Lots of Hats but no Cattle: the UCP unveils its Transformative Plan!

Yesterday, the United Conservative Party, led today by Jason Kenney and Finance Minister Travis Toews, provided the province with an economic update and unveiled their plan for relaunching the Alberta economy. What I saw was reminiscent of Jim Prentice’s update, delivered following a crash in the price of oil and subsequent recession in late 2014. Once more we had “Alberta Shock and Awe,” delivered by a Conservative premier to his heretofore fans and supporters. They claimed 330,000 unemployed in a province of just over four million people. The Finance Minister, in a 180 degree turn from the party line, spoke of “good debt” vs. “bad debt.” To complete the announcement, the Premier declared $10B in infrastructure spending to kick start the province’s recovery, among other things.

                The most significant declaration though was that the provincial Corporate Income Tax rate was being lowered immediately from 11% to 8%. This, in conjunction with the infrastructure spending, was claimed to cause the creation or support of a combined 100,000+ jobs. It’s easy to say why it’s significant – it isn’t just an immediate, apparently giant move, but it’s actionable. Of all the things discussed yesterday, this one can and is happening.

                I had the distinct pleasure of not watching the press conference in toto. However, I did skim through the short “plan,” published on alberta.ca. The premier promises that the ideas don’t stem from ideology, a popular refrain of his, but are rooted in good common sense. I suppose that’s half true, in that looking at the details, this transformational plan is nothing new. Common sense at work, I guess. Expectedly, much of the plan isn’t anything at all, being vague, or simply plans to make plans. This deserves some elaboration, but I’d like to focus on the main themes.

The Unemployment Perspective

                330,000 unemployed is a massive number. It warrants an asterisk, though. It needs to be kept in mind that in the first year of the UCP, Alberta lost 50,000 jobs – all while cutting corporate income taxes. Furthermore, during the crisis, the UCP took the unprecedented and unrivalled step of “letting go” of tens of thousands of education assistants and supports – all just to “save” a figure slightly north of $100,000,000 (a cost that was simply uploaded to the Federal government’s CERB, more or less). Of course, to these numbers we can add the dozens of doctors shutting down their practices and moving away, resulting in further losses throughout rural Alberta.

                Next, who is getting work? Notwithstanding the hope that the corporate tax cut will attract a variety of white collar workers back to Calgary (“they’d be negligent not to” – Kenney), this plan at best supports jobs in the construction sector, which, while hard hit by the completion of the build out of the Oil Sands several years ago, was not overly affected by COVID-19. In fact, hiring signs have been up along the Stoney Trail expansions as one example. These are jobs that haven’t been filled, regardless of unemployment, for ages.  Moreover, this money, invested wholly in infrastructure construction and maintenance overwhelmingly helps men, when we know that women have been the sex hardest hit by the pandemic. This isn’t to say that infrastructure spending is unimportant – it’s very important – but this move clearly ignores the biggest group of victims from the pandemic. It certainly raises eyebrows what influence the 15 women UCP MLAs have had on their overwhelmingly male caucus.

The Capital Spending that Wasn’t

                The UCP declared they were spending $10B on infrastructure, a move, which in their words, was the biggest investment in Alberta history. This is false on a variety of levels – private investment in the Oil Sands was far greater, often for individual projects. Government infrastructure investments under Manning or Lougheed, adjusting for inflation, were no doubt greater. Lastly, and more embarrassingly, it falls billions of dollars short of what the Trudeau Ministry in Ottawa has provided just for the Transmountain Pipeline, no less their direct aid to Alberta municipalities.

                Infrastructure is an incredibly important asset to have in any society. Sanitation systems reduce the incidence of death and disease. Power systems make everything move faster, more reliably and safely. Transportation systems enable the more efficient movement of people and cargo. All of these make society richer while lowering the costs of living and business. There are few places in the world where this investment is as essential as Canada, a nation with great expanse and few people; great resources but great barriers to extraction, such as the climate and geology. Within Canada, there are few places as poorly situated as Alberta, which is effectively an island of rich people separated from civilization by 1000 km of mountains, lakes, forests, and bad weather. Look in any direction: the nearest major population centres to Calgary are over a 1000 km away – either west, south, or east. Edmonton is even more isolated. We need connections.

Unfortunately, the Alberta government of the 1990s took the fantastically neo-liberal position that the Private Sector could and would provide the province with the infrastructure it needed. This failure in historical thinking resulted in the notorious infrastructure deficit that afflicts the province to this day as the market failed to deliver them. But I digress; the Klein government, then his successors, may have paid off the provincial debt (how consequential was that), but at the cost of putting much of the province’s infrastructure decades in arrears – all the while the population grew from 2,500,000 in 1991 to an estimated 4,500,000 today, and its needs grew, too.

