Guest Post: Fiscal hawks’ formulas for cutting spending don’t really fly in the face of reality

Posted on August 17, 2017, 12:46 am
9 mins

PHOTOS: The Alberta Government’s Dash-8, used and abused by Premier Ralph Klein so that he could smoke while in transit between Calgary and Edmonton (Photo: Wikimedia Commons). It’s not just what you spend, but what you spend it on, says Guest Post Author Bob Raynard, below. Below him: former Conservative premiers Klein (Photo, Chuck Szmurlo, Wikimedia Commons) and Alison Redford, both of whom saw no problem spending public money on government aviation.

Guest post by Bob Raynard

Irresponsible levels of government spending is a theme we have heard a lot about from opposition politicians and conservative media outlets. There are, however, a couple of ideas that need to be considered, which to date haven’t really seen the light of day.

Although much has been said about how much money our provincial government is spending, there has been almost no criticism of what the government is spending it on.

There have been no reports of the current premier building herself a “Skypalace” and nothing equivalent to abusing government airplanes, something not only Alison Redford did, but Ralph Klein did too, just so he could smoke on the plane.

Similarly, there has been no money wasted on pet projects pandering to the party’s base, like the self-described good money managers have implemented and advocated.

Things such as senator-in-waiting elections or lawsuits fought just to make a point when there is no hope of winning are huge money wasters that serve nothing other than advance a conservative agenda. Examples of these ideologically driven lawsuits would include joining Saskatchewan Premier Brad Wall’s challenge of the federal government’s authority to implement a carbon tax, or fighting Omar Khadr’s successful lawsuit.

The closest Premier Rachel Notley’s government has come to something like this would be the money spent promoting the initiative to address climate change, which unfortunately became necessary as a result of the work of climate change denial groups and even opposition politicians.

Given the resources available to the opposition parties, and especially the deep pockets of the Canadian Taxpayers Federation, the Fraser Institute and the like, it’s a pretty safe bet that if inappropriate spending did happen, it would be exposed.

This, I would argue, is why we hear opposition members complain loudly about the money being spent but they fail to present examples of the government’s profligate ways.

Simply put, the money is being spent on projects or programs important to at least some Albertans. Jason Kenney wouldn’t dare cite a new library in Tinyville, or a program helping spousal abuse victims, as examples of wasteful government spending if he has any hope of getting votes from Tinyville, or spousal abuse victims.

Another idea that needs to be challenged, and never seems to be, is the notion that a government should restrict spending increases to the rate of population growth and the rate of inflation. While limits based on the rate of inflation make sense, the idea of tying spending to the rate of population growth needs to be rethought.

On the face of it, this idea appears to make sense. When the population increases by 5 per cent you hire 5 per cent more teachers, and buy 5 per cent more tongue depressors for hospitals. What could be more straightforward?

The problem is, where do those new teachers teach? Unless they are expected to hold their classes in the playground, they need a classroom around them. The same line of thought can be applied to any new hires caused by population increase. New surgeons will require new operating rooms; new firefighters will need new fire trucks.

Remember when Conservative premier Ed Stelmach defiantly declared he would not put the brakes on the Alberta economy when it was booming? He said it in a way that seemed like it was a no-brainer, but there are downsides to an overheated economy, and one of them is the infrastructure demands population growth will create. This is a demand that has largely been unmet. The number of years Sherwood Park waited for a hospital is a classic example.

The population of Alberta has increased by approximately 1.3 million people since 2001. This is the equivalent of another Edmonton- or Calgary-sized metropolis that has needed to be built in the past 16 years. That’s a lot of streets, schools and hospitals. Government spending at the time by in large did not meet it.

Challenged to build new infrastructure, Mr. Klein argued that the time to engage in a building spree was when the economy was down, when labour costs were lower and government spending was needed to stimulate the economy. Mr. Klein said that, of course, when the economy was red hot and he welcomed an excuse not to spend.

