Quebec's Perfect Storm

Here's what I wrote  back in December of last year, three months after Pauline Marois and the PQ took office.

"Looking forward to the gathering clouds of debt, overspending and diminished economic activity, it is painfully obvious that we are headed into our very own Perfect Economic Storm"   Quebec's Nanny State Running out of Gas

I'm often proud when my predictions come true, but in this case I wish I were wrong.
No matter how you slice it, Quebec is in big economic trouble, likely heading into a recession and towards a three or four billion budgetary deficit.
Long gone is the PQ election promise of a balanced budget, the realities of Quebec economics dictate that in the present and foreseeable future, it just ain't gonna happen.

For Quebec and Canada, economic indicators are pointing in opposite directions, with the ROC making economic and job progress, and Quebec losing ground in all directions.

With talk of a PQ induced election in December, Pauline appears to be stealing a page from Jean Charest's playbook in calling an election before the bad news hits.
You'll remember that Charest called an election before the news of a massive loss at the Caisse de depot went public and when he received a majority government, the public felt misled, but left with as many options as lobsters in a trap. (to steal a phrase from Jacques Parizeau).

When first elected and after looking over the poor state of the finances left behind by the Liberals, a shocked Bernard Drainville promised a law whereby the auditor general would give a financial update whenever an election was called so that voters could make an informed choice.
That idea has been quietly shelved as the PQ are now playing the same game of hide-and-seek that they accused the Liberals of doing before.

In ripping a page form the Liberal party playbook, Pauline intends on calling an election before presenting a real budget, one that would no doubt lay bare the sad economic reality that we face.
There is no more wiggle room for the PQ and no Jean Charest to blame any more.

And so the PQ is doing what they do best, practicing the politics of improvisation, changing directions as the political sands shift under their feet, trying to stay a step ahead of one disaster after another.
But finally, time has caught up to Quebec and we are about to embark on some very dark economic days that neither the Liberals, the PQ or the CAQ can do anything about.

It is a Perfect Storm, the result of excessive taxation, excessive borrowing and excessive spending which has been building over decades and has now finally coalesced into a witch's brew of economic pain.

This economic disaster that we face is not entirely the responsibility of the PQ, we've been on course for this economic bruising for the last twenty years.
And so Pauline Marois is the dumb sucker left holding the bag, like the unfortunate kindergartner who is left standing in a game of musical chairs.

Every single government, over the last forty years, PQ or Liberal, has contributed to the spending orgy that has led us to the point.
So let us not be holier than though, the Liberal government of Jean Charest piled on one third of Quebec's $240 billion in debt, in just nine short years.

But even though, the biggest economic blow to Quebec's economy belongs to the separatists, who created a climate of uncertainty for outside investors and in fact, its own indigenous anglo community.
In making Quebec inhospitable to those who don't speak French, the inevitable result is what we have now, a situation where the only way to get companies to invest in Quebec is to bribe them with subsides.
Pauline may crow about Montreal's world class video game industry, but the truth is that the government pays 38% of the salaries of the employees of these companies on a permanent basis. And this doesn't even include the upfront cash subsidies and interest-free loans.
Quebec pays out  almost 4 billion a year in subsidies to industry, double what Ontario pays and considering the population difference, it means that Quebec is forced to give out subsidies at a rate more than three times that of Ontario. All those forgone billions contribute to the ever-rising $240 billion deficit.

Just recently we heard of the sadly amusing incident of the National Geographic photo contest barring entrants from Quebec (as well as North Korea and Cuba and other outlaw states.) There was a great deal of embarrassment on the government's behalf, with a spokesman for Loto-Quebec stating that if only the magazine checked with them, there wouldn't have been a problem.
But we all know what that means, checking with Loto-Quebec meant dealing in French, so it would mean hiring outside help to navigate the endless paperwork and ultimate time delay.
Thanks, but no thanks.

It is a clear metaphor for the bigger picture, where companies and investors just cross off Quebec from the list of investment considerations. Who needs the hassles?
It's like walking down a street with fifty restaurants side by side and choosing the one that won't speak to you in English, has an inhospitable atmosphere and charges more for the food, as well as piling on taxes galore.
As the Jim Reeves song goes. 'Just walk on by'

And that is exactly what investors are doing, skipping Quebec, just walking by.
And the only way to get customers into the door, is to have Pauline stand outside like a shill and beg diners to come in with giant discount coupons.