Now, Jason Kenney, leader of a province that could soon pass British Columbia to become the 3^rd most populous (it already has in terms of GDP), has boldly declared his government will spend $10B on infrastructure. We must always ask, regardless: on what are you spending this money? When are these amounts being spent? Is this an action, a promise, or an intention? The UCP have promised schools, hospitals, roads, long term care facilities. This is good. Now, when? Who can say?

The Relaunch Plan fails regarding these questions quickly and comprehensively. Don’t mind the details – since there aren’t any outside of Alberta’s new public investment hotspot: Peace River. Focus on the numbers. Is this really a new investment of $10B? Apparently not. First, the government already earmarked $7B for infrastructure spending in its catastrophically short-sighted first budget in March (the “oil at $58/barrel” budget), which is consistent with previous NDP budgets. This number is included in the $10B, however, so the response to COVID-19 is reduced to $3B – less than 1% of Alberta’s GDP. That’s not all: also included in that figure is the $1.5B given away to support the passage of the Keystone XL pipeline – money that is likely going to be written off when the Democrats win in the USA in November and finally put that white whale to rest.

If you’ve been following, that leaves the government proudly leading our revival with $1.5B in new infrastructure spending. For perspective, that’s as much as the New Cancer Centre at the Foothills Hospital costs. This amount could build two new “Grande Prairie” hospitals. It could build 2/3 of the Stoney Trail ring road. In fairness, this amount could build, potentially, 50 new high schools modelled after All Saints in Calgary. Or, more fantastically, a single new arena for the Flames in the West Village. As you can understand, this amount of cash, likely representing less than 0.5% of the Alberta economy, in the face of the greatest economic challenge since the 1930s simply isn’t significant or remotely world changing.

Even this paltry amount isn’t even new either. The Alberta government, on April 9^th, announced a $2B investment in infrastructure in response to COVID-19. Is this a separate amount? If it is, why not roll it into the announcement of yesterday? $12B is a larger figure than $10B, and it almost equals what the Federal Liberals have committed to Transmountain. Given that the UCP already included two previous announcements in yesterday’s, why not a third? Oversight? Possibly, but more likely that it is included – the half billion-dollar discrepancy could very well stem from elimination of duplication or redundancies.

As a last – yes – last component of this issue: the Calgary Green Line. The provincial government promised $1.5B in funding for the Green Line, yet issued a letter to the city immediately after the municipal government voted to go forward with it. Basically, the letter threatens to remove that funding. A project whose can has been kicked as long as I’ve lived just might have got its final, Jon Ryan-punt into the red zone. Ottawa save us.

So, is $10B a lot? Yes. Is it needed? Yes. Is it a lot? Maybe. Yet, there remain many questions concerning this plan: when will that money be spent? On what? Is it even $10B? What of the Green Line? Is this $10B the end?

So, we have a big announcement: the biggest infrastructure investment in Alberta history, and none of it is new or anywhere as significant as alleged. It may be more aptly declared the biggest non-event in Alberta history since Aberhart’s recall election. So why include it at all? First, probably because without it, the plan doesn’t look like a plan, but a number on a napkin. Second, because that number on a napkin: corporate tax cuts, is a tired, Hail Mary pass to Toronto, Canada’s business capital.

The Corporate Income Tax Cut

                This is the centre-piece of the whole plan, and it echoes throughout the pages of the short document. As of Canada Day, Alberta’s CIT will be immediately reduced to 8% - 2/3 of the CIT in British Columbia. We aren’t even out of the pandemic yet, but the government’s only real decision in their whole plan was to speed up the pace regarding their planned cuts to big business taxes. It seems a little crazy that with insurance rates increasing, liability growing, uncertainty reigning, a pandemic raging, that any private enterprise would decide to gamble on Alberta, but there goes the UCP. As economist Dr. Andrew Leach has pointed out, this cut isn’t even news to business, who would have been making plans about the 8% CIT since the last election – so their moves or non-moves would already be planned or decided. Really, this smacks of a last desperate attempt by neoliberals to right the sinking ship of their ideology. It has to work, this time, it has to!

                Because, if we remember – it didn’t work from 2019 to 2020. The UCP were in, the NDP were out, the CIT was cut, and yet companies still moved away. 50,000 people were laid off in just that year (granted, many were public service employees), but making Alberta cheaper for the most successful didn’t make anyone want to come here. At the sacrifice of hundreds of millions of dollars every year in revenue – compounding year after year – the UCP have doubled down on this strategy that has failed since its introduction to the world almost half a century ago. Toronto Banks and Vancouver video games companies aren’t going to rush over to fill our empty office space. They probably don’t want to fill office space anywhere, honestly.