The “increase spending with population growth” argument almost has merit if it is applied only to operational spending. (Government spending is generally categorized as capital expenses, which are one-time purchases like the cost of building a new hospital, and operational expenses, which are everyday costs, such as salaries and consumable goods like paper, utility costs, etc.).

The reason this argument lacks merit is because a lot of minor capital expenses fall under the category of operational costs. Examples would be new desks, textbooks and the photocopier needed for a new school to become operational, or beds and an x-ray machine for a new hospital.

Viewed in this light, it is easy to see how the present government could escalate spending as much as they have without moving into wasteful spending – previous governments have left a tremendous backlog of very deserving projects and programs.

A statistic that fiscal hawks like to highlight is how Alberta’s per capita expenditure is much higher than that of B.C. This is where the rates of population growth must be considered. The 1.3 million who came to Alberta since the 2001 census is a 43-per-cent increase in population. By comparison, B.C.’s population grew less than 18 per cent in the same period. To imply Alberta’s spending requirements are the same as B.C.’s is absurd.

Irresponsible government spending is a theme we will continue to hear about from the United Conservative Party in the next several months.

Considering Alberta’s tremendous growth in the past 20 years, we really have to wonder how much of the irresponsible spending is actually a result of previous governments engaging in irresponsibly low levels of spending. Yes, the deficit needs to be addressed, but irresponsibly low spending levels are not the answer.

Bob Raynard is a retired teacher who lives in the Edmonton area and a regular contributor to AlbertaPolitics.ca’s comments section.

17 Comments to: Guest Post: Fiscal hawks’ formulas for cutting spending don’t really fly in the face of reality

  1. Jim Bornec

    August 17th, 2017

    Minor Correction: Sherwood Park still does not have an actual hospital. Instead we have a “Community Hospital” which has 27 emergency beds plus outpatient services. It is way better than a kick in the pants, but there is no overnight admittance.

    Reply
    • Bob Raynard

      August 17th, 2017

      Thanks, Jim. I was pretty sure that was the case. I am under the impression that the Tories repeatedly announced a new actual hospital for Sherwood Park before building your current building. Comment?

      Reply
  2. August 17th, 2017

    well said, Bob Raynard. Now that we know how ‘Fildepockets’ treated taxpayer money, perhaps UCP members are more careful about decrying wasteful spending. An audit of MLA expenses definitely would be interesting.

    Reply
  3. J.E. Molnar

    August 17th, 2017

    An excellent overview and analysis on government spending initiatives, Bob. Well done!

    I think during the next election cycle demagoguery will be the order of the day. As you aptly pointed out, there is little to complain about given the direction funds are being allocated by the current government.

    Comparing Saskatchewan and Alberta economic management practices by way of economic indicators, it easy to see that Alberta choose the more prudent fiscal approach. The tax hikes, public service cuts and wage freezes championed by Brad Wall have forced him to resign early after an election victory that was less than 18 months old. Wall’s approach to deficit and debt management was the tired, old, regurgitated conservative method of slash and burn.

    There’s no question favouring a Keynesian economic approach put Alberta in the strong position of once again the leading the nation in economic growth. Combined with rising oil prices and a new pipeline, Alberta’s future looks promising — something the fledgling UCP finds politically annoying.

    Reply
  4. David

    August 17th, 2017

    Well the Conservatives usual pap is to talk about cutting administration spending, while keeping front line workers. A good example of this is what the Conservatives did in Ottawa when they introduced the phoenix pay system. They got rid of all the people that knew how to run the old system and said there would be all kinds of savings. Instead the new system is problem plagued and they have spent millions to fix it, with delays and problems still occurring. Here in Alberta a few years ago the PC’s great idea was to cut administrative costs by centralizing things in AHS – that too has been problematic and the billions in savings haven’t happened.

