Calgary·Analysis

Playing the politics of Alberta's multibillion-dollar debt

Based on history, Duane Bratt says it would appear that Rachel Notley could go down to a hard defeat in 2019 — punished for rapidly increasing Alberta’s debt load. But as the political scientist tells us, there's a counter narrative that the NDP could play, and that's the fear of the bad old days of debt reduction.

Do Albertans care about deficits and debt anymore?

The NDP may face a tough election battle in 2019 with the growing debt levels in the province. But there's a counter narrative that the NDP could play, and that's the fear of the bad old days of debt reduction. (Jeff McIntosh/Canadian Press)

Do Albertans care about deficits and debt anymore?

Rachel Notley and her NDP government appear to believe that they do not, while Jason Kenney or Brian Jean are likely to make it a fundamental issue.

Our political leaders could end up fighting each other by leveraging fear of debt, against fear of debt reduction.

That leads us back to some old debates in this province. But the same debates, don't necessarily lead to the same reactions.

Everything old is new again

On Thursday, Alberta Finance Minister Joe Ceci delivered a budget that showed a projected deficit of $10.3 billion for 2017-18. This followed a previous deficit of $10.8 billion in 2016-2017.

Alberta 2017 budget highlights

5 years ago
0:53
We pull out the big numbers from Finance Minister Joe Ceci's announcement Thursday. 0:53

Looking forward, the NDP is projecting deficits of $9.7 billion in 2018-19, and an additional $7.2 billion in 2019-2020.

In total, Alberta will be in debt to the tune of $71 billion by 2020.

Numbers like these become political dynamite.

Massive cuts or just brutal cuts?

For most of its history, Alberta had balanced budgets.

Then, in 1986 there was a dramatic drop in the price of oil, which saw Alberta's resource revenue plummet by 40 per cent.

Instead of increasing taxes or cutting spending, the Getty government made the conscious decision to run deficits and hope for the price of oil to rise again.

Year after year, they repeated this budgetary gamble.

And by the early 1990s, Alberta was in a crisis situation — spending more on interest payments than on social services, which lead to a very odd election season in 1993.

Liberal leader Laurence Decore campaigned on "brutal" cuts and Progressive Conservative leader Ralph Klein campaigned on "massive" cuts. Klein won.

Ralph Klein January 1993

6 years ago
2:27
Ralph Klein gives his first major speech a month after becoming premier. Facing an imminent election, he charts the path he wants Alberta to take to eliminate its deficits and eventually pay down its debt. 2:27

Through a combination of across the board spending cuts, maintaining taxes and increased natural gas prices, Klein was able to slay the deficit in 1995.

This became known as the Klein Revolution, and in 2004, with great fanfare, he announced that Alberta was debt free. It was a time when debt fighting was a ticket to political power.

The Alberta example was replicated in other jurisdictions across Canada, and across party lines.

Other deficit busters included Liberal Prime Minister Jean Chretien and Finance Minister Paul Martin, and the Saskatchewan NDP government of Roy Romanow. Debt busters tend to win Alberta elections.

Political oratory

Based on history, it would appear that Notley could go down to a hard defeat in 2019 — punished for rapidly increasing Alberta's debt load.

The leader of a new united conservative party (which looks increasingly likely) would focus attention on the red ink splattered across the Notley government's fiscal record.

We'll likely be reminded that we used to be debt free, and of the deep sacrifices we made in the 1990s in order to be deficit and debt free.

Albertans will also be reminded that it took a strong conservative leader in Ralph Klein to successfully cut the deficit.

Should this political oratory get enough traction, the result will be that the Alberta NDP will be a one-term government.

But this may not be how it will play out.

Countering the 'slash and burn' narrative

The NDP could choose a counter narrative.

Notley and Ceci can legitimately argue that no Alberta government would have been able to balance the budget with sub $50 a barrel oil. In addition, Alberta's debt to GDP ratio, although it is rising, remains the lowest in Canada.

The NDP could well assert that a united conservative party would introduce slash and burn tactics by cutting indiscriminately.

The 2017-18 provincial budget unveiled Thursday by Finance Minister Joe Ceci lacks specific details about how the NDP government plans to return the province to a balanced budget or to start paying off the debt. (Terry Reith/CBC)

They will remind Albertans of the costs of the Klein revolution — an infrastructure deficit, fewer hospitals, larger classrooms sizes, nurses leaving the province, etc.

More strategically, by refraining from spending cuts to health, education and the public sector, the NDP would be able to count of the support of its core supporters (and voters) at election time.

Political suicide?

In determining whether politicians can still weaponize deficits and debt, it is useful to turn, once again, to the federal scene. During the 2015 federal election campaign, Justin Trudeau announced that he would run a $10-billion deficit.

Federal numbers released quietly by the Trudeau government in December are painting a bleak picture of Canada's financial future — one filled with decades of deficits. (Sean Kilpatrick/Canadian Press)

A pronouncement that seemed so outlandish that the Sun newspaper chain called it "political suicide."

But Trudeau, by tacking left of the NDP (who had promised balanced budgets), won a majority government. In its first budget, the promised deficit of $10 billion ballooned to $30 billion.

But public opinion support for the Trudeau government did not take a hit.

Maybe Canadians have decided that deficits or debt don't matter. Or at least, don't matter right now.

While Alberta's carbon tax will most likely be the major issue in the 2019 election, deficits and debt won't be far behind.

What all the parties will be evaluating right now, is just how many Albertans care so deeply about cutting the deficit or debt that they will elect a government committed to substantially reducing spending?

ABOUT THE AUTHOR

Duane Bratt is a political scientist at Mount Royal University in Calgary.

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