Laying It Out: There was an Advantage, but they blew it

By Medicine Hat News on March 7, 2020.

“… and that, Billy, is when COVID-19 showed up and swept across the province,” the millennial, now late into his 70s, said to his young grandson.

“But then the doctors made everything better, right, Grandpa,” Billy replied.

“Nah, they all left. Now put your mask back on, Billy, and get some sleep.”

“Can we go to the park tomorrow?”

“No, Billy. We can’t afford the park.”

Obviously, predicting the future can be a silly exercise of extremes – even if not near as far fetched as it should be – and talking about the present right now is, frankly, downright depressing. So this week I thought we could delve into the past a little… You know, the good ol’ days.

I think people understand that the Alberta Advantage – aside from being an extremely well researched podcast you should check out – has always been oil and gas, since many of us have the T-shirts to reflect it. But I wonder if people truly realize how deep that reliance has been over the years, seeing as it rarely receives detailed public airtime.

University of Calgary economics professor Ron Kneebone and School of Public Policy research associate Margarita Wilkins – not the song, nor the singer – issued a paper in October 2018 detailing energy revenues since 1965 in regards to how they were used to supplement the budget. The report is named 50 Years of Government of Alberta Budgeting, is readily available at policyschool.ca and I highly recommend reading it. But the contents are much simpler than charts, graphs and numbers usually suggest.

Alberta lived the high life when oil could pay for it, and Albertans paid the price when it couldn’t. In the meantime, the electorate was sold short-term gains such as keeping taxes down, while the long-term stability of the province was ignored.

“… over the past 50 years the government has made a policy choice to allow volatility in the energy revenues to create volatility in its budget,” the report reads. “This policy choice has resulted in occasional bouts of severe spending contractions and likely encouraged higher rates of spending and lower taxation than would otherwise have been observed.

“These outcomes are the result of the government failing to heed the advice of economists, namely, to save energy revenues and in this way establish a steady and reliable source of revenue.”

The conclusion leans toward spending restraint more than anything, but the report is quite clear on multiple occasions that governments used low taxation to win over the electorate, and explains in detail how the Peter Lougheed-created heritage fund was abandoned after a handful of years, leaving hardly anything for future generations to use in times of downturn like, say, today.

When Cypress-Medicine Hat Drew Barnes talks about getting back to “conservative values,” this is really all he’s talking about – a life of strong public services and low taxes entirely based upon waiting for money to show up and then blowing the whole wad. That’s not a dig at anyone who enjoyed the Alberta Advantage, it’s just literally what happened, and the proof is right there in a report written by a man no one would ever accuse of being on the left.

The problem now isn’t the realization of this epic fiscal failure – sorry, but that’s exactly what it is – but getting off the cycle of it. One school of thought, and I might guess Kneebone would attend it, is that spending simply must come down to deal with yet another crash in oil revenues.

This is what we are seeing under the UCP. The money is gone, so let’s quit spending. But is that remotely fair to younger Albertans? Not even a little.

The reality is this: Alberta’s Advantage was a decades-long illusion created through short-term luxuries and not caring about the future.

I’m certain most people – myself included- would’ve been happy to accept, especially when governments don’t properly inform the public as to where the advantage comes from. Except that doesn’t change reality.

Instead of saving money for the future and having taxation rise in a reasonable, gradual fashion, every dime was used to provide the so-called advantage. And now, because Alberta blew all the money and the revenues are gone again, generations coming up behind are left to foot the bill.

As I said, the electorate of old shouldn’t be blamed for this – governments of old should – but that doesn’t mean the electorate didn’t gain from it. It wouldn’t be a well-known advantage if it hadn’t.

If I can concede that Albertans themselves shouldn’t be blamed for the mess, can those Albertans at least concede that younger generations shouldn’t have to accept a disadvantage simply because the advantage was spent before they got here? A lot of voters in this province lived through the entire 50-year period, enjoying big provincial spending (most of the time) and low taxes (all of the time), and some are convinced that a not-coming oil boom will arrive once again to save the day, while every available sign says otherwise.

Your future is now our present. If Alberta doesn’t provide the same services-committed province you grew up in, even if that means – god forbid – spending our deficits on people instead of corporate CEOs that aren’t trying to “create” anything but fatter off-shore accounts, someone might actually spend their final days explaining to Billy why parks are $1,100 per visit and his pediatrician doesn’t exist.

Dr. Heref Oru is the layout editor at the Medicine Hat News. Contact him at sschmidt@medicinehatnews.com or follow him on Twitter at @shmitzysays. All opinions are his own and do not necessarily reflect those of the News’ editorial board.

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