Glory days ahead vs. impending doom: The political rhetoric over Alberta's financial future
NDP and UCP spin same numbers different ways
Remember that "math is difficult" comment?
The one that got Jim Prentice into trouble when he said it to Rachel Notley during a televised debate? Well, let's be honest, math is hard.
Somewhere inside Alberta's bureaucracy, hundreds of financial experts are crunching numbers and putting the final touches on the province's fiscal plan. Budgets are complicated. They are intricate plans for how to balance finite revenue with infinite spending options.
On March 22, the finance minister will stand up in the legislature and reveal the latest numbers. It will be like drinking from a fire hose. For most of us, who likely can't even sufficiently help our kids with Grade 8 math, it's likely to be a bit overwhelming.
And to complicate it even more, politicians from all parties will do what politicians do — they'll spin the numbers.
They'll all use the same numbers. But the story the politicians tell will be very different. That is certainly the case with our province's big budget issue at the moment: deficit and debt.
Debt and deficit
The United Conservative Party suggests Alberta is careening toward a fiscal precipice. After last year's budget, UCP leader Jason Kenney tweeted the province is "drowning in debt." The governing New Democrats insist their deficit spending, during the recent recession, protected the public services that Albertans rely on.
"They are both playing games on the debt and deficit," said Mount Royal University political scientist Duane Bratt in an interview with CBC News.
When it comes to rhetoric, we need look no further than the recent fiscal update.
Like Alberta's reliable Chinook winds from the west, politicians spin. Democracy, after all, is a contest of ideas. And a chance to plaster opponents.
Politicians have a vested interest in framing issues and events in terms that favour them or their party. They hope their rhetoric serves as a "recipe" for voters to "cook up their opinions" about the budget.
So, no surprise, Finance Minister Joe Ceci painted an upbeat outlook recently, saying all signs point toward a full economic recovery for Alberta next year.
"I think this is great news," said Ceci.
Then, when asked about lagging business investment in Alberta, Ceci took a swipe at the UCP leader, suggesting he is peddling a false narrative about the improving economy.
"I just wish Mr. Kenney would stop talking this province down," said Ceci.
For it's part, the UCP used the economic update to hammer the NDP.
Accusing the government of being "more out of touch with Albertans than ever," Kenney seized on the expected decline in business investment. In a news release, the UCP leader also said that the NDP's tax hikes have driven business away from the province.
Then, the party's finance critic blasted the governing New Democrats and the finance minister for adding to the debt.
"I didn't hear him mention that right now Alberta, young Albertans — all Albertans — are paying $1.355 billion in interest costs this year," he said. "$1.4 billion in interest to bondholders and the rich."
The competing narratives are stark. Either Alberta is well on the road to recovery and a bright future or we are drowning in debt and heading toward a fiscal disaster. But for economists, it's a lot more complicated.
According to economists, when you set the rhetoric aside, the answer to whether Alberta can afford its recent deficit spending depends on the province's total debt compared with its gross domestic product (GDP), a measure of total economic activity.
Alberta still has the lowest debt-to-GDP ratio — forecast last fall at around 6.5 per cent — in Canada. The economy is growing again, oil production is expected to grow and more people will likely move to Alberta, translating into more revenue for the province. If that continues, then Alberta's deficit spending is not a looming crisis.
"Of course we can afford it," said University of Calgary economist Trevor Tombe in an interview. But there is a trade-off: debt has to be paid back and that often means higher taxes or less spending in the future.
Tombe does have concerns about deficit spending. And he's not alone. Last year, a report by the federal Parliamentary Budget Officer raised concerns about Alberta's long-term budgetary challenges.
Tombe thinks the NDP's promise to balance the books by 2023-24 is doable. The associate professor of economics predicts that if the economic projections continue as forecast, Alberta, in comparison with the rest of Canada, will balance its books with a "higher than average level of spending and a lower than average level of taxation."
In recent months, the NDP has talked about "compassionate belt-tightening" as the economy improves. But the government insists that running short-term deficits is preferable to "severe cuts to programs and services," especially when so many Albertans were out of work in recent years.
Slash and burn or compassionate belt-tightening
"Severe" is a flourish the NDP use to attack the UCP. Last fall, Premier Notley called Kenney's fiscal plan "heartless, reckless and mean-spirited."
When he launched his UCP leadership bid, Kenney slammed the NDP, saying Alberta is "under assault" by a government relying on "the failed theories of socialism."
This is an example of what occurs when politicians talk about money. Data gets weaponized.