Prospects

                In a world economy shackled by fear of the Coronavirus, it’s highly unlikely that the UCP will achieve success in its goals of attracting major businesses to Alberta. This was a failure, after all, before the virus, and was a failure for the previous NDP too. The risks from moving a business are simply too complicated for the foreseeable future, on top of being difficult in the best of cases. At worst, it is simply old-fashioned thinking.

Further, the virus has depressed the value of Alberta’s premier natural resources – oil and gas – in a period where many fossil fuel assets are at risk of becoming stranded. The current temporary collapse in demand for fossil fuels is a taste of what the near-future holds as the world weans itself off traditional oil and gas energy systems for renewable energy. Alberta, which has some of the highest marginal costs for oil extraction in the world, is in no condition to compete in a shrinking market. Ultimately, this means the province loses billions in lost royalties and bad investments, and not just this year, (AIMCO), but in perpetuity. However, in a more immediate sense it is the royalties and their impact on the deficit that will have the greatest effect.

This deficit risk is further compounded by the sacrifice of revenue to cut the CIT permanently. This feeds into a structural Alberta deficit situation that no amount of wage-rollbacks or spending cuts can correct, as much as it may pain Conservatives or the general public to admit. However, we can all look at the Relaunch plan, past UCP habits (mid-year budget changes, by which I mean cuts) and guess that when public service contracts expire at the end of August, the UCP will be seeking grotesque quantities of wage and spending cuts both.

In summary, we can anticipate a milquetoast, if not negative reaction from the private sector (Fitch has already downgraded the province’s credit rating, releasing a re-assessment of the province’s finances less than 24 hours after Kenney spoke). The infrastructure spending, though sounding big, is too small and too shallow to impress investors, no less aid even a small fraction of Alberta’s unemployed under the plan’s own wildest dreams. Lastly, a spiralling deficit situation only ensures that a belligerently and dogmatically anti-labour, anti-public service UCP government attacks Alberta’s already lean public sector in the near future, ensuring the last years of the 30^th Alberta Legislature is punctuated by lots of business-attracting public labour conflict. None of this is transformative in a positive sense.

The premier’s plan is just a big hat and a big blue truck. The cattle have left for BC.

Book Review: Notley Nation

Notley Nation
By Donald Braid and Sydney Sharpe; Dundurn Books, 2016

As you might have guessed by now, I come from a very political family, and I have spent most of the last 20 years in Alberta. I returned to this province in 2010 - coincidentally the same year one may as well take as the starting point in the author's argument: that the successes of Justin Trudeau, Rachel Notley, and Naheed Nenshi all reflect the growing strength of a younger, more urban and more progressive Alberta, and Canada at large.

Accordingly, as someone who has been in Calgary long enough to remember the mayoral election of 2010 (and voted in it), much of the book is hardly a surprise. Of the 10 chapters, 9 are basically historical, while one is analytical. Therefore I feel the book is most valuable to the Canadians living outside of Alberta.

As a historical account, the book serves fairly well in taking a blow by blow approach to the decline of the Progressive Conservative Association, and the rise of Rachel Notley and the NDP. The coverage of events is a good deal more fair than the portrayal one would receive in Canada's newspapers - ironically, as Braid continues to be a reporter for the Calgary Herald/Sun/National Post. Braid and Sharpe do a wonderful job illustrating the comprehensive decline of the PCAA's relationship with the people of Alberta. It wasn't just that they were doing a bad job governing; it becomes quite clear the "association" no longer gave a hoot about its membership - only corporations. Truly, the impression one gathers is of a highly Corporatist political body.

As someone too young to know Premiers Lougheed or Getty, the historical diversions about these men is welcome. A standout chapter, though, is the story of Grant Notley, "the Social Conscience of Alberta," as a posthumous biography labelled him, and the upbringing of his daughter, the future Premier of Alberta. Their story is amazing in terms of their hardwork, dedication, and values.

The real hit in the book, however, is the unfortunately titled chapter, "Math is Hard," the analytical chapter discussing the changing role of women in politics, and just how important it is. This chapter was very illuminating to me, and served to impress on me how important gender representation truly is.

The only downside to the book is that Braid and Sharpe are occasionally too gentle on some of their subjects. In the aforementioned chapter, the authors provide a very good explanation for the terroristic internet traffic coming from Alberta's far right. However, they don't go far enough to discuss the obvious criminality and insanity of much of the content. I feel it worth noting just how frequently the female members of Notley's government have received death threats. They only mention one, and an early one at that.

