Alberta is One of The Wealthiest Places on the Planet - Why Do We Have a Financial Crisis?

Let us get one thing clear. Alberta is a very wealthy place. Here is a table of GDP per capita for each Canadian Province / Territory and the UK (source Statistics Canada and Gov.UK)

State / Province	GDP/Capita (US$) 2014
UK	36,202
Canada	41,889
BC	47,590
Alberta	80,516
Saskatchewan	72,156
Manitoba	45,970
Quebec	44,428
Ontario	49,940
Newfoundland and Labrador	65,958
Nova Scotia	40,473
PEI	37,967
New Brunswick	41,723
Nanuvit	65,222
Yukon	72,880

We have more than twice the tax room of the UK, yet our Government behaves as if we are “maxed out” on taxation for corporations, individuals and resources. While all agree that services should be provided as efficiently as possible, almost no one agrees that this should be the only way in which Alberta responds to the incompetence of the present Government (which got us into this mess by not thinking clearly about its dependency on royalty revenues).

Part of the problem is that the GDP/per capita figures masks the rising nature of inequality in Alberta. We have a growing number of working poor, poverty is rising and women, FNMI, recent immigrants and those facing energy poverty get hit hard by rising prices and the cost of housing. Those at the top of the pile want to preserve the status quo (and they bankroll the present government), those at the bottom of the pile have no voice.

This is why the current debate about budgets and the role of Government is so important. Wildrose Premier Jim Prentice has a chance in a generation to fundamentally change the paradigm and do the right thing. From all he is saying, he will keep the paradigm and reinforce its key idea: let the rich get richer, the poor get poorer and we can screw the middle class (especially the public servants). This is pure Republicanism come to Canada. It is the tragedy that is about to happen in Alberta.

There will be fancy rhetoric, all sorts of doom and gloom and all sorts of promises that “front line services will not be impacted by any of our decisions”. Its all a smoke screen for what is about to happen. Just follow the money – see who wins and who looses.

It is “trickle down” economics with a touch of austerity and a big dose anti-professionalism. Klein-Smart. It is the new Republicanism, the new cocktail for the rich. All of which we have clear and compelling evidence that it will not work and is more likely to make things worse than better.

What is interesting is that we have no opposition to speak of. No alternative to vote for in the snap election that Wildrose Premier Prentice seems likely to call. This too is part of the new Republicanism – we replace monarchy with monarchy and call it something else.

Alberta is in trouble. It need not be. But it is. Will anyone offer to save us from the new WIldrose Premier?

Who is Wildrose Jim Prentice Listening To?

Lets ask a simple question. When the Wildrose Premier of Alberta says “he is listening to Albertan’s” who is he actually listening to?

We don't really know But we can guess. Given that he has ruled out all of the solid recommendations of  all of the leading economists, including the very smart people associated with the Premiers Council on Economic Strategy, we know he is not listening to those who have studied the problem.

We also know that he is not listening to those who have day to day direct contact with those Albertan’s most in need. That would be social workers, health workers, teachers, community development workers, foster care parents, mental health workers, First Nations outreach workers. The fact that he says that many of these are overpaid (he never says the same about bankers, oil and gas executives, engineers, and corporate executives) tells us he is not talking to them.

Nor is he listening to the growing number of poor people in Alberta. Nor is it possible that he is really listening to single parent mothers, the growing number of working poor or those who struggle with three jobs to pay rent, put food on the table. He is not listening to Public Interest Alberta or the Parkland Institute who champions the issues faced by these people.

So who is left? Well his own caucus members feel “left out”, at least according to some. He is not sitting down with the NDP, whoever remains in the Liberal Party or the Alberta party and asking “what can we agree to do which will really transform our economic position and end our dependency on oil and gas revenue?”.

So I am left with the working assumption that he is listening to a select group of oil and gas executives (and their bankers) who are telling him to keep their taxes low, to keep royalties crazy  low, not to introduce any new taxes on sales and to argue that all of this is in the name of “competitiveness”. I also think he spends his evenings in an echo chamber listening to himself.

This is why we have the broken Ralph Klein message and really poor thinking. This is why we are going to see conflict between those with power and those without. This is why he will take on the public intellectuals who challenge him and the bloggers who will be key to laying out an alternative narrative, given that our political opposition seems “dead in the water”.

