Welcome to the New ‘Alberta Advantage’

It could have been the perfect, quintessential Alberta pre-budget fireside chat:

“We’re doing a lot right, and we have much to be proud of. But as a province, we have also made mistakes.

In terms of who is responsible, we all need only look in the mirror. Basically all of us have had the best of everything and have not had to pay for what it costs.

Bluntly stated, our province has become unsustainably dependent on non-renewable resource revenues.

Collectively we got into this as Albertans, and collectively we’re going to get out of it, and everybody is going to have to shoulder some of the responsibility.

There is only one real answer: lower spending, and start immediately. … Every single one of our efforts is aimed at preserving and building on the ‘Alberta Advantage’ and achieving the kind of future we all want.”

The excerpts above have been stitched together from that trifecta of fiscal discipline, Ralph Klein, Jim Prentice, and now Danielle Smith: A franken-speech, constructed from the necrotic limbs of oratory political interventions at crucial, life-or-death moments in Alberta’s economic history.

It doesn’t take a degree in discourse analysis to recognize the similar themes, tone, and prescription in these echoes of the past and last Wednesday’s announcement. So why, exactly, has Smith decided to run this particular play — and why now?

The answer to the first question is twofold: first because there is a tiny kernel of truth in the starting premise, that our ride on the resource-revenue rollercoaster is nauseating and unsustainable; and also because, no matter how small that initial truth may be relative to the grand narrative being spun from it, it works. Nine times out of ten, this play has yielded electoral victory or grudging acceptance of the most unacceptable of budgets. 

It's a tried-and-true drill:

• Step 1: Present the populace with an existential fiscal crisis;
• Step 2: Blame everyone but the people and parties who held power and made those policies possible;
• Step 3: Enact a budget that lowers the bar on citizens’ expectations for their public services and their own quality of life;
• Step 4: Profit from it all.

So beginning from the slim basis of reality upon which the foundations of this plan are laid, we can acknowledge that yes, absolutely, Alberta’s volatile boom-and-bust budget cycle cannot continue to compensate for the massive holes in provincial revenue and an undiversified economy. Quite a few folks from diverse political and economic perspectives have been saying as much for decades. Moreover, this occasion may mark the first time Smith has said the quiet part out loud on the necessity of energy transition, the need for a “path to prosperity that will last long after our last barrel of oil has been produced.” Non-renewable resource revenue… its fleetingness is in the name, really.

In this present incarnation, Smith unveils the revelation that our ‘Alberta Advantage’ — the multi-billion-dollar revenue gap between Alberta and its provincial counterparts — was always unsustainable, and was always subsidized. As Parkland’s 2008 report “Saving For the Future” pointed out, the key to the ‘Alberta Advantage’ is that royalties are used to artificially suppress taxes.

The solution, per Smith, is to siphon off those royalties into the Heritage Fund and fill the resulting hole in the budget with curtailed spending. Not to establish new or higher taxes, not to pursue a diversified economy based on concerted investment in renewables, not to keep a long-term eye on reducing the costs to our health care, social supports, and justice system by tackling the social determinants of health and well-being.

In the opening of her address, Premier Smith asserted:  

"Some say the answer is higher income taxes or a sales tax. I reject this. We only need look at some of our fellow provinces and many US states, to know that increasing these kinds of taxes to balance a budget is a recipe for economic decline. That will not be the approach of our government.”

 The prize, we are promised, will be a money pot to rival Norway’s sovereign wealth fund… eventually. On paper, it is possible: putting $3 billion a year into the Heritage Fund for the next 25 years will yield a fund of $250 billion to $400 billion by 2050, just as the premier suggests.

This, however, is where that sliver of reality loses its tenuous grip and is evacuated into the ether. Norway built its fund not by starving public services of revenue, as Smith is proposing to do in Alberta, but rather by doing all the things that Smith dismisses in the first 90 seconds of her address:

• Putting the majority of oil revenues into savings (not just the occasional surplus);
• maintaining a high level of public spending on world-class public services and infrastructure (comprehensive health care and pharmacare, free post-secondary education, world-class infrastructure, and excellent social and community supports);
• enacting high and progressive income taxes and consumption taxes (including a carbon tax);
• ensuring the wealth fund is independently managed and ring-fenced from government interference.

The result of this approach has been some of the best and most stable public services in the world, and a fund worth over a trillion dollars that contributes about 20% of government revenues.

Despite Alberta currently facing a multitude of crises, including serious funding, infrastructure, and staffing shortages in both health care and education, houselessness, a drug poisoning epidemic, and crumbling provincial infrastructure, we are not actually facing a fiscal crisis. Our crisis is one of failing to collect the revenues necessary to properly and stably fund our services and infrastructure. As the government boasts on its own, the province could raise an extra $19.7 billion a year, and still have the lowest taxes in the country. That’s entirely about a lack of political will to tax and fund what we value.

Alberta could absolutely replicate what Norway has done both in terms of savings and public services, but Smith is choosing the path of austerity and chronic underfunding instead. 

In other words, Alberta would literally try anything to look fiscally sustainable — except go to therapy or raise taxes.

The real prize awaiting us in Smith’s reality is the entrenchment of permanent austerity for Albertans and extra austerity for public-sector workers.

In one short statement, Smith has imposed a fiscal sentence on all Albertans: “I have instructed our finance minister to limit government spending to below the legislated rate cap of inflation plus population growth…not just during lean years with lower oil prices as we expect next year…but also in years when high oil and natural gas prices result in billions of surplus provincial dollars.”

Which presents us with an answer to the second question posed above: why now? In 2024, approximately 200,000 public sector workers in Alberta will enter collective bargaining for new contracts.

The implications of this approach are evident in the United Kingdom, where nearly a decade and a half of imposed austerity measures has seen massively detrimental impacts on public services — from the once-lauded National Health Service to public education to the Royal Mail. Wait times have skyrocketed, access is limited, life expectancy has declined for the first time since WWII (even after factoring out the impacts of COVID 19). Infrastructure is literally crumbling, and labour action among doctors, nurses, paramedics, and rail workers has been widespread. Thanks to austerity, public services are in a “doom loop” from which it may be impossible to return.

This is the real “future” being secured by the UCP plan; the costs, as ever, are to be borne by Albertans. Already per capita spending in health and education — to be spared the worst of the cuts, according to Smith — is dropping behind our comparator provinces; our health-care workforce is under unprecedented strain. Even with a promise of steady funding (by no means a guarantee), there is no way for these vital services to regain the ground that has been willfully lost.

But wait! What about those alternatives, the solutions that Premier Smith rejected in the opening of her address? Contrary to fireside chat rhetoric, those futures are still possible. But Albertans will have to fight for them — and harder still, vote for them.

 

Note: images related to this post were AI-generated.