I follow a number of journalists and economists on Twitter. This gives one a very interesting perspective on current events. By following economists, you learn why everything you (as an average Joe) know about economics is wrong. By following journalists, you learn what to be outraged over.
The latest outrage is the planned purchase of F-35 fighter planes by the Harper Government (HG for short). It appears that the HG’s estimate of $16 billion for the purchase of the jets is off by some $10 billion (at least!) The $10 billion is the estimated cost of operating the F-35s over a 20 year period, which the HG conveniently neglected to mention. Andrew Coyne (one sharp – and funny – cookie, by the way: follow him on Twitter @acoyne), writing in the National Post, described the HG’s handling of the F-35 file as:
“a fiasco from top to bottom, combining lapses of professional ethics, ministerial responsibility and democratic accountability into one spectacular illustration of how completely our system of government has gone to hell.”
And he may indeed by right. Even so, I believe the HG will ultimately emerge from the F-35 affair relatively unscathed. I rest this belief on two key points.
The first is the fact that the average Canadian believes the HG lies about everything anyway. Just like they believe the Opposition does, and all politicians do. Here’s what I mean: If you gathered a bunch of average Canadians in a bar and said to them, “The HG has said that the F-35s (which do not yet exist, by the way) will cost $16 billion. When all is said and done, do you think the planes will really have cost this much?”, I would wager that the vast majority would say “No way.” If you pressed them, they would say the planes will probably cost more. “How much more?” “Hard to say.” “Could it be $5 billion more?” “Yeah, maybe.” “Could it be $10 billion?” “Wouldn’t be surprised.”
Remember, we live in a world where the vast majority of MAJOR public expenditures, for whatever purpose, seem to invariably come in way over budget (and behind schedule). It would be absolutely no surprise to anyone to see that the current estimates (for something that extends so far into the future) are way off base.
The second pillar of my argument relates to the “HG lied to Parliament/Canadians” angle, which a number of media stories have played up. The HG has tried to get out in front of this by saying the difference is simply due to different accounting methods. As Defence Minister Peter MacKay said on CTV’s Question Period:
“This is the way that accounting has been always been done for major procurements. We do not calculate as part of the acquisitions costs what we pay military personnel. Or the fuel. Or the cost of keeping that existing equipment running.”
Of course, as Coyne and others have pointed out, this runs counter to Treasury Board directives (not to mention generally accepted accounting methods for these types of estimates). A number of journalists have used the example of an automobile purchase to illustrate how ridiculous it is to not include operating costs in the overall cost estimate.
But therein lies the reason that the HG will get a pass on this file. It will not be at all difficult for the average Canadian to believe that the HG honestly felt that the relevant number to communicate to the public was the “sticker price” of the F-35s. After all, when we are buying a car, the price of the car itself is paramount. Yes, we know that we have to pay for gas, insurance, maintenance and repair, etc., but (if you already own a car) you pay for those things right now, anyway. Yes, if you feel you need to economize, you will perhaps look for a car that is easier on gas (a 4-cylinder, rather than the 6 you have now), or one that is cheaper to repair (maybe domestic, rather than imported), but this is an impressionistic exercise and, crucially, is usually looked at separately from the purchase price of the cr. Most people do not calculate the actual projected operating costs over a 5-year period and include it in the car’s price. And they certainly do not use the actual-5-year-total-cost in conversation: “I can’t believe, when I crunched the numbers, that the Ford Flibertigibit will only cost $79,750 over 5 years. And I’m paying $89,595 for my Volkswagen Whatsit!” No, they say, “I talked the Ford dealer down to $19,995, all in – out the door! Bow down before my haggling skills!”
Bottom line – out here in the real world, no one will be shocked that the F-35 costs will actually be higher than the HG said. And no one will feel particularly “lied to” when they hear the HG’s explanation for the difference.
Comments, as always, are welcome. I approve all comments that are not spam.