No doubt a response to this will be that we are surveying Albertans. Really. Look at the questions NOT ASKED in that survey and, more significantly, read the last statement on the survey which makes it a political statement.  Also, ask what difference these surveys will make to the policies which come out of the echo chamber.

As one of my respondents has suggested, we are past the time of trying to help the Wildrose Government and Premier hear us, we need to start using street politics to get them to understand just in how many ways they are misunderstanding Alberta.

The Wildrose Prentice Governments Austerity Strategy - What's Wrong with That?

What is the problem with the Jim Prentice Wildrose Government narrative about the financial situation in Alberta?

First, it is based on the “big denial”. It is based on the fact that our revenue base is over-reliant on oil and gas royalties which, though they favour the oil and gas companies, have enabled the Government not to have to face up to a real revenue problem – we don't have the right mix of taxes, user fees and corporate revenues. We need to develop a progressive income tax regime which taxes those earning over $150,000 higher than those earning $50,000. We need to develop a harmonized sales tax which generates significant revenue. We need to rethink royalties so that we manage to secure an appropriate return for all Albertans from their resources (we own the oil and gas, Total, Conoco, Shell are leasing from you and me). The “big denial” is that we cant do these things.

Second, its based on the idea that the problem is the public service and their costs. The reality is that this is not the case. While efficiencies can be found, 9% cuts across the board for the public sector is the cowards way of dealing with the artificial problem created by the Wildrose Prentice Government. Reducing the depth and range of service harms the poor and vulnerable. The rich can still do what they have always do – pay for alternatives.

Third, the strategy the Wildrose Prentice government will be aimed at encouraging a mild form of austerity. We know from other places that this lowers tax revenues, increases unemployment, increases demands on social services and health care and damaged the long term sustainability of social institutions, including schools, colleges and universities. This is of little concern to Wildrose Prentice – he wants to further de-professionalize these organizations and lower their cost, effectiveness and resilience.

All of this is ideologically driven. What Alberta needs is an alternative narrative, set of propositions and new leadership. Sadly, we don't have it. While I have a lot of time for Rachel Notley (NDP), the NDP carry a lot of baggage – not helped by the decision of Brian Mason to seek another term as an MLA (he carries some of the bags). The Liberal Party of Alberta – say no more. Killed off by Raj Sherman, the PC who crossed the floor in the most opportunistic way. The Wildrose is now the Tame Daffodil and impotent. The Alberta Party is a party in name only. Prentice will win a snap election, though it is likely the last election the PC Party will win.

What can happen now is that public intellectuals should speak out loudly and call what they see directly, bluntly and clearly. As we watch our carefully built world class education system – the leading English speaking system in the world – being stripped of its capabilities and attacked in very direct ways, we need to speak out. As we watch our health care system staff being challenged, we need to speak out. As we watch the rich benefit from all of this and the poor getting poorer, we need to speak out. Its time for straight talk.

Alberta- The Non Budget Crisis...

Does Alberta have a financial crisis? No.

  

There is a complex answer to this question. It begins with a set of assumptions being made by Government and ends with a question of the competence of one of the longest serving Governments in the world.

Let’s start at the beginning. Alberta is anticipating a budget shortfall because the Government misunderstands the nature of the problem. As the Premiers Council on Economic Strategy made clear, the dependency on oil revenue for funding a great many Government operations represents a predictable problem: it is not a sustainable way of funding Government operations (see pages 95-100).

The so-called $7 billion “shortfall” is actually a myth. The real shortfall is in producing an intelligent response to the current conditions. Such a response looks to replace oil and gas revenues as a basis for operational spending with progressive income tax, sales taxes and revised corporate taxation and oil and gas revenues. This will take some time, but right now is the time to start. Alberta is ready.

The current government seems to have rejected these options on the grounds that it may affect Alberta’s competitive position. Yet our competitive position is more about the attractiveness of Alberta as a place to invest, live, work and play – the quality of education, social care, social services, health care and recreational services – than it is about taxes. No one likes paying taxes – we do what we can legally to avoid doing so – but we pay them because we value what they provide. As one of the wealthiest places on the planet (our GDP per capita is higher than anywhere else in North America), there is plenty of room for more taxes. Ideology gets in the way of collecting them.

