Report relays many past errors, sparking reason for concern
In a report published last month by the University of Calgary School of Public Policy, former Saskatchewan NDP Finance Minister Janice MacKinnon and perennial right-wing think tank favourite Jack Mintz ostensibly set out to create a sense of panic about Alberta’s “multiple money problems” and then offer up a series of “common sense” fixes to those problems.
In identifying the supposed scope of Alberta’s money problems, Mintz and MacKinnon break down the current debt and debt projections on a per capita basis, suggesting that the government’s own projections—which they call a best-case scenario— would see an accumulated debt by 2020 equivalent to $16,500 per Albertan.
The problem with breaking down debt on a per capita basis, however, is that it doesn’t account in any way for the size of the provincial economy and the potential for paying it back. Think of the difference between how a $20,000 personal debt would impact a young professional in a booming economy with extensive job prospects versus how that same debt would impact a high school drop-out in a depressed economy with no job prospects. The same amount of debt is largely meaningless for the one and almost insurmountable for the other.
When you bring the size and health of the economy into play by calculating the provincial debt as a percentage of GDP, all of a sudden Alberta has the lowest debt to GDP ratio in the country at 6.8 percent, and it is projected to remain the lowest for some time-—certainly not the panic-inducing analysis MacKinnon and Mintz were going for, and likely why they chose to measure debt per capita instead.
They then launch into a comparison of Alberta’s per capita expenditures compared to B.C., Ontario, and Quebec in a variety of areas, including infrastructure, health, and public sector salaries.
Their conclusion, of course, is that Alberta spends more per capita than all these other provinces, and if the government would just bring its per capita spending more in line with those provinces, then we would be fine.
Here again, looking at spending per capita is problematic for the same reasons as above. When you look at Alberta’s overall spending as a function of GDP, we are at most middle-of-the-pack across the country, but again, that doesn’t serve MacKinnon and Mintz’s purposes, so they neglect to mention that.
The reality is that a growing and thriving economy necessitates a greater degree of spending and is subject to greater inflationary pressures, which makes the per capita analysis largely meaningless.
Regardless, our two heroes carry on and propose measures which they claim will ultimately result in some $8.1 billion a year in savings. Specifically, they propose spending $1 billion less than budgeted on infrastructure, cutting public sector salaries by half a billion a year, and slicing a further $6.6 billion from public services through various privatization and procurement initiatives and other administrative cost reductions. If you’re keeping track, that amounts to cutting the provincial budget by about 15 percent—something that MacKinnon and Mintz don’t consider austerity, but rather a “middle ground” between austerity and out-of-control spending. They do not speak to how many Albertans would lose their livelihoods as a result of reduced infrastructure spending and service cuts, or how reducing public sector wages will affect spending in the economy, so those things must be irrelevant to their analysis.
In the final section of their report Mintz and MacKinnon tackle the question of how taxes in Alberta could be changed to better “align revenue and spending”. Their recommendation, reduce taxes for corporations and the rich, and using the carbon levy to further reduce business taxes, rather than providing rebates for low and middle income Albertans. Interestingly, this is the one section where they don’t compare Alberta’s performance with that of other provinces, choosing instead to ignore the fact that Albertans are the lowest taxed Canadians by a margin of $8.7 billion.
Ultimately Mintz’s and MacKinnon’s recommendations are not new, nor do they represent some middle-of-the-road balance in fiscal policy. What they are is a rehash of the extreme austerity, pro-privatization, small government, low tax ideology that got our province into this mess in the first place.
Mintz and MacKinnon assert repeatedly that it’s a mistake to build solutions based on a “black-and-white scenario of either spending or imposing austerity and drastic cutbacks.”
They are right, although their report seems premised on the exact same scenario. The solutions are in addressing revenues, and if the government doesn’t deal with those in the short order, then that black-and-white scenario will become inevitable. Until then, the government would do well to fully disregard the recommendations in this report.