominent given her penchant for public display, notably absent in the recent election but still very much in play.
The unelected, undemocratic, self appointed corporate sustainabilists masquerading as environmentalists are the prime providers of social license and key communicators of the required propaganda.
Tzeporah also chairs a committee which funds most of the “environmental” engagement in British Columbia.
Its high time that we begin to not only call to account the political figures who choose to avoid disclosing the abysmal state of our finances -for all the reasons you state, but we need to also closely examine the roll of those who provide the social license that facilitates the debt burden while burying its existence in the memory black hole of the public psyche.
Aiding and abetting this agenda is criminal and accountability is required now
Sunday, 26 May 2013 12:20 posted by Terry Hand
The reason that none of the current political parties will address the debt issue is because they know that it is a physical impossibility to wipe out provincial and national debts.
The first question that public need to ask is if there is a provincial and a national debt, then to whom is it owed?
Next how did those debts come about?
The reason that these debts cannot ever be settled is because you cannot pay interest which doesn’t exist on that debt.
The way our money is created is it is borrowed into existence. Therefore if a million dollars is borrowed into existence and a 3% compound interest charged on it, where does the additional $30,000.00 come from to pay the first years interest? it doesn’t, it simply grows exponentially.
Fractional reserve banking was created as a symbiotic arrangement between the banking cartel and the government. Why?
Banking cartel gets to charge interest on money it never had and the ability to inflate or deflate the economy (taxation).
The government gets access to additional funds once its squandered the taxes it took in. Basically it passes more taxes to the public without the public being aware of it.
Sunday, 26 May 2013 12:10 posted by erik
Oh dear, Kreditanstalt, you just don’t get it. We are not in the financial mess because of government but because of crony capitalizims grip on morally bankrupt or stupid represntatives. There is a reason for all IPP contracts being kept secret. There is a reason that the Liberal government and BC Hydro defied the Auditor General’s multiple year requests for full disclosure. There is a reason that most of Hydro’s plus $100 billion of new debt never came up for discussion in the legislature. There is a reason why Gordon Campbell was made poster premier of the P3 industry crowd when he was being paid to look after the public inertest. There is a reason why Chrisy Clark preferred not to disclose provincial finances. There is a reason why BC Hydro debt exploded and it was not because customer demand also exploded. In fact in the past 12 years annual BC demand for electricity only increased by 7.8% but total liabilities increased by over 600%; $10.4 B to $70 B.
This is not a story of government over spending but of the people in government knowingly using the unsuspecting public purse to give a bunch of private industry griffters free rides.
Sunday, 26 May 2013 11:33 posted by Michael Gilfillan
I think you hit the target bullseye.
My question is, what would the BC NDP have gotten in return from the liberals for looking the other way?
Stay tuned.
Sunday, 26 May 2013 09:34 posted by Kevin Logan
What the election proves is that we are completely in the hands of the oil and gas industry or the broader “energy” industry and our well being is their whim.
Non disclosure of debt as well as deals being made in LNG and Dilbit distribution means they are leveraging our government behind the scenes in the backrooms for favourable conditions to accommodate massive exploitation agendas.
The IPPs forced government into a deep dark hole and they offered LNG plays as the light.
This leaves British Columbians in a deep dark hole of misinformation and with little option but to accept the dictates of the oil and gas industry not unlike any third world petro state.
Sunday, 26 May 2013 09:27 posted by Damien Gillis
While I don’t disagree that we’re in an era of peak growth and that belt tightening is required across the board, “austerity” is a failed policy that puts the burden for the looting of public resources by corporate entities on the shoulders of those least responsible and least able to bear it. That’s precisely where we’re headed and it’s a dangerous, foolish path.
Sunday, 26 May 2013 08:49 posted by Kreditanstalt
“More tax revenues will need to be found”?
Every dollar you remove from its owners and earners in the private sector is one less investment, construction or job creation dollar available. What’s worse is that it is then handed to governments and squandered on non-economic social engineering projects which generate no revenue whatsoever.
What’s needed is REAL, SERIOUS governmental austerity.
We live in a “peak growth” world of peak cheap money. Even with interest rates of effectively zero it is obvious that we won’t be going back to 1980s or 1990s levels of growth – ever. For that reason, deficit budgeting, annual wage increases, rising living standards and higher asset “values” are all going to be things of the past.
Given that future, with continued governmental overspending and borrowing we will simply never reduce the deficit. Time to make serious cuts in spending and in size and scope of government.
Sunday, 26 May 2013 06:50 posted by ron wilton
Give us a worst case scenario.
What is most likely the near term result?
Higher taxes, increased gas, electric bills etc., and how much higher, 10%, 50%, 100%?
Something much worse?