The release of the Alberta government’s first quarter fiscal update last week resulted in the now predictable flood of press releases and editorials from the province’s right and the mainstream media.
As always, the various “sky is falling” messages from these sources have an aura of careful coordination and overlap among them. Both the Calgary Herald and the Wildrose Opposition, for example, reserved privileged status in their post-update missives for the assertion that yet-to-be-implemented carbon levy is in some way at least partly responsible for the state of the province’s finances.
Likewise, both also focused their attention on the province’s current spending on public services and the growing fiscal debt, most of which is being used to fund infrastructure investment. In a recent press release, Wildrose finance critic Derek Fildebrandt characterized it as the government being on a “spending binge using borrowed money,” and a Calgary Herald editorial suggested the problem is that Finance Minister Joe Ceci “refuses to make any spending reductions and insists on blithely following a path of reckless borrowing.”
The problem with phrases like “reckless borrowing”, however, is that a close look at the quarterly update and the 2016 budget reveal that they are simply not true.
For starters, the bottom line in the update was not particularly bleak or startling. It projects an overall deficit at year end that is $527 million dollars higher than what was in the budget. That may sound like a big number to miss by, but when you factor in the fact that the Fort McMurray fires are responsible for about $500 million of that, it is actually not bad at all. Missing by $27 million on a $52 billion budget is, by anybody’s accounting, largely negligible—it equates to 0.05% of the overall budget. In other words, three months into the fiscal year, the government is still pretty much right on target in terms of its bottom line. By no means the “bad economic news” portrayed by the Herald or what Fildebrandt characterized as “a rude wakeup call”.
Suggestions that the government is flying blind, or being reckless, or on a spending binge are equally questionable. Whether you agree with the government’s approach or not, they have actually been entirely consistent in their plan and vision for dealing with the economic downturn. They have identified their priorities, made their choices, and stuck with them. No flip-flopping, no uncertainty, no increased volatility. And yes, those choices are based on the NDP’s ideology and vision of the economy just as the choices being promoted by the Wildrose and the Herald are reflective of their particular ideology and vision of the economy.
For example, both the Herald and Fildebrandt suggest that the government needs to engage in spending cuts. They don’t specify where or how, other than to repeat regularly that civil servants are over-paid, but they want to see cuts. Their suggestion is based on the oddly circular belief that cutting spending will reduce debt payments which will in term free up money that could be directed to public services, the public services they just advocated cutting.
The government, on the other hand, says that to cut peoples’ salaries and/or put them out of work in the midst of a significant recession is counter-productive: it reduces the amount of money circulating in the economy and increases demands on public services thus further increasing costs. They reject the notion that just because the private sector is laying people off and cutting salaries that government should follow suit.
Likewise on the question of incurring debt to fund infrastructure. The right’s ideology suggests that any debt is bad, and that the government should delay infrastructure spending until it can afford to pay for it without incurring debt. The government, for its part, believes that going into debt to pay for infrastructure now makes sense. Interest rates are lower, construction costs are lower, and building public infrastructure helps keep thousands of people working. We need the infrastructure, and delaying these projects would add to the record number of construction workers already out of work in the province.
In the end, neither the right’s portrayal of the quarterly update as shocking and dire nor their characterization of the NDP government as flailing and reckless holds any water. The government has a plan and a vision. It is the same plan and vision they ran on, and it is the same plan and vision reflected in budget 2016, and the first quarter results show that the plan is thus far yielding the results they anticipated. You don’t have to like their plan, and you may have other ideas and priorities for how to manage the province’s finances during this current recession, but to pretend that the government has been inconsistent or is out of control is disingenuous and not constructive. It is likewise disingenuous to pretend that the government’s vision is ideological but that no one else’s is. We are at our best when we focus on debating the ideas and visions than when we focus on building straw men to tear down. Let’s be at our best. V
Ricardo Acuña is the executive director of the Parkland Institute, a non-partisan, public policy research institute housed at the University of Alberta. The views and opinions expressed are his own and do not necessarily reflect those of the Institute.