PHOTOS: Alternative tar sands use in the event Premier Jim Prentice’s budget scenario turns out to be the right one. Below: Mr. Prentice with an appropriately grim expression and a sunny looking ATB Financial Chief Economist Todd Hirsch.
How does Alberta Premier Jim Prentice get to be optimistic and pessimistic about the same thing at the same time in order to reach contradictory conclusions? Can someone explain to me how this is supposed to work?
He’s pessimistic: Mr. Prentice is on record as saying repeatedly that low oil prices have punched a $6- to $7-billion hole in the provincial budget and that, as conservative politicians usually say in such circumstances, “tough choices are going to have to be made and they will be made.”
Tough choices. Since we’ve ruled out a fair progressive tax system, fair hydrocarbon royalties, a sales tax or indeed any tax increases at all, this means cuts in services and their replacement with privatized version that (never mind this part for the moment) will almost inevitably cost taxpayers far more.
And we’re all going to feel the pain. All of us, that is, except those rich enough to benefit from Alberta’s “flat” tax, which counterintuitively tilts the playing field even further in favour of the wealthy, who can afford to do whatever their little hearts desire outside the country or, in the event it’s their little hearts they’re worried about, whatever they require.
This will keep his new market fundamentalist Wildrose caucus friends happy for sure, as it provides the traditional neoliberal justification for further application of the Shock Doctrine to encourage big cuts to public services.
Mr. Prentice’s pessimism depends on the assumption that oil prices are going to stay low.
He’s optimistic: Mr. Prentice is on record as saying there’s new momentum on the $8-billion TransCanada Keystone XL Pipeline project in the United States.
“I continue to be encouraged by the level of broad public and bipartisan support in the United States that is developing around the Keystone XL pipeline project,” Premier Prentice said in a recent statement. Accordingly, he’ll be jetting off to Washington, D.C., in a few days to help subsidize the oil industry’s massive lobbying effort in the U.S. capital.
But, obviously, if oil prices remain below $50 a barrel, and especially if they creep lower toward $20 a barrel as some commentators want us to believe and the government of Saudi Arabia apparently wants us all to experience, a point will come when all these pipelines that Mr. Prentice dreams about pumping Alberta’s tarry black gold will become uneconomical.
And if the decline of the North American hydrocarbon industry is going to be as swift and as devastating as the gloomiest doomsayers in the financial pages keep warning, the point at which Keystone XL turns from the Next Best Thing into Last Year’s Dumb Idea could be quite soon.
Mr. Prentice’s optimism depends on the assumption that oil prices are going to bounce back soon.
So which is it? It obviously can’t be both.
One possible answer comes from Todd Hirsch, the chief economist of ATB Financial (the former Alberta Treasury Branches, founded by Premier William Aberhart in 1938 to represent the interests of Albertans against the power of the big banks) who predicted Wednesday that while Alberta’s economy will slow down in 2015, it won’t go into the toilet.
Mr. Hirsch put it a little more elegantly that that, actually saying “it is going to feel a little bit slow when growth is cut in half” but “an outright recession is highly unlikely.”
“We do think prices will recover in the second half of the year,” Mr. Hirsch said after ATB Financial released its quarterly economic outlook for the province.
I’m not saying professional economists always get it right, but Mr. Hirsch’s prediction splits the difference between the premier’s two self-serving and mutually exclusive claims, and makes a certain amount of intuitive sense to anyone who has figured out that the prices of commodities always go up and down over time.
“Things will return to normal fairly quickly,” Mr. Hirsch concluded, and only the deeply cynical would suggest that’s because he hopes Albertans will keep using their ATB Financial credit cards.
So, since it looks like we’re going to be stuck with them for another 44 years of Tory rule anyway, maybe it’s time for the Progressive Conservative government of Alberta to start behaving like grownups and quit pretending we don’t have a cyclical, resource-based economy, which we obviously do.
That, of course, would require us to have a more progressive tax system and possibly to introduce a sales tax like virtually every other jurisdiction on the continent, something we could easily do while still maintaining among the lowest income and corporate taxes around.
We can guess what Mr. Prentice’s answer to that one would be. You know, the price of oil is going to stay low long enough to require us all to feel pain, but no so long to require the KXL Pipeline not to be built. Or something.
He’s already saying, as the CBC summarized it, that the province can’t control international oil prices, but it can control public spending.
Actually, it can control much more than just spending. But that’s what happens when you take some of the options off the table while you’re claiming all the options are still on the table.
This post also appears on Rabble.ca.