A letter to the editor by Parkland Institute Director Trevor Harrison responding to an August 25, 2016 editorial in the Calgary Herald which accused the Alberta government of "blithely following a path of reckless borrowing" ran in the August 30, 2016 edition of the paper. Below is an expanded version of Dr. Harrison's response, which was declined by the paper.
Finance Minister Joe Ceci’s announcement of August 23 that Alberta’s deficit has ballooned to $10.9 billion has elicited criticism from the usual suspects whose chief complaint is that the government is not reining in spending. While no one supports waste (and everyone lauds seeking out “efficiencies”), much of this criticism ignores the importance of stimulus spending in the short term and the need for Alberta to address its revenue shortfall in the long term. In effect, the NDP’s critics want it to emulate previous conservative governments, bringing in austerity measures at a time when the economy is barely limping along.
In this vein is a Calgary Herald editorial published on August 25. The editorial casually admits the NDP can’t be blamed for low oil prices, but then asserts the government deserves no sympathy "because it refuses to make any spending reductions and insists on blithely following a path of reckless spending."
The editorial decries the fact that $7 billion of government borrowing is for operational spending, implying that this is unneeded. But not borrowing for this purpose would in effect require $7 billion in cuts, lessening services to Albertans at a time when they are needed. Additionally, a decrease in borrowing would lessen aggregate demand in the economy, at a time when purchasing power in the province is already at low ebb.
Using a shopworn analogy, the Herald editorial board says a family household whose income dropped substantially would eat out less and put off making major expenses; in other words, be inconvenienced, but not actually suffer. From the neoliberal perspective, the average family – like governments – has a lot of fat that can be called upon during lean times.
The Herald’s editorial concludes with calling for the NDP to "end its policies that are driving investment out of the province." This statement, as they say in Texas, is a dog that don’t hunt.
Which policies, empirically, can be pointed to? If anything, the NDP has bent over backwards, sometimes to the consternation and anger of its supporters, to keep peace with the business sector. The NDP’s royalty review left the previous regime pretty much untouched. It has pushed, as avidly as previous Alberta governments, for new pipelines. The hated carbon tax hasn’t even come into effect yet and, in any case, is a measure that every jurisdiction in North America is gradually adopting. Similarly, the staged-in raise in the minimum wage to $15 is in keeping with similar moves across North America.
The NDP’s right-wing opponents have also focused on government tax. But Alberta’s corporate tax rate is 12%, tied with Saskatchewan and only 1% higher than BC; while its small business tax rate, though currently 3%, will fall in January to 2%, tied with Saskatchewan and 0.5% lower than BC – even as Alberta continues to have no provincial sales tax (Saskatchewan’s is 5%, BC’s is 7%). In short, Alberta continues to have the lowest tax rates in Canada.
Investment in Alberta is not tied to government action, but to current oil prices, over which the NDP – like previous governments – has no control. Alberta’s current economic problems did not arise in 2015; they are the product of decisions made over decades, and include a failure to diversity the economy and to put away revenue from non-renewable resources during times of plenty. Turning the ship around will take time.
Admittedly, there is no certainty that the NDP’s efforts at stabilizing the economy in the short term and attempting to diversity it in the long term will bear fruit. Moreover, the government can be faulted for appearing to adopt the same failed solution to Alberta’s economic woes as previous governments: praying for the price of oil to increase.
But austerity based on chimerical, and frankly elitist proposals, that massive cuts can be made to government operations without real pain and long-term harm, is not a solution to be followed.