    I would prefer if they were honest with Albertans and just told us which schools they intend to close and which hospitals they plan to blow up this time. Of course, if they did that their chances of getting elected would decline considerably, so like Saskatchewan’s recent experiment with austerity it will be as vague as possible and happy talk until after the election. Only then will voters realize they are not getting what they thought.

    Reply
    • Jerrymacgp

      August 18th, 2017

      Indeed. “Front-line workers”, to continue that well-worn military metaphor, can’t do their work without the administrative infrastructure that management provides. Who will pay them, and sign off their payroll? Who approves their vacations and other time off? Who evaluates and provides feedback on their performance to ensure a high standard of service to the public? Who ensures they have the resources to do heir jobs properly? Who hires their co-workers, so they don’t find themselves alone in their jobs? Who sets broad organizational goals so everyone in the organization is pulling in the same direction? All this, and much more, is the responsibility of the various layers of management that exist in any large organization like Alberta’s (and Canada’s) public service.

      Of course, organizational charts can be flattened, but there is a limit to how far one can go in such an exercise, based on the management concept of ‘span of control’, which is about how many direct reports a manager or senior administrator has. Too broad, and the manager loses sight of what is happening in their part of the organization, and bad things can happen (like decision paralysis).

      Reply
  5. Farmer B

    August 17th, 2017

    One area where the present government is wasting taxpayer dollars is electricity generation. Read Chris Varcoe’s article in the herald: calgaryherald.com/business..Alberta’a-power-contract-mess. Fascinating how everyone in Alberta goes off the deep end over Derek Fildebrandt’s $2550 screw up, the electricity mess involves billions of dollars being spent resulting from poorly thought out legislation. For the record I did call for Derek to resign and I am glad that he has stepped down from the UCP caucus. If he had simply reduced his housing claim to the government by the same amount as he recieved for renting he could have been promoted what he had done and would have been celebrated for it. Having said all that still baffles me how the wasting of $2550 dollars recieved far more coverage than the billions being pissed away on settling the power purchase agreement mess with no real benefit to consumers. Enjoy your day 🙂

    Reply
    • August 18th, 2017

      Hey Farmer B,

      Honestly I don’t really get the whole power generation situation, and reading about it just makes things more confusing. I really wish Steve West hadn’t started the whole thing to begin with, and I am glad the NDP is undoing it.

      So, I admit that me, a retired teacher don’t understand it, and a few hours research will not make me an expert, either. Likewise, I think it is fair to say the same thing applies to a veterinarian (Steve West), a bus driver (Brian Mason) or a news reporter (Chris Varcoe). All I can do is assume that the government has hired experts to advise them on the best way to do things. Before my eyes totally glazed over reading Varcoe’s article, I saw he quoted Mayor Nenshi; given Calgary’s stake in Enmax, Nenshi obviously has his own agenda.

      I really think people need to acknowledge there are some, not many, but some, commodities that are best delivered using a socialist model rather than a corporate one. Don’t get me wrong; I love the choice and price that result from buying things in a corporate model where companies compete for my business. Every time I try a no-name product (How can they mess this simple thing up?) I am glad I have the option to pay more for something of a higher quality. Furthmore I definitely acknowledge how trying to provide consumer goods in the communist countries just didn’t work.

      My definition of socialism is when the government provides a commodity and people use as much, or as little, as they wish. This is a perfect description of our road system. If our roads were provided with a corporate model, two or three companies would build a road from your farm to town, then offer you different qualities of pavement, different speed limits and prices to try and get your business. Obviously this is ludicrous. It is, however, something a person should think about before they declare that the corporate model is always better than the socialist one. I wonder if Jason Kenney ever considered he was using a socialist provided road when he drove his blue truck around complaining about the socialist NDP.

