Playing the politics of Alberta's multibillion-dollar debt
Do Albertans care about deficits and debt anymore?
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.
- Premier Rachel Notley defends $10.3B budget deficit and higher debt
- Alberta's debt soars to $45B, but budget has no big cuts, no new taxes
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.
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.
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.
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.
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.
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.
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?
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