further to the last

One regrettable consequence of my last blogpost is that a P"C" party activist or two seems inclined to think my dissatisfaction with the Wildrose Alliance somehow makes the government party a more attractive option. Let's be clear here: if there is a problem with Wildrose people making getting elected an end-in-itself instead of a means to an end, it remains a bigger problem yet with most P"C" party people. As longtime Leg watcher Marc Lisac observed in 2004:

[W]hy would anyone with a solid position in the community want to run for the opposition? The prize for election is putting up with casual insults in question period, being largely ignored by the media, watching government backbenchers earn much more money by virtue of being appointed to this agency or that board, and knowing that one's future employability outside politics is likely being impaired. The most attractive choice is to fight for a nomination in the governing party.

You have to be a saint to run for the ragged, perpetually debt-ridden shells that pass for opposition parties in Alberta. A saint, or someone with the character of a stubborn, defiant buffalo facing directly into a stiff wind coming off the mountains. Most people in public life here are neither. Contrary to the stereotype of the defiant individual, the province is full of people who take the easier path and join the party (literally and figuratively).

There is accordingly a context to my issues with Wildrose. That context includes that fact that the governing party has to take a lot more responsibility for the spending spree of the last decade than the opposition. Also, even if the Wildrose caucus successfully led an effort to kill off the restriction on teachers' right to strike, for some other planks like the right to not associate with a union and the secret ballot, it was "close but no cigar" in terms of getting them eliminated from the policy book. With the P"C" party, in contrast, you have a party that, as a government, introduced legislation that had clauses like section 29 of the Labour Code: "[e]mployees to be union members."

I have regularly returned to the issue of unions because I think how a politician is inclined to deal with this interest group is a far more revealing indicator of fiscal conservatism than nebulous talk about cutting back on spending. Remember how the unions howled at the Klein cutbacks in the mid-90s? What has changed such that spending restraint today wouldn't involve a confrontation with the unions? Premier Stelmach called the limiting of teachers' right to strike which Wildrose used to stand for "draconian," but in New York State ALL public employees are banned from striking ALL the time by section 210 of the Public Employees Fair Employment Act, more commonly known as the Taylor Law. Yet New York unions are still in the saddle. An expert panel hosted by the New York Times titled "Can California and New York be saved?" returns repeatedly to the idea that New York's new governor "has to steel himself for the long run and be prepared for the wave of ads from unions claiming the sky is falling." In Illinois where union muggings of the taxpayer are, if anything, even more egregious than in Albany or Sacramento, the Republican candidate for governor collected more than 1.7 million votes last week, losing by a thread, yet challenged the unions directly. The point being here that "draconian" is relative. As I noted in my last post, although Alberta supposedly has much in common with Rocky Mountain states like Idaho, the province allows closed shops when even the chair of the Swedish Building Workers' Union has said "closed-shop clauses [are] old-fashioned and [are] being removed" in Sweden. (As an aside, I have lived in Sweden more than a year and am a fan of much of the Scandinavian system, which in many respects is not as "left wing" as North Americans presume, e.g. a lower corporate tax rate than the UK and the USA, and perhaps the world's most radically free market in schools, schools that, by the way, privilege Christianity in the curriculum).

As I said before, the key problem is "not how much will be going to the unionized public sector per se" but how Alberta (and North America in general) decides how much is too much. Imagine an audience with some politicians on a stage in front of them. Now randomly pluck one "ordinary person" from the audience and sit them on a stool on the stage. Now invite the politicians to talk about how much that person should be paid and then vote, as an audience, for the politician who has said the most convincing thing and, by this mechanism, determine the pay. That the politicians will engage in a bidding war to pay the most should be as obvious as the fact that studio audiences invariably root for a game show contestant to win spectacular amounts of money. As much of a circus as this hypothetical scenario would be, reality is considerably worse because it isn't nearly as transparent: collective bargaining agreements are not conducted on public television.

Now having said this, if anyone should ask why I quit the Wildrose Alliance, it is not over a policy difference. Nobody gets all the policy they want out of a political party that represents a significant proportion of society. It is rather the way the party made a move that wasn't anti-any particular policy I favoured, but anti-policy period.

