Alberta’s ‘boom and bust’ plague must end – by Jeffrey Simpson (Globe and Mail – January 30, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

How do you change a political culture? Is a crisis required for change, or will honest talk without a crisis suffice? How many times does a jurisdiction have to make the same mistake before people wake up?

These questions relate to Alberta today, just as they have in the past. Alberta is not the only place where an entrenched political culture produces enduring mistakes, but it’s the one in the headlines – again.

Alberta’s political culture is about low taxes and big spending. The province has the lowest taxes in Canada – the so-called Alberta Advantage – and it’s at or near the top in terms of per capita spending on government programs such as health care.

Filling the gap between the low taxes and munificent services are revenues from oil and natural gas. These revenues account on average for 30 per cent of Alberta’s budget. These revenues fluctuate with world prices, North American energy markets and other factors beyond the province’s control. Unsteady prices lie at the heart of the “boom and bust” plague of Alberta’s economy – and its budget.

Albertans ought to know in their bones about “boom and bust.” They’ve lived it before. But their governments don’t do anything about it, in large part because they’re creatures of a political culture in which citizens enjoy the fairyland of low taxes and large government.

When times were good and non-renewable resource revenues were buoyant, Alberta governments systematically refused to plow into the Heritage Fund. As a result, the fund contains a piddling amount relative to what it could have become. The province built a Sustainability Fund to cover downturns in revenues, but that’s shrivelling.

Once again, the prices for Alberta’s non-renewable resources are dropping. Natural gas prices are very low and will stay there courtesy of new supplies. A glut of North American oil (so much for the End of Oil folly) means Alberta’s bitumen oil has to be sold at a huge discount, costing the province billions of dollars.

What Alberta needs is a steadier source of revenue to fund its basic government services – namely, a provincial sales tax of the kind found everywhere else in Canada. With such a tax, Alberta’s revenues would be much more stable, and more money from non-renewable resources could be placed into the Heritage Fund.

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