Another weakness is their discussion of the media environment in Alberta; clearly this would be a conflict of interest for Braid, as he still works in it, but no story of the Alberta NDP government is complete without exploring the extremely hostile media environment they exist within. Braid himself is one of the few remaining voices of reason and decency within the mainstream media here - and his realistic and reasonable treatment of the economy and Oil business in Alberta will no doubt drive many readers crazy.

In sum, the book is a solid 4/5 - at least to me. If you happen to be an interested outsider, this is probably the best account yet of what has happened in Alberta since the retirement of Ralph Klein.

Thanks for reading.

Alberta's Perfect Storm, part 1

What a mess we're in. However did it get so bad? Didn't we all promise not to piss away the boom? Why is this happening? Well, in the interest of exploring those questions, I would like to mention some things I felt key to Alberta's present predicament.

In 2014, oil prices were twice what they are now. For the first time in 20 years, the Flames had an exciting offence. The Stampeders had the best football team I had ever seen. However, the Flames were no longer selling out every game; they weren't selling out any. Meanwhile, the Stampeders were watching their attendance drop game after game. In other locales, like Nashville North, patrons showed up drunk and left sober, the bar staff left to stand listless before empty tip jars. Clearly, something was wrong in Calgary. It was no longer its exuberant self. No more were blue collar folks blowing hundreds of bucks a night on beer; people weren't doing much of anything at all.

While the premiership of Alison Redford continued on its path to collapse, the province was turning a corner. The country's booming real estate markets across Alberta hit a wall. It became apparent that the price of oil had hit a wall of its own, and the PC dynasty that had run Alberta for two generations finally expired.

Alberta had been through busts before. But a number of factors conspired to make the present one the worst we had faced since the 1930s.

Alberta's economy had always rested on two pillars: farms and fossil fuels. The first of these fuels, coal, was responsible for the settling of communities from Crowsnest to Canmore to Grande Cache, to Hanna, to Drumheller. Oil, of course, had and has the most prominence. But it should be remembered that the fuel Ralph Klein wielded to slay the province's debt was not coal or oil, but Natural Gas.

This is the first problem. In the 1990s, Natural Gas had been worth $8-$9 a unit (US!); for over a decade now it has been worth only about a $1.50. When you consider that the Canadian dollar increased in value from $0.61US to almost parity (and sometimes better), it means the slide in price of Natural Gas in Canadian dollars, and adjusted for inflation is simply huge - at worst being in excess of 90%. The outlook for its price recovering to 1990s levels does not look favourable. Indeed, Natural Gas is so plentiful it could very well be given away for free, despite being considered the fossil fuel of the future.

Alberta's coal industry faced a different problem. In a world saturated with oil and gas, it simply no longer possessed any economic rationale. The Grande Cache coal mine first went under, was bought for $2, and was recently closed again. Coal simply pollutes too much, and powers too little. Even the coal producing regions of China, the world's leading consumer of the stuff, have been hard hit by the collapse in demand. Simply put, coal is obsolete.

Then there is oil. Certainly not obsolete, oil's problem is better described as a catch-22. The easily and cheaply accessed sources of oil being depleted forced massive investments in oil resources in places such as Alberta. However, the prices which made these investments profitable made oil too expensive to fuel the world's economy. Even today's price of $41US is high by historical standards. This has encouraged people to adopt alternatives, the most prominent of these being Natural Gas, which in spite of its popularity remains incredibly cheap. However, countries like China, Denmark and Germany have become leaders in renewable energy, and the bright future of those systems should give members of the Wildrose Party pause.

However, is $41US fair? I cannot think so. Oil should be selling for a higher price today. However, there are strategic reasons behind the current price of oil. Oil is the most important substance in the world. Its price can be manipulated to grow economies, and it can be used to devastate them. In the 1980s, the price of oil was deliberately depressed by the Arab States and the USA to fight Iran and the Soviet Union. At that time Alberta experienced its greatest recession. I believe something similar is going on today, with targets again being Russia, Iran, and also ISIS.

The other part of the oil problem Alberta faces is that our primary customer is the United States, a country that has desired energy independence since the 1970s. Thanks to fracking, among other technologies, the Americans are realizing this goal. Keystone XL failed to be authorized because it made no economic sense - hence the present emphasis on the smaller and more expensive (and more politically sensitive) Energy East and Northern Gateway pipelines. Now, how permanent our loss of the American market will be can only be guessed at; fracking wells supposedly possess a short lifespan. What I have read, though, would imply the Americans should be able to supply themselves into the early 2020s.

As we have seen, fossil fuels, the second pillar of the Alberta economy, and its biggest, was subverted by a number of global effects. In the next instalment, I will explore the human dimensions of Alberta's current bust. In part 3, I will examine the things that give me hope.

Again, thanks for reading.