For whatever reason, an elected provincial politician, Doug Griffiths, wanted to talk policy, not politics, and Wildrose Executive Director Vitor Marciano (with the possible agreement of others) decided to try and make money for his party off of the uninformed grassroots using that very fact. Talking policy instead of politics is what my whole motivation has been since I left Ottawa's policy shops. Politics is a means to an end. If the end is to try scare politicians like Griffiths out of saying what he has been saying, I'm working for the wrong team. It's as simple as that, really.

Former minister Allan Warrack's comments about bringing an HST to Alberta on Alberta Primetime last Monday hit almost all the bases in terms of a concise defence of the idea. The segment quite likely would have never occurred, and Professor Warrack thus not have been given a soapbox, had Griffiths not made the effort to push the debate into the general culture. Wildrose not only failed to play enabler with respect to bringing a conversation to Albertans that I've made it something of my personal mission to bring, Wildrose actively contributed to trying to marginalize the conversation as unacceptable.

British Columbia doesn't have anything like Alberta's royalty revenues yet, as of this coming January, the corporate tax rate is no higher (10%) than in Alberta and a person earning $45 000 would pay almost $1000 less in income tax in BC than in Alberta. BC's tax on carbon does not bother me at all since I haven't owned a car for more than 8 years and the policy makes it that much less likely that BC would be targeted by a hostile foreign public relations campaign. This while BC, population 4.5 million, spends $40.6 billion and Alberta, population 3.7 million, spends $39.3 billion. The BC deficit is furthermore far more manageable. Calgary-based George Koch, writing in Alberta Venture in October, noted that "we Albertans seem a complacent lot, addicted to our government entitlements," and lamented the lack of leadership, observing that "[f]or the wilful leader, public support is a bank to draw on rather than just a wave to ride." With the exception of people like Doug Griffiths, Alberta's politicians all seem to be out surfing.

UPDATE:

Apparently I'm not alone in terms of general frustration. Mike Moffat from Western, Stephen Gordon from Laval ,and Andrew Coyne have been referring to each other's work for a while now and they are all unimpressed with the direction of Canadian politics.

this Wildroser salutes Kevin Taft

Former Alberta Liberal leader Kevin Taft (right) has announced that he will not be seeking re-election, although he will continue to serve his Edmonton Riverview constituency until the next election.

This is a lengthy post, but mostly because I quote at length from Taft's response to the 2008 Stelmach budget. The boldfacing you see is my own emphasis.

If there was a policy forum being held in the capital city, like on healthcare in Whitemud or on power at Rexall, Dr Taft could be counted on to attend. After lining up with other ordinary citizens to speak to a microphone at the Rexall rally, I noticed that the former Leader of Her Majesty’s Official and Loyal Opposition never introduced himself by name, never mind as an Edmonton MLA. Few politicians, I would think, would have been inclined to remain so anonymous.

When Wildrose MLA Rob Anderson introduced his private member's bill in February to limit provincial spending to population growth and inflation, Finance Minister Ted Morton responded "If you look at what’s happening in most of the U.S. states that have those types of rules right now, you’re seeing massive cuts to education, law enforcement, health care." In fact Finance Minister Morton was disseminating disinformation here since the bill at hand would cap the growth of spending, and as such would not force any net cuts. The states that are making deep cuts are in fact doing so because of mandated prohibitions against deficit financing (a reason why I spoke up against a proposal to prohibit debt financing at the last Wildrose AGM). If Morton were inclined to make a reference to the situation in the USA that was revealing instead of misleading, he could note that not all 50 states are running deficits. Alberta's only American neighbour has remained in surplus throughout the recession, and Alaska, which has analogous energy resources, anticipates a surplus in 2011. In addition, the Center for Budget and Policy Priorities notes that neither state has cut services. The Pew Centre's State of the States 2010 report notes that states situated similarly to Alberta are in relatively good fiscal health:

Call these the “Lucky Few”—states that have weathered the recession better than most: Alaska, Montana, Nebraska, North Dakota, Texas and Wyoming. Except for Nebraska, all of these states are rich in minerals. Nebraska, meanwhile, benefits from low unemployment, rising farm income and conservative government fiscal policies.

