I was invited by the Economic Society of Northern Alberta to participate in a panel discussion providing a post-mortem analysis of the 2022 Alberta Budget. I was given 7 minutes to give comments and I reproduce them below for you. My main message is that the Alberta UCP are not the fiscal stewards they present themselves to be and this is a really disappointing budget, particularly from a fiscal and economic lens that is informed by recent thinking, learners, and evidence.
I will give some high-level comments about the budget, aspects which I think everyone probably already has a good handle on but probably with a bit of a twist. I am known for my twists!
Before I start I would like to take this opportunity to acknowledge the traditional territories of the people of the Treaty 7 region in Southern Alberta. The City of Calgary is also home to Métis Nation of Alberta, Region 3.
I boil down my main comments into four specific areas that consecutively build on the one before.
First, there is no evidence in this budget that the Alberta UCP government are savvy fiscal stewards whose actions and policies have directly led to the fiscal bottom line reported in this budget. It is well known by now that the government has booked a surplus of about $511 million, which will likely be much larger by year-end. What has changed over the dire message in previous budgets?
Resource royalties have recovered significantly, projected to be ~$12B in Budget 2022 based on $70/barrel oil (WTI, which today is trading around $110/barrel). Two years ago, OPEC+ was in a supply war, now we are in a real war, both driven by the actions of Russia. While the price of oil is currently expected to remain high for a while, if not a few years, balancing a budget on these volatile revenues is precisely the reason why Alberta has weathered boom and bust cycles directly through its budget. When oil is down, Alberta gets out its pruning sheers, when oil is up, it is Ralph Bucks for everyone. But I learned about a saying that you have here in Alberta: “Please God give me one more oil boom and I promise not to piss it away this time”. Well, sorry, but Alberta is pissing away this possibly last oil boom. There is nothing in this budget that gets the province off the resource royalty roller coaster and that means that no, the hard work has not been done. There is also nothing in the budget for abandoned oil and gas well clean-up or for the missing payments to landowners or unpaid property taxes in rural Alberta municipalities (now totally $253M).
But while that is well known, another aspect that led directly to the strong reported fiscal position in Alberta was due to fiscal transfers from the federal government of nearly $12B and additional large investment in ECE in the province, an amount that rises to nearly $1B a year over the course of the agreement. While Alberta often talks about how it does not get its fair share, we know it also left money on the table for COVID supports. Further, it was the federal government that did the real heavy lifting in terms of supporting Albertans through the pandemic, not the province.
Second, the budget presents government spending and debt in a way that suggests there is no benefit from either and that all spending that adds to debt is wholly bad. This ignores the fact that there are clear economic rationales for spreading out the cost of spending across time periods and even across generations. This is because benefits can, and often are, felt across time and generations. Imagine thinking that the COVID-19 debt and spending should only be borne by current taxpayers and not thinking about how those policies and spending have benefited those who are not yet taxpayers. Our policies were, or at least should have been, focused on saving lives and preventing long-term disabilities. Those are benefits that are shared across time and generations. So in thinking about fiscal policy from an intersectional perspective, you begin to see the real concerns with failing to appreciate where the costs and benefits accrue and how to form fiscal policy with that understanding in hand.
Third, and building on this comment is thinking about how the usual fiscal anchors and guardrails fail to truly appreciate the role of government in society. It is not that I am arguing against thinking about parameters that help guide spending and investments, it is more that the fiscal anchors and guides being employed by Alberta are the usual ones, dating back decades. This means that there is no consideration about the value of the spending. That is, the metrics lump all spending together and just assume that spending is spending is spending and that all cuts are equal. What this ignores is the marginal value of public funds. While some people seem to think this is true, public funds are not set on fire. They are used to engage in valuable projects, programs, investments, and supports. But there are programs that generate more value than others and many might be surprised to learn that some of the highest value of spending is in the field of programs that benefit children, including supports to parents of kids that have long-term intergenerational benefits. We often fail to consider the long-term stream of intergenerational benefits of specific programs, thinking all that matters is next year’s GDP growth.
Finally, and bringing this all together, the budget is based on a view of fiscal and economic policy that is very dated, lacks inclusion, and fails to think beyond the three-year budget horizon. It fails to consider any measures of well-being in addition to the usual narrow economic metrics. The point of government, of society, is to improve well-being. Historically we have used narrow economic indicators assuming these translate into well-being but the translation is imperfect and incomplete. Without expanding our understanding and measures of well-being we continue to include the usual in our policies and continue to exclude everyone else from our policies and our economy.
The COVID-19 pandemic has served as a watershed moment, hoisting to the top of priority lists the demand that we do better to ensure that public policy works for the many, rather than the few. We’re hopeful for not only a fair recovery, but also the chance at a bigger shift towards a more just society. We require a modernized approach to public policy to address longstanding policy failures. This budget does not reflect this, at all.