The Government also espouses a narrative that says we should balance the books. This is another non-sense idea. We can chose not to without it impacting our credit rating, especially if the debt relates to needed infrastructure and investments for our future. With interest rates at a very low level and our credit rating high, it is a really good time to invest in our future. A reasonable debt to GDP ratio (between 25% and 30%) makes sense for a petro-state like Alberta.The Taxpayers Federation is not the conscience of Alberta (who elected them?) - our publicly elected officials are. Just listen to the Mayors and Councils or school trustees to realize we can do better. 

Of course we should make sure that all of our spending is efficient and effective, which is why results based budgeting and management makes sense. We should also systematically rethink how government does it work – do we really need over 650+ people working in Alberta Education, for example? Wouldn’t we make more progress on implementing new policies and practices aligned with Inspiring Education if we had just 150 people in this Ministry? After all, its at the level of the school that real change occurs. So we should look at all expenditure and question them. Taking a 9% axe doesn’t really do this, it just leads to bad decision making: why use a hammer when what we need is a sniper?

So when we hear “there is no alternative” to the strategy this Government wishes to pursue, know that there is. It is one which is not liberal, conservative or progressive, just sensible. It is called rethinking government. Do it now – it is a fantastic moment for new thinking. 

Does it look like this will happen? No. We have a Government that is stuck in a paradigm that is no longer fit for purpose. This is the competence issue. At the exact moment when we need inspired leadership, we do not seem to have it. After what seems like a Government in power for ever it has run out of imaginative ideas, despite a new leader. What we need now are public figures demanding change in how we approach this terrific opportunity to do the right thing.

The Alberta Version of Democracy - DIctatorship?

Parliament or a Legislative Assembly is an important place. Here Government presents its budgets and commitments and the House (all sides) are supposed to hold them to account. The opposition – for those parliaments fortunate to have them – also are expected to challenge the assumptions and strategy of government. The backbenchers of the ruling party are supposed to hold the feet  of the government to the fire with respect to their commitments.

MLA’s or MP’s are expected to have a degree of independence. The whips office can issue 1,2 and 3 line whips to require support for the party, but the more often the whips use the lash the less creative MPS’s/ MLA’s are and the less likely we are to attract the brightest and the best.

Committees of the House are just that – committees of THE HOUSE. Not the governing party. Their job is very clear: to hold the Government of the day to account. For example, if the Government says it has a financial crisis and they have systematically looked at all options and have developed a response plan and a budget to deal with it, the relevant Committee should ask some deep and challenging questions: (a) how seriously did they look at all of the options – e.g. a sales tax, progressive income tax, changes to corporate taxes, new fees and charges, new royalty regimes for natural resources, new options for death cuties, new options for stamp duty on financial transactions, targeted fiscal constraints, new investments in infrastructure to generate jobs and tax revenues; (b) does their budget make sense; and (c) are the claims about the budget – e.g. a 9% cut in every area of Government “will have no direct impact on the most vulnerable” – supported by the evidence. The job is to be critical and challenging, offering support only when it is due and supported by evidence.

In this tradition, Parliamentary Committees chaired by Government back-benchers with a majority of Government back-bench members will often draw attention to the stupidity of their own Ministers and will often send back legislation, budget strategies or regulations as not meeting the commitments made or for being, well, just stupid.

But in Alberta, the Committees are now creatures of Government. They are grotesque creatures which the Premier wants to order about. For example, when the appropriate committee restored financing to the Auditor Generals office to support investigative work, the Premier asked the committee to rescind its vote. A sensible committee would have politely told the Premier where to put his request and also reminded him that they are a Committee of the House, not of Government. If the Premier wants to control these committees he would be better off not having them. Disbanding them would save money.

Given the situation in Alberta, there is a good test for our parliamentary system. If the committee meets and does as the Premier asks, then we know they are wasting all of our time. If the Committee meets and reaffirms its original position, then we have something worth keeping. If they do as they are told and don't immediately then all resign we know a lot about the intention of the Government back-benchers – they want a Ministerial position. We also know that they are not good parliamentarians. Its a cunning test of democracy - the Premier is saying "shall we have a democracy" or something else?

You cant have a democracy which looks like a dictatorship. Get used to it.