When Kevin Taft addressed the issue, he observed that capping at population growth and inflation "doesn't account for growth in the economy" and accordingly should perhaps just be "a short-term way to control spending." It was a thoughtful and respectful argument that prompted Anderson to say "very good question" and Anderson even felt compelled to agree with the former Liberal leader that "[y]ou don’t want to in perpetuity cap spending at inflation plus growth."

For what it is worth, I disagree with Taft and think the Wildrose MLA conceded to him too readily in that I don't see a gradual reduction in the size of government relative to the economy as a problem. The level and quality of government services would not go down, as their resourcing levels would be calculated per capita and would not be eroded by inflation. You just wouldn't see the government taking a cut out of the additional future wealth the economy would hopefully create over time. It's the most easily managed "diet" that a government could be on. I might add that the government's pension liabilities are likely to increase and the specific bill here, Bill 204, explicitly excluded changes in "liabilities respecting pensions" (and "debt servicing costs") from the "government spending" it sought to control.

Taft nonetheless helped inform the policy debate instead of disinforming it like Morton, and I note that Kevin Taft has repeatedly called for true fiscal conservatism. By this I mean caring for the province's asset position as opposed to just demanding less revenue collection, as all too many self-styled "conservatives" would have it. During the last election campaign the party he led issued a press release calling on the Tories to "rein in their massive spending", and observed that "[t]he Stelmach government spends more per capita than any province in Canada..." Without committing his party to a policy of indefinite duration, the press release quoted Taft saying, "'The Alberta Liberals will keep our commitment to real change through our platform, with no increase in real per capita program spending. It’s time to spend right, not more. It’s time for an end to Stelmach’s tax-and-waste government." He also observed that "[t]he Stelmach government spends 35% more per capita than the Ontario government" without noting that the former had a "conservative" label and the latter a "liberal" one.

Most notable of all, however, were Dr Taft's prescient observations that

[t]he Stelmach government is addicted to royalties. They act like the end of the gravy train will never come, like they can continually add spending without consequences. We have to get responsible and provide for the future before it’s too late.

At this rate, the Tories are setting us up for service cuts and rapidly increasing taxation when royalties slow down.

Within a year, the very slow down that Kevin Taft had warned of had materialized, with the one thing that he did not fully anticipate with his remarks being the fact that the Tories would evade tough choices with respect to service cuts and tax hikes by repealing their own "Fiscal Responsibility Act" in order to run massive deficits.

Within a matter of days after this press release, however, Albertans re-elected Stelmach, Morton, and the rest with a massive majority, effectively terminating Taft's mandate to indefinitely continue as Liberal leader. The government soon released its 2008 budget, and Taft gave his response to the budget on April 23:

...[o]n a per capita basis Alberta has 51,900 barrels of recoverable oil reserves, tops in the world. In other words, for our small population, per capita we have the largest oil reserves in the world. Second is Kuwait, then the United Arab Emirates, and then Qatar. Saudi Arabia, which we always assume is incredibly wealthy in petroleum, actually ranks fifth on a list of petroleum wealth per capita. Alberta ranks first. I think that’s something we should all remember when we’re weighing out how we manage this wealth. Now, that’s just oil reserves. If you add in natural gas reserves, our wealth rises even higher. Natural gas reserves are almost 57 trillion cubic feet, and there’s perhaps another 500 trillion cubic feet of coal-bed methane....

But in this budget it’s the same approach that we’ve seen for far too long from this government, which is no plan for savings, and the results of that are shocking. I think the most obvious result of that is the value of the heritage trust fund, which was set up over 30 years ago. It was set up to be a savings vehicle for the people of Alberta, and in real terms the Alberta heritage fund today is worth less than it was 20 years ago. I think that’s shameful.

We are liquidating the wealth of this province just about as fast as it can humanly be done. You can see that in the overheated economy. You see that in the labour shortages. You see that in the consuming of the environment. We’re liquidating our wealth as quickly as we can do it. We can’t do it any faster – can we? – because we can’t get the people here, can’t get the equipment here. We’re selling our wealth as quickly as is humanly possible, and what’s the long-term result of that? Where are the savings? Where is the wealth that’s going to be there for our grandchildren and beyond?