In a recent speech, Premier Notley mocked Kenney's tax plans.
"Jason, the 1990s are calling and they want their ridiculous ideas back," she told a mostly partisan crowd in Edmonton.
The NDP claims the UCP would slash and burn public spending on education and health. After the party unveiled policy proposals that its members will debate this spring, Ceci labelled the UCP's ideas "risky and extreme."
The UCP's "member policy declaration" offers few specifics about how it might curb government spending other than promising to "require each government ministry to implement a budget process that re-assesses every program and project." While running for the the leadership of the UCP, Kenney indicated he'd like Alberta to rein in government spending, cutting the amount of money spent on each Albertan to match the lower per-capita levels in British Columbia.
Kenney also hasn't held back attacking the government's handling of the slumping economy.
The UCP leader promises to kill what he repeatedly calls the NDP's "job-killing carbon tax." And when he won his seat in the legislature last December, Kenney branded the New Democrats a "job-killing, socialist government."
Is tough medicine required?
Economists tell us that balancing the budget doesn't require Draconian cuts.
"It all doesn't have to be done today," said University of Calgary economist Ron Kneebone.
Closing the gap between spending and revenue over two years would necessitate some painful cuts — but gradually, over four or five years, doesn't have to hurt, says Kneebone.
"It doesn't have to be dramatic or horribly painful, but you have to get going on it," stressed the economist with the U of C's School of Public Policy.
Last fall, a report by the School of Public Policy suggested modest spending reductions, including applying the brakes to infrastructure spending, curbing public sector salaries, restructuring government services such as health, and reforming Alberta's tax regime, to boost economic growth.
So all this is a lot of wind. A lot of "they will …" and "she is …" and "beware of …" and "fear the...." But when you actually get beyond all the smoke, you see, surprisingly, that the NDP and UCP are not that far apart when it comes to actually balancing Alberta's budget.
One year difference
The NDP and UCP targets for getting back in the black are only one year apart.
In its draft policy proposal, the UCP promises to restore the "Alberta Advantage" and get Alberta back in the black by the end of its first four years in power. That's one year earlier than the NDP's promise to end its deficit spending by 2023-24.
The UCP does not offer many specifics on returning to a balanced budget.
But before he became leader, Kenney did say "a period of sustained restraint in spending" would be required to balance the province's books.
What that could mean in a practical level — cuts, cutbacks, more of the same — remains unclear.
For its part, the NDP is equally vague about stemming its deficit spending. The government said it will balance the province's books by 2023-24.
Yet, unlike the PC government it defeated, the NDP hasn't so far provided a detailed 10-year plan outlining how it would balance Alberta's budget.
Critics say the government needs a credible plan for ending the hemorrhaging of red ink. Last November, Saskatchewan's former NDP finance minister, in fact, told Alberta's New Democratic government to come up with a plan for balancing its books.
Tombe also thinks it's time for the NDP to flesh out how it's going to make spending and revenue meet, adding that those details would reassure international credit rating agencies that have downgraded Alberta's credit rating in recent years.
"A lot of the downgrades that we have seen is not that we have a large deficit. It's more that we have a lack of a plan for how to get out of these deficits in the future," said Tombe.
"So, laying out the plan this year could improve not just the government's political messaging but also the province's credit rating," he added.
The recent speech from the throne hints at balancing the budget. The coming budget will likely offer more detail about how the government plans to do that.
Down to the wire
When the budget drops on March 22, economists and political watchers will be keen to hear how much next year's deficit will run, and about the New Democrats' plan for ending deficit spending.
Bratt thinks the NDP would be smart to table a budget that forecasts a deficit in the $6-7 billion range.
"If they can show a lower number — not a balanced budget number but a lower number — they can plausibly make the political argument that there is a pathway to a balanced budget," said Bratt.
And there are two important words: political argument. No matter what numbers the NDP comes up with, the argument won't abate.
The UCP, no doubt, will continue its attack, with accusations of reckless spending by the NDP. New Democrats will champion the improving economy and highlight their commitment to maintaining public services.
Both parties, will spin the numbers.
Albertans will be left trying to figure out who to side with. We cared a lot about deficits and debt in the 1990s. The question now is do we still feel — despite all the spin from both sides — that same sense of urgency? How many billions is too many billions? How long can Alberta run deficits?
Albertans will ultimately have to do the calculations in their own minds. Luckily, we have more than a year to do the arithmetic before the next election.
Math, as Prentice said, is difficult.
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With files from Robson Fletcher
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