While Canada created 15,000 resource based jobs this year, Quebec produced not a one.

"This largest of projects was meant to revive the economy of the province. Less than three years after its official launch, there's not much left of the 'Plan Nord'  according to data obtained by our Bureau of Investigation.
A review of major mining projects in the North shows that the Plan Nord, which was renamed the 'Nord pour tous' by the PQ government, is just a shadow of what it once was.

Of the 11 major projects announced north of the 49th parallel, valued in tens of billions of dollars, more than half are under review or have undergone major downward revisions .

Some have been abandoned altogether. Link{fr}

All this while our bumbling Minister of Natural Resources, Martine St. Pierre, (a woman who doesn't know the difference between a loan and a loan guarantee,) is busy calculating higher resources royalties.
I am reminded of Emperor Nero fiddling while Rome burned.

And how is the PQ reacting to the job losses and economic decline? ......More improvisation, by spending more money on busy work, a two billion stimulus package that will drive Quebec further into debt.
You see readers, spending money is the only available recourse that governments seem to have in dealing with any problem. But it ultimately delays and exacerbates the real problem of high taxes and public debt.

"The Parti Québécois government is vying to reboot the province’s economy with a new $2-billion plan that it says will create more than 40,000 jobs by 2017.
Premier Pauline Marois and Finance Minister Nicolas Marceau revealed the job creation program at a press conference Monday that had the look and feel of an election campaign event.
The plan aims to encourage new investments and jobs in Quebec through incentives like electricity at discounted rates and tax credits.
The money injected into the province will fund employment and development in a number of targeted areas:

• $566-million for the renovation of infrastructure, including community centres, arenas and schools
• $516-million for the development of an electric transit industry in Quebec that will build electric cars, electric railways, and related infrastructure.

The new plan also includes more than $700-million in tax credits as well as discounted hydro rates for companies which invest to create new jobs." Link

 I wish Pauline and finance Minister Nicolas Marceau would have watched this video before embarking on another money-wasting adventure.

Quebec has, for the last twenty or thirty years, been writing cheques that taxpayers couldn't honour, and so Ottawa, as well as lenders, have been enabling Quebec's addiction to spending
But like all binges, excesses ultimately draw to a close, and in the end, the time comes to pay the piper.

And so a desperate PQ is calling an audible, looking to make the Charter of Values the election issue instead of the economy.

When Drainville presented his charter, he said that the government is open to changes and could possibly soften up certain aspects of the law.
But that option is out the window, the PQ is about to table a Charter that is even tougher than presented, something they know the opposition will not vote for, thus triggering an election on their own terms

And so Pauline will have her election and might very well pull off another government, perhaps even a majority if everything falls her way.

It doesn't change anything, because the next government, whomever it is, is looking into an economic abyss.

For all you voters who think that the Charter of Values is a debate that merits such a large proportion of public debate, I have land in Florida to sell you.

The misdirection that is the Charter of Values debate is painful to watch, like arguing about which colour to paint the bedroom walls, while a fire has broken out in the kitchen.
And like the cartoon at the top of the page, we are being distracted with trifles, while our pockets are picked clean.

So if and when the Charter of values passes in one form or another, what will be next?

Will we get down to tackling the real problems of economic stagnation, debt and inferior productivity or will the PQ (if they are still in power) do another sleight of hand by dredging up another red herring.

I'm betting on the latter and it's called Bill 14.

Another loud and time-consuming debate meant to distract, as Shakespeare said: Full of sound and fury, Signifying nothing.

But readers, know this......It's all coming to a head and sooner rather than later.

The next government, whomever it is, is going to admit to some very startling realities, one that takes into account that the Quebec model is broken and more importantly never was viable in the first place, supported only by massive borrowing and alms from the ROC.

That era is drawing to a close and what is to come is not exactly a picnic.
The sad part is that there is nothing to be done, no way to mitigate the fallout and spending our way out of the coming recession,is impossible.

See you on the other side....