Of course, it’s said many times that Alberta has fallen behind other jurisdictions on this measure, and it’s very true. I fully acknowledge that each jurisdiction is different and has different priorities, but when you look across the globe, you see that Alaska has a strategy for saving its petroleum wealth and converting it into something permanent, Norway does, Russia does, and several Middle Eastern countries do. Then you look at Alberta and you go through this budget and you don’t see that plan. That is, in my view, the fatal shortfall of this budget.

... it’s worth perhaps looking a little bit at the past. How much nonrenewable resource wealth has flowed through this province’s treasury since this government was first elected? It’s a staggering amount. It would now be well over the $200 billion mark. If you go back, you can itemize it through the years, starting in the 1970s and moving up. There are many individual years when as much as $10 billion or more in one year of nonrenewable resource wealth flows through this government’s hands. Yet the Heritage Fund today, if you liquidated it entirely, wouldn’t finance six months of government operations.

It is very much, Mr. Speaker, like this government believes it won the great big lottery of all time, and in many ways it did, but instead of doing what every reasonable and well informed financial adviser would recommend, which is to save some of that, we’re spending it as fast as we can, and that is a mortal danger to the future of this province.

What this budget indicates is that we have become addicted to the process of liquidating our capital. This government has become addicted to it. There is actually an enormous gap, which we call a sustainability gap, between what this government brings in in reliable sources of revenue – I’m talking there about taxes, federal transfers, fees and premiums, and so on, things that every other provincial government has to rely on so heavily – a gap between all of those permanent and secure sources of revenue and how much is being spent. We haven’t had time, since this budget just came out yesterday, to work out the size of the gap in this budget, but based on previous years, I’m sure that it’s grown. It’s probably over $2,000 per person, the gap between what we’re spending and what we’re bringing in in sustainable revenue. The only way we’re able to cover that gap is by spending our petroleum wealth, our nonrenewable petroleum wealth.

This is a dangerous, dangerous pattern, and it’s a pattern that’s been building now for many years with this government: spend more than you bring in and make up the difference by selling part of the farm. Well, at some point we’re not going to be able to do that, and we’ve learned that lesson historically. The Minister of Energy is snickering at this analogy. Well, maybe that’s the difference between your government’s position and mine and this caucus’s position.

History will tell us that, in fact, there’s a real danger here. We learned that lesson 20 years ago when the world price of oil dropped below $10 and we were as a government massively dependent on those nonrenewable resource revenues. When they dried up, what did we have to do? We had to make dramatic cuts to public services, we had to increase taxes, we had to lay off thousands of people, and we went into a prolonged economic slowdown. We’re on the same course again, and this budget reinforces and, in fact, amplifies that course. That’s my single biggest concern with this budget, Mr. Speaker.

At the time that Taft made these remarks in the Legislature, there was no Wildrose Alliance representation, the party having been wiped out in the election of the previous month. But just the day before, April 22, the Liberal leader opened with following remarks:

It’s a great pleasure for me to introduce a person who many of you will know and many of you won’t have known. He’s seated in the Speaker’s gallery today, the former Member for Cardston-Taber-Warner and the current leader of the Wildrose Alliance Party, Mr. Paul Hinman. I would ask Paul to please rise, and let’s give him a warm welcome.

Alberta at the Olympics

Below is the gift package they were handing out at the Alberta Pavilion.

























Perhaps there is an association between the province and chapped lips?

Media celebrity for Edmonton? CFRN sports host Don Short:


















I watched Lindsay Blackett take the stage to announce some prizes for correct answers to trivia questions (a sample correct answer: a giant easter egg). Cindy Ady was supposed to arrive later in the day but the Premier was reportedly fogged in in Alberta... meanwhile it was glorious sunshine in Vancouver on Wednesday.

A protester completed the scene.

drama at 10800 97 Avenue

Before discussing what has happened at the Alberta Legislature this week, I'd note to any interested readers that a funeral date for Sgt Miok is still uncertain. The problem is apparently that the coroner's office in Toronto is busy solving crime such that it is not clear when the remains of those who fell in Afghanistan will be released. 41 CER is busy drilling in preparation for a military funeral on Saturday but a postponement may be required.

