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The Fiscal Mess

Frank Atkins

During the recent election campaign, Jason Kenney promised to assemble an expert panel to assess the financial position faced by Albertans. This panel has convened, and a comprehensive report is expected in early September. Of course, as most people know, Alberta is in a fiscal mess. Deficits and debt have soared. This actually started in the late years of Ralph Klein’s regime, continued under Ed Stelmach and Alison Redford, and was taken to new heights by the Rachel Notley government.

It is extremely naive to think that Alberta is in this position because of a revenue problem. This myth is perpetuated by those who advocate for introduction of a provincial sales tax. There appears to be a great deal of misunderstanding of a sales tax, and some economists are to blame for this. Economists have long argued that a sales tax is a good tax in the sense that it is preferred to an income tax. Therefore, ideally, introduction of a sales tax should be accompanied by reduction or elimination of an income tax. Some economists conveniently forget the income tax reduction part. If the Alberta government were to introduce a sales tax now, it would only serve to justify the current high levels of spending. I suspect Mr. Kenney knows this, and he will likely pay only lip service to the possible introduction of a sales tax.

The reality is that successive Alberta governments have been spending too much of taxpayer money. The time has come to not only stop the growth in spending but to institute meaningful spending cuts. These cuts are going to have to come from the civil service, health care and education. Symbolically, Mr. Kenney has taken a 10 per cent pay cut, while the rest of the MLAs have taken five per cent. This, of course, is just a drop in the bucket.

Mr. Kenney recently stated, “The NDP added 40,000 people to working for the government. We have the most inefficient provincial government in Canada by a country mile.” It has never been clear to me why we need so many people to run the government bureaucracy. Then there is the bloated Alberta health-care system. Surely there must be some efficiencies that can be found in the manner in which Alberta Health Services is run. Finally, there is the question of education. In the early days of the Alberta downturn, as private-sector employees were losing their jobs and taking pay cuts, I was enraged by the attitude of the teachers that they should not have to take a cut.

There is no question that these will be extremely difficult political choices. Although Mr. Kenney has shied away from the comparison, this is reminiscent of the early days of Ralph Klein. The truth is that Mr. Klein’s across-the-board spending cuts actually worked. If he, and successive Alberta premiers, had simply allowed spending to grow by the rate of inflation plus population growth subsequent to the cuts, we would not be in the mess we are in today, and we would have a sizable Heritage Fund to fall back on. I would not be so quick to shy away from Mr. Klein’s original methodology.

Frank Atkins is a senior fellow at the Frontier Centre for Public Policy.