      So, what of supplying electricity? Our appliances only work with one type of electricity, so there really isn’t any choice in quality, like you get when you buy most items. The only other advantage of corporate supply, price competition, has not materialized because of the huge list of incomprehensible charges that prevent a consumer from making an informed choice. In my mind, privatization has only produced a series of annoying salesmen at my door threatening all sorts of high prices if we don’t sign a contract.

      So yes, I am glad the government is getting rid of a model that should never have been introduced in the first place, and I only hope they are doing it the most efficient way possible.

      Oh, I may be wrong about becoming an expert in a few hours. I just found a website that shows how to do dental work for your friends. Let me know when you need some dental work!

      Reply
      • Farmer B

        August 18th, 2017

        First off Bob I appreciate your honesty of your support for socialism. I think many in the Alberta NDP government and also on this blog have complained that they are being falsely accused of being socialist. I think there is no doubt that most NDP supporters believe that government should do and control more. I don’t subscribe to that view but I do feel that if the majority of Albertans feel that way the tax base has to be adjusted to pay for it, something that hasn’t been done as yet in Alberta.

        As for the power system, to my knowledge the ownership structure has not changed. As far as I know most if not all power generation is privately owned. I also believe as far as renewable generation goes tenders are being put out to private concerns but there is a price cap of 6.8 cents a kilowatt to consumers and if the cost of generation exceeds that carbon tax money will be used to fill the gap.

        I do agree we need to decide what the government should own and supply and what should be done by the private sector.

        Reply
        • August 19th, 2017

          Well, I have never thought of myself as a supporter of socialism before, and I am sure my stock broker will be quite entertained by your description of me! I support socialism as much as all the other radicals who like our road system just the way it is, and don’t want to see private companies building parallel roads, then competing with each other for drivers.

          My point with the roads was just that there are some things that really are better delivered in a socialist model, and I think we need to acknowledge it, rather than instinctively curling our nose at the word, like some public figures do. While roads is the commodity with the highest level of support, I expect, other commodities enjoying very high levels of support would be education and health. Saskatchewan and BC both had pretty right wing governments for many years, but they chose not to eliminate their delivery of insurance with a socialist model.

          With regards to power, your comment about ownership change made me realize it is not a socialist model I would like, Rather, I just want a return to the non-competitive, government rate regulated model, that we enjoyed for many years until Steve West drove a square peg into a round hole and concocted the system we have now.

          Incidentally, I have read the financial analyst’s reports of the various power companies, and have gotten the impression that they are largely indifferent to which model a company operates in; they certainly did not advocate a mass exodus of Alberta power companies in 2015 when the election of the NDP created a possibility of a model change. When reading about Capital Power the analyst seemed to think the compensation the government was providing for the early decommission of the coal fired power plants was fair.

          By the way, I love your phrase ‘adjust the tax base’! It was only on the third reading of your post that I caught the actual meaning of it. This is an area you and I totally agree on. Alberta desperately needs to adjust its tax base (still loving the phrase) to make up for its oil revenue shortfall.

          Enjoy your day.

          Reply
  6. August 18th, 2017

    Do those right wing formulas ‘not fly in the face of reality’, in that they don’t make sense when looked at realistically, or do they ‘fly in the face of reality’, as in they move contrary to the direction reality faces? I am being pedantic. A good article with valid observations, thank you.

    Reply
  7. AL

    August 19th, 2017

    A little bit of a bias reporter DAVID CLIMENHAGA (Wikipedia) Canadian union activist, blogger, journalist, author and teacher Ndp supporter. Here are some interesting FACTS he never seem to mentions when it come to the NDP spending tax payers money foolishly.
    – The provincial government is now wasting $1 billion annually on debt interest payments.
    – that number will double to $2 billion per year by 2018-19.THAT IS JUST INTEREST!
    – Alberta’s $28.4-billion debt is rolling in at a rate of over $355 EVERY SECOND.
    – Between the last PC government and the ruling NDP, Albertans’ gas taxes have gone up 94.3 per cent in less than two years.
    – expenses are projected to reach a record high of $59.4 billion in 2018-19.
    and MORE

    http://business.financialpost.com/opinion/its-time-to-stop-the-relentless-punishment-of-alberta-taxpayers/wcm/b2db715a-f062-4aad-a969-1119147704da

