OK, so the Alberta Provincial Election is a week old, and momentum has swung from the incumbent Progressive Conservatives to the upstart and conservative Wildrose Party. The leftist parties, which comprises the Liberals, NDP and Alberta Party are trailing well behind province-wide, although they have greater support in Edmonton and Lethbridge and can probably win seats.
All of the parties, however, are offering policies that are economically foolish, to lesser or greater degrees.
First, Wildrose is offering to resurrect “Ralphbucks”, a policy whereby excess royalty revenue from oil and gas is returned to Alberta residents at a rate of $300 per person per year. I assume that this would be if royalties came in above some predecided number. Danielle Smith has explained that this is away to return monies to the taxpayers without cutting taxes – which she claims can’t be done because of the unpredictability of royalty revenue. The correct solution is to set budgets based on lowball oil and gas prices, and put the excess revenue into a trust fund. Maybe the Heritage Trust, maybe something else. But it should NOT go into the Budget Stabilization Fund. That was a stupid idea in the first place, because it allows for excess government spending even in bad year. The government should not be allowed to withdraw the principal from any trust funds – only live off of the net earnings of investments. In the long term, that would allow for tax reductions, or god forbid fund the province if and when the oil runs out.
The Progressive Conservatives (who haven’t been very conservative since the 1990s), have proposed to waste $3 Billion on oil sands research, in the form of recreating AOSTRA. The problem is that AOSTRA was never a very effective research entity. Yes, it piloted SAGD when no one else would, but most of the rest of it’s research didn’t lead to anything (not that one can predict research). I would have been supportive of AOSTRA in the 1970s and 80s because the oil sands didn’t have a lot of private investors and private R&D investment was small. The same cannot be said today. The multitude of oil companies, large and small, that are involved in the oilsands are spending tens of millions, if not hundreds of millions of dollars per year on R&D to improve their economics, environmental footprint and operational stability. Some of the firms have joined forces on key research areas, like the Oil Sands Tailings Consortium and the Oil Sands Leadership Initiative are two of note. If government starts saying they will fund research, it won’t increase the amount of good research going on. Companies will cut R&D funding and use government grants to make up the difference. And government interference in research may send it in directions that make any resulting technology unattractive economically.
The other proposal from the PCs is the idea of building 140 new family care medical centres. This will have capital costs, and will need to pull doctors and nurses from their current practices into these centres. Central planning of health care hasn’t been effective anywhere in the world – so why would more central planning be good for Alberta now?
The Liberal Party, led by former PC and physician Raj Sherman, has proposed eliminating post-secondary tuition by 2025… OK – so students today may get a small cut, but it might entice them to vote Liberal. But by the time university tuition is free, today’s students will be the taxpayers footing the bill for free tuition. Free tuition is a VERY BAD IDEA. Students must be made to invest in their own education more than just committing 4 or more years to it. Investment in education ensures students have to raise the funds through real work before they go to school, while they are at school, or borrow the money so they can pay it back after they go to school. It makes students value their education and also value getting it over with. Free tuition will lead to 6-year bachelor’s degrees and lifetime students. And students that graduate with even less work ethic than they have today (which isn’t great).
The NDP want to raise royalties on oil sands, with a subsidy version (i.e. lower royalties for upgraded crude). This means taxpayers would be subsidizing the construction of upgraders and refineries, when there is a surplus of such capacity in North America. Not economically wise. They would also return us to progressive income taxes, higher corporate taxes and a policy towards small business that has the (un)intended effect of discouraging business growth… They also want to cap childcare costs at $25 per day. Many Albertans currently pay $40-70 per day, which is the market value. This means that capping prices means massive government subsidies or child care businesses closing down because they can’t make money at the “proscribed” rate. This is Atlas Shrugged economics.
Other than a few signs, the Alberta Party has had trouble getting press, and my perusal of their platform found many items that are about spending more government money, with little openly said about how they would pay for it. One of the key items that stood out is their support for a clearly uneconomic high speed rail link between Calgary and Edmonton…. That should be built when the free market believes it should.
So, I call on all the parties and their candidates to figure out how to spend less money. Alberta already spends more per capita on government provided services than any other province. We need to spend less. Far less. And government should get out of a whole number of areas…
- It’s not easy being orange in Alberta, just ask Brian Mason (theglobeandmail.com)
- Free tuition, Dani-Dollars and small-town health care – the Alberta election … – Globe and Mail (theglobeandmail.com)
- Alberta’s Redford promises $3-billion investment in energy technology (business.financialpost.com)
- Political parties promise billions in perks to Alberta voters (calgaryherald.com)
- Danielle dollars? Wildrose promises to give energy surplus cheques to Albertans (with video) (calgaryherald.com)
- In some Alberta ridings, election is far from a two-horse race (theglobeandmail.com)