What to say about Monday's news? When rumours of floor crossings first arose in late September, I wrote to a member of the Wildrose exec to give my opinion (which I am very generous in sharing) that

[the party] executive [the leader still being undetermined at this time] shouldn't just accept them without any conditions if it is going to create a backlash... We would arguably be better served going into the next general with 1 MLA and 100% credibility than 11 MLAs and an attack line. ...
The ideal situation would be for these people to announce, then run in byelections, and to run in open nominations for the WAP nod. But that would mean no concessions to any [MLAs putting out] feelers... If they are people opposed to Bill 44 s.9 and they are not all concentrated in Calgary it would be political gold.

What we ended up with isn't quite gold and I think I would be rightfully dismissed as a party mouthpiece if I tried to pass it off as such. That would in turn arguably do the party more harm than good because people looking for attack angles would associate my remarks with the party line, something they cannot fairly do when neutral observers are of the opinion that I comment from an independent (albeit ideologically sympathetic) perspective.

But neither is this just a lump of coal for either the Wildrose party or standards of political practice. That some have expressed outrage should be acknowledged. An Edmonton Wildrose organizer in a south side constituency got an angry call from a resident who had previously been an enthusiastic volunteer. Given that not one but two 41 CER men are the go-to organizers in northwest greater Edmonton, I was particularly uneasy about a Facebook note of displeasure I received from another senior NCO from the unit concerning the news. Bob Layton has wagged a finger. A letter writer to the Calgary Sun has deplored the "desecration of democracy." The Edmonton Journal has huffed about the "betrayal of voters' intentions" and Paula Simons has, predictably, jumped on the (supposed) opportunity to play up the menace of Calgary oil men with an alacrity that would impress any old Alberta Reformer given to regular warnings about nefarious eastern bankers.

I'd say methinks the lady doth protest too much but it appears that I am not the only one who suspects that Ms Simons has called wolf a time or two too many given some of the comments I've seen. To envision a crime against either Edmonton or democracy or both seems rather too conspiratorial. Consider this: you vote for a platform. Since you believe that individual candidates generally can only impact 10% at most of the platform that affects you and your constituency, generally you base 90% of your vote on the candidate's party affiliation. Suppose the platform you believed you voted for was simply fiscal conservatism. But the party turned away from that platform after some time in power. The candidate, however, wished to remain true to platform and crossed over to a new party that took the vacated place with respect to that platform. Would it not be a "betrayal of voters' intentions" to NOT cross the floor in this circumstance? So what if the labels are "conservative" or "liberal" when the substance is yesterday's conservative is today's liberal? If the Canadian Parliament went from 169 PC MPs and zero Reform MPs to, say, 160 PC MPs and 9 Reform MPs because of floor crossing in 1992, would continuing with 169 and 0 into 1993 truly have been more reflective of the electorate's desires given that after the election of October 93 it was 2 (yes, two) PC MPs and 52 Reform MPs?

Before Monday, the Alberta PC caucus outnumbered the Wildrose Alliance caucus by a 70 to 1 margin. Now, it is a 23 to 1 margin. The 2008 election result was less than an 8 to 1 margin. Where's the "desecration" again? "Ah, but you are looking at it from too broad a perspective," someone might say. "I'm talking about my backyard." Of this NIMBY view I would ask why not restrict your backyard to just your local polls or literally your backyard. 100% of the votes in my own backyard went Wildrose last election and this backyard didn't get the result its electorate wanted. The point being here that there is a continuum here and the point at which one makes the slice is more or less arbitrary. Too arbitrary to support much righteous indignation beyond tut-tutting.

Which brings me to what I think the real issue is here, and that's the internal consistency of a political party's view of what is democratic and what is not as opposed to whether a particular floor crossing is democratic or not in the absolute sense. There are no absolutes here. There is a rather a spectrum where at one end a party would accept into its caucus only those who had been elected under its party banner consequent to an open nomination. By-elections in 100% of cases where the caucus is enlarged outside of a general election, in other words.

