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Ideology, not economics, behind Alberta's financial woes
As always, crawling over the hump into the new year is a time to reflect, and the first week of 2013 is no different. So what’s the most important (and grossly under-reported) story of the past 12 months?
It would be nice to celebrate how the Alberta government not only talked about, but implemented a world-class monitoring program in the oilsands, as it keeps promising it will. Or that oil industry CEOs, basking in the glow of record profits, have decided to voluntarily implement best-available technologies to limit greenhouse gas emissions and render toxic tailings ponds obsolete in the oilsands — even though the Alberta government refuses to regulate them to do so.
Alas, in a province so dangerously wedded to a fantastical ideology, such ruminations are simply wished-for fictions, Peter Pan-like flights of fancy reserved for quieter moments around the Christmas tree. Instead, we are left to ponder an even more unbelievable reality: How a democracy run by Conservatives who claim to be fiscally responsible, and who oversee the world’s second-largest reserve of oil, could be borrowing money to pay for such societal essentials as roads, schools and health-care clinics.
On the surface, at least, it seems impossible that Albertans should have to dip into their savings and/or pay interest on borrowed money to provide their children with the high-quality education they deserve, and to maintain and expand the transportation infrastructure required of a growing economy. After all, we’ve allowed the oil industry to pretty much drill and dig as much oil and gas from the ground as it can, a minimum of 750 million barrels of oil equivalent over the last 12 months alone. You’d think we’d have enough money to paint the walls with gold.
And yet, the perverse reality of our fiscal health is considerably different: Alberta will usher in the new year with a budget deficit somewhere around $3 billion, and we will spend about $500 million a year to service our debt. Meanwhile, the rich get richer and the rest of us increasingly lose out. Add to all these dismal statistics the growing, multibillion-dollar environmental debt we continue to ignore (more than $30 billion at last count), and Alberta’s moral and economic tragedy becomes Shakespearean in its incompetence.
Of course, Alberta’s Conservatives blame Alberta’s financial mess on fluctuations in the price of oil, which is lower today than they would like. And it is lower in Alberta in particular, they claim, because those damn environmentalists keep delaying the construction of more pipelines to get our crude to more lucrative Asian markets. In other words, it’s not our fault. We just need to allow Big Oil to do its thing at breakneck speed. Everything else will take care of itself.
Not so fast, Tories. Let’s not forget that the Alberta government has chosen to limit or expunge revenue streams enjoyed by most other capitalist democracies. Alberta, remember, has the lowest personal income tax in Canada, a 10 per cent flat tax that puts a higher burden on the middle class than the richest Albertans. It also has low corporate taxes, the lowest fuel taxes in the country, no capital tax, no payroll tax, no health premiums and no sales tax. According to the Alberta government website, if we had implemented the tax regime of the second-least taxed province, Saskatchewan, we could have raised an extra $12 billion or so this year. In other words, we would have a budget surplus.
And then there’s royalties. Premier Peter Lougheed, as close to a saint as exists in Alberta, came to power on a “behave like an owner” platform that saw royalties on all non-renewable resource revenue increase to 40 per cent from 17 per cent. This revolutionary act increased government revenues by $10 billion a year, 30 per cent of which went into savings. Today, the free-market extremists in power collect less than 15 per cent of available non-renewable resource revenue on behalf of the people they are supposed to represent, one of the lowest rates in the world.
So what kind of long-term solutions is the Alberta government considering to address our ridiculous fiscal crisis? It’s already proven incapable or unwilling to raise royalties, and Alberta Finance Minister Doug Horner has made it explicitly clear that new or higher taxes are not on the table. Instead, he’s going to dig into Ralph “We Had No Plan” Klein’s bag of tricks and gut the programs and services Albertans rely on. Inevitably, it will be the poorest who will suffer the greatest consequences.
And yet, anyone who has been keeping a close eye on the hydrocarbon industry over the last decade could have predicted potential deficiencies in oil revenues, and incorporated them into last year’s budget and whatever long-term economic plans we have for ourselves. Even Conservative economists have been warning Albertans that running an economy so heavily dependent on oil revenues — and so ideologically opposed to reasonable taxes — is dangerously stupid.
Indeed, economists warn that the proposed austerity is itself a problem, a slippery slope leading ever-closer to the dangers of recession. Besides, there is nothing wrong — at least from an economic perspective — with taxing citizens and corporations at a more reasonable rate, or demanding more of the revenue from our oil.
The only thing standing in the way of a common sense solution to Alberta’s economic woes is ideology. Alberta has become the poster child of neo-liberal economic philosophy run amuck, and it is failing as miserably as one would expect, even — especially! — in a province as wealthy as ours.
How about this for a New Year’s resolution? Let’s base Alberta’s public policy on facts rather than beliefs, on small-c conservatism rather than neo-liberal greed, on a sustainable long-term future for the whole rather than short-term benefits for the few and the rich.
Wouldn’t it be nice to write about that next year?