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 3rd 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 9th,
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 30th 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.