Moving along the spectrum one would first find a caucus that was enlarged without a by-election but only after announcing the desire to cross the floor on a conditional basis, the condition being consultation of all of

- the constituency association of the party being left (with particular concern for those who put the most time and effort into campaigning for the candidate)

- the constituency association of the party being joined

- the membership of the party being left

- the membership of the party being joined

and

- the constituents in general

As an aside, if one were to contend that it is not the business of anyone outside the riding, then in my view consistency would demand that a constituency association or a candidate issuing their own press releases (to take an example) ought to similarly be considered no one else's business. If the party's view is that everybody wears it when a controversy erupts in a particular constituency, then I would think that there would be no carve-out for controversial floor crossings. Recall that Edmonton Wildrose people have received feedback about events related to Calgary-area constituencies this week.

To return from that aside, while there may be much gnashing of teeth during and post-consultation, the fact is that people had the opportunity to express their opinions in letters to newspapers, to friends, to party officials, etc. There are always going to be losers, just as there would be losers in a formal byelection, but losers in the byelection scenario accept it because they got their 2 cents in, and they would still get their input in (albeit to a rather lesser degree) were they are consulted in a more indirect and approximate way.

Moving further along the spectrum, the transparency and the breadth of the consultation and the conditionality of the floor crossing goes down, to the eventual point where the representative is not only crossing without any demands from the party that the crossing representative demonstrate that his action has the support of his constituents, but the representative makes demands of the party being crossed to and back room deals are cut to satisfy those demands.

Suppose a representative with all the perks of a front bench role and comfortable re-election prospects under the same party should cross to a party that is polling poorly, for an obscure role in the legislature and lower pay. Even if there were no transparency at all with respect to the decision to cross, the circumstances would suggest that there could not have been a back room deal of much significance. On the other hand, crossing to a party that is polling better than the party defected from suggests more constituents would support the move. Both of these mitigating elements exist with respect to the floor crossings that occurred this week, to the extent they can when they are more or less inversely related on the polling strength aspect. Also, if one is consistent in holding an uncompromising view about representatives acting with the approval of their constituents, then we ought to be having byelections every day on the each day's unique issues. The practical reality is that most democracies allow elected representatives to go against their constituents' desires as often as they like but for a maximum of 5 years. If the voters will be given an opportunity to render a verdict within 4 or so years on a floor crossing, one's outrage should accordingly be limited, and perhaps limited in proportion to the expected wait. What's so special about a floor crossing decision relative to other major policy decisions that a byelection is much more required for the former?

The safest thing is nonetheless to hew as close as possible to the byelection side of the spectrum. That's why I spoke of a byelection as an "ideal" back in September. But where one is beyond that depends more on consistency of philosophy than anything else. I don't believe in recall, referendums, or an elected senate, primarily because I see myself as a "conservative" cynic who looks through to the concrete result as opposed to a "liberal" type who idealizes some ambition in its unimplemented abstract. California is ground zero for recalls, referenda, etc and is also home to some of America's worst K-12 schools, net out-migration, and a fiscal disaster. I've seen Senate committees at work in person in Ottawa and I've come to the conclusion that most Senators, many of them accomplished individuals, conduct themselves with more dignity and less grandstanding than our elected Parliamentarians. So I am not uncomfortable with these floor crossings in and of themselves. Byelections here would be wastes of time and money, and having a Wildrose caucus that is 1/23rd the size of the PC caucus despite leading the PCs in the polls is hardly a situation that screams for an electoral review for possible oversize.

I could go on: freeing up the crossers to dissent and speak their minds is a net gain for transparency in this province. Advanced Education Minister Doug Horner's contention that "it takes integrity" to tow the party line instead of supporting what one really supports or saying what one really thinks strikes me as laughable. It takes loyalty, not integrity, to be a good soldier for Stelmach. When I question the Wildrose party I am presenting a true front instead of united front. Let's not pretend there isn't a trade-off.

