September 2, 2009

Campbell Decoupled

"You won't find one person who anticipated the decoupling of natural gas revenues from oil revenues." That is what Gordon Campbell said today in a media scrum recorded by Sean Holman of Public Eye Online, where you can hear the entire scrum. Unfortunately for the Premier, a simple search on Google for relationship, disconnect or divergence between oil prices and natural gas prices reveals studies and discussions going back five years or more about the decoupling.

The scrum showed Campbell on the run from media questions asking what and when did he know about the declining state of the province's finances. During the budget lockup the previous day CTV British Columbia's Jim Beatty asked Finance Minister Colin Hansen when he learned that revenues were under pressure and, to everyone's surprise, Hansen said he learned during the election. That didn't stop them from campaigning with the promise that the deficit wouldn't go a dollar over $495 million, even though they knew better. It would be interesting to hear what they consider the "election period" to be since they tried to pass a gag law that would have taken effect starting in December.

In December I wrote about the increase in the welfare caseload and the drop in construction employment. On February 15th, two days before the pre-election budget was released, I wrote:

The welfare statistics for November 2008 were released late in the afternoon of New Year's Eve. Those statistics showed the number of cases classified as "temporary assistance expected to work" up 24.3% in November 2008 relative to November 2007. The statistics for December show the expected to work cases up by 30.0%, from 19,708 in December 2007 to 25,609 in December 2008. That is a human tragedy, and it is a source of "cost pressure" that has to be watched in Tuesday's budget documents.

The government has the benefit of daily statistics on its tax collections to help it forecast how revenues are doing relative to forecasts, but it will not share that level of useful information with the public.

I wasn't the only one pointing to the challenges facing B.C.'s economy. On February 5, 2009 Central 1 Credit Union's Economics B.C. Weekly Briefing carried a headline "Latest Indicators Confirm Recession" and said: "The economic recession both nationally and in British Columbia deepened during January and is accelerating." On February 27th the Briefing said: "It was another week of uniformly negative economic indicators, with no floor to the unfolding recession in sight."

That is why it is impossible to believe that Campbell and Hansen were taken by surprise and didn't know that their pre-election budget figures couldn't hold water.

This week's budget update was accompanied by a slide show containing several graphs which further undermine the credibility of Campbell and Hansen. Those graphics show a 9.6% decrease in retail activity between September 2008 and March 2009, a 61% decrease in housing starts between September 2008 and June 2009 and a 78% decline in natural gas prices between June 2008 and July 2009. Enough of those data were available and the start of the downturn certainly was sufficiently clear so most economists knew that the B.C. economy and government finances were in trouble.

There are several ways to describe what Campbell and Hansen said before and after the election, including 1) they misled voters, 2) they were incompetent, or 3) they were willfully ignorant - a concept big in the Nixon era. Whatever the explanation may be, one thing is clear: they likely would have lost the election if voters had known the truth.