A little bit more reality hit the Alberta budget today with the projected deficit increasing about another $2B to $6.9B. Now, they've got a nice stash of around $17B in a rainy day fund that should still have a few billion in it after things have turned around so it's not like the province is completely screwed. However, their budget swung from about an $8B surplus to almost a $7B deficit in a year. For a bit of perspective, that swing is substantially more than our entire budget.
So, I know that there are some people who claim that Alberta isn't just making money off of resources, and has a booming economy in other areas, and it's because of their taxation system and forward thinking government, etc. And I'm sure there are some industries that are doing well there outside of oil and gas. The question is, with the 'booming' economy, has the government done anything to put the province in a position to survive in the event of a longer term price reduction or decline in demant in oil and gas? There may be other industries doing well, but it appears that the government collects little to no money from them, at least that's what's implied by the budget swing. If oil and gas revenues fall (which they will eventually), and the veil of a properly managed economy falls off to show nothing more than a government making use of short-term high revenues to convince voters they are doing a good job to keep getting elected, then what happens?
They are still in a strong position economically if the situation is handled correctly, but I have the impression that the provincial government has used the oil boom as a way of covering all the provincial costs that taxpayers are normally on the hook for, allowing them to cut taxation levels to a point where they are no longer in any position to cover their own costs without the monsterous supply of free money thrown into the books. And because they have gained so much support from the public by doing that, they aren't realistically going to do any taxation measures that need to be done for long term provincial stability. You can't even mention resource control in Alberta and survive politically. Try telling people you need to add a provincial sales tax or increase personal or business tax rates to plan for the future and it's just not going to happen. When you've built your support on the idea that things work well when the government stays out of consumers and business' pockets and that things are going well because of the whole economy and the government's hands off approach, saying that the government needs to collect more from you to make ends meet, isn't going to go over very well. Not when you've built up this myth that the province could still function in close to the same way if not for the high resource revenues.
This is a bit of long, mainly pointless post to get people's opinion on if you think the Alberta government will actually start taking a look at the long-term financial stability of the province after this, or keep pushing the illusion that everything's fine as soon as oil and gas rebounds and they can project their next surplus? That's really what I was getting at here, and probably could have done so without the previous three paragraphs. Thoughts?
So, I know that there are some people who claim that Alberta isn't just making money off of resources, and has a booming economy in other areas, and it's because of their taxation system and forward thinking government, etc. And I'm sure there are some industries that are doing well there outside of oil and gas. The question is, with the 'booming' economy, has the government done anything to put the province in a position to survive in the event of a longer term price reduction or decline in demant in oil and gas? There may be other industries doing well, but it appears that the government collects little to no money from them, at least that's what's implied by the budget swing. If oil and gas revenues fall (which they will eventually), and the veil of a properly managed economy falls off to show nothing more than a government making use of short-term high revenues to convince voters they are doing a good job to keep getting elected, then what happens?
They are still in a strong position economically if the situation is handled correctly, but I have the impression that the provincial government has used the oil boom as a way of covering all the provincial costs that taxpayers are normally on the hook for, allowing them to cut taxation levels to a point where they are no longer in any position to cover their own costs without the monsterous supply of free money thrown into the books. And because they have gained so much support from the public by doing that, they aren't realistically going to do any taxation measures that need to be done for long term provincial stability. You can't even mention resource control in Alberta and survive politically. Try telling people you need to add a provincial sales tax or increase personal or business tax rates to plan for the future and it's just not going to happen. When you've built your support on the idea that things work well when the government stays out of consumers and business' pockets and that things are going well because of the whole economy and the government's hands off approach, saying that the government needs to collect more from you to make ends meet, isn't going to go over very well. Not when you've built up this myth that the province could still function in close to the same way if not for the high resource revenues.
This is a bit of long, mainly pointless post to get people's opinion on if you think the Alberta government will actually start taking a look at the long-term financial stability of the province after this, or keep pushing the illusion that everything's fine as soon as oil and gas rebounds and they can project their next surplus? That's really what I was getting at here, and probably could have done so without the previous three paragraphs. Thoughts?