I am concerned about a potential gap between what the powers-that-be in the Wildrose Alliance deem is OK for them and what is OK for others. Call me a concern troll but the deal here is that I'm a Kantian in that I think one has to universalize one's principles. That's why I think consultation with the constituency association being joined should be matched with consultation with the constituency association being left. If a floor crosser left my constituency association and I complained about it, I would expect to be given the same level of consideration as I was given when a floor crosser came to my constituency association. Why would my opinion count in the one case and not the other?

There is, of course, a need for political realism. Things get done because people make the compromises necessary to go with the team instead of one's own way. But if any of the three caucus members introduce a MLA recall bill I am going to have to ask myself whether there is any way to get what I would consider a glaring inconsistency ring fenced into a regrettable one-off incident. A recalled MLA isn't going to suffer "financial hardship" as a consequence, an excuse I've seen trotted out for not having a byelection? Taxpayers aren't going to have to foot the bill for a byelection consequent to a recall? Why are these justifications coming from the party and not from the floor crossers themselves if there were no quid pro quo that the party would help provide political cover? A Wildrose nomination is the hottest ticket in town and people ought to begging for one. If there is going to be a nomination sale everyone should have a chance at the same deal. It's not like the Alberta Altruist or Shawn Howard would have been unacceptable candidates such that s. 9 supporter had to be courted to represent Airdrie and area. Allow me to quote from a Tory insider who rightly perceived far more downside to a byelection for his party than for Wildrose, which raises the question of why so much as an inch was conceded on whether to demand one:

[The PCs should] stop calling for Forsyth and Anderson to step down and run in by-elections as Wildrose candidates. It’s a stupid idea. Let’s say they actually went ahead with the suggestion and DID step down to run again a-la Sheila Copps: what would that accomplish? If you’re the PCs, not a damn thing.

Not only would a pair of by-elections serve to draw attention (every day for an entire 28-day writ period) to the fact that two government MLAs left government to sit in opposition… they would both win their seats back - quite handily, too. A month of anti-government press (almost guaranteed in Calgary these days) capped off with a couple of Wildrose blowout victories will only legitimize the notion that the good ship Tory has already hit the iceberg and is on her way down in spectacular fashion.

And I say all three caucus members because even though one of them did not make such a significant decision so as to create more than a negligible expectation of a recall desire, this one has shown more enthusiasm for having MLAs elected under other banners come over and provide company than I was ever comfortable with. As far as I'm concerned, this should be a matter for the leader not the caucus, since the leader has the confidence of the full membership that caucus members do not. If the caucus does not defer to the leader, the party's greatest asset is going to be left unutilized. These crossings are a potential sign that the party has matured to the point of appreciating nuance and practical politics. To revert to populist moralizing going forward would be a serious regression.

Casual readers who haven't worked with me may not know that I am a notoriously unhappy camper. Due allowance for that means that folks ought to just move along since there really is nothing particularly new to see if Brian Dell has a beef. But I will say that an uncompromising defence of this floor crossing that I saw coming from a Wildroser who had previously condemned Belinda Stronach (who was re-elected by her constituents under the banner of the party she crossed to in the first subsequent general election) as "treacherous" and a "traitor" created the biggest beef I have had yet, outside of operations management issues. A "waste of time" argument was scoffed at in 2005 yet now that the shoe is on another foot the same argument is being advanced to refuse to "go to the people" in Airdrie or Fish Creek. How about either a more dialed down denunciation of Belinda or, in the alternative, a more equivocal and tepid endorsement of this week's crossers? Or is partisanship just too hard to step back from? This person is not the leader, but as far as I'm concerned the attitude is either too widely held or too influential. Stop giving passes to federal Conservatives for engaging in the same high-handed behaviour that was so bitterly denounced with the Liberals did it. Why is Andrew Coyne the only prominent conservative to take issue with the federal government's spending spree? If a prime minister dodges a Parliamentary confidence vote it is not a violation of "the first and greatest commandment." It's a political maneuver that should be regretted but with a sigh instead of righteous indignation. I consider it the mark of an older, wiser individual to jump on a high horse only after much introspection. Crusading should be generally left to those with little experience of the world and the complexity of its demands. As the Calgary Sun responded to the letter writer, "politics is a blood sport." It's a response that concedes that corners were cut, and is accordingly the response that