    Reply
    • David Climenhaga

      August 19th, 2017

      To clarify AL’s comments about me personally, I used to work as a reporter but I do not any more. This is a commentary blog that expresses my distinct personal point of view and those of a few select guests, all of whom are known to me. So it’s a red herring to complain I’m being a lousy journalist by revealing my admitted bias in political matters. As for my being an NDP supporter, I certainly support the government of Rachel Notley over the alternatives, but over my lifetime I have voted for candidates of all major political parties. Indeed, I am so old this list even includes Social Credit! I will leave the technical responses to AL’s numbers to my readers. DJC

      Reply
    • August 19th, 2017

      Al, you raise one of the points I tried to make above. Yes, there is a lot of money going out – but can you cite any project or program that is wasteful, like Ralph Klein using government plane as his personal smoking area? For years Alberta had the lowest tax rate in Canada and no sales tax because we were blessed with oil revenues. Now that those oil revenues have dried up it is time for us to pay tax levels similar to the rest of Canada.

      Reply
    • Ken

      August 28th, 2017

      Quoting an article from the Financial Post written by a Canadian Taxpayers Federation and you lean on David for having a bias? The article may be factually based but has a heavy dose of spin – does a dollar per second number really all that meaningful except for shock value? “Relentless punishment” verges on purple prose!

      I’m not an expert on government finances but I’ve done a little reading (lots of Trevor Tombe). For instance, I’ve learned that if Alberta had the tax rates of the next-lowest taxed province, we’d be running a surplus… I’ve learned that the carbon levy is thought by many economists to be a reasonable and fair way to pass on the cost of carbon to consumers. The intent is exactly to increase the price of gas so that consumers alter their behaviour. The NDP method of keeping the carbon levy revenue neutral so it doesn’t become a government cash cow and limits to the impact on low-income families seems laudable. Plus there are many private sector jobs being generated using the grants to home and business owners to take green energy retrofits.
      (By the way, gas TAXES may have gone up, but the price of gas is now lower than when the NDP took office due to market conditions. That’s an example of spin.)

      Reply
  8. Michelle

    August 19th, 2017

    Bob,

    Well argued.

    You made an excellent point with respect to Klein’s history in particular. (which left Alberta with a horrific mess to sort out – and we’re still cleaning up the infrastructure debt created) It is ironic that today, when the economy is down, the conservatives are running about telling us we have to tighten our belts, when this is the ideal time to address those issues.

    Reply
  9. August 20th, 2017

    One of my biggest issues with Jason Kenney and his ilk is that they are always ranting about fiscal conservatism. Don’t get me wrong, I am a fiscal conservative who has supported the Conservative Party in the past.

    My issue is that I feel that Mr. Kenney et al are trying to con me. They keep going on about the terrible socialists, fiscal mismanagement, etc yet I have yet to see them put forward one policy to address the issue. They have no platform.

    I certainly do not agree with everything the Notley Gov’t is doing. BUT, they are doing what they promised to do and their policies are right there out in the open. And the are building some Alberta infrastructure projects that we promised by the Conservatives for years but never delivered.

    So, if UCP want my vote and my support they need to clearly outline their policies, why they are better, etc. Without this, from my perspective, they are not an alternative for my vote. And those policies need to be concrete and not focused on so called social issues to placate the religious right.

    Growing an integrrated and expanded Alberta economy, dealing effectively with Healthcare is fare more important to me that prayer in schools, shutting down LGBQ clubs in schools, or worse trying the resurect policy discussions about issues/legislation that are clearly the purview of the Federal Government or well within Charter rights.

    So far it has been all talk. And talk, as we know, is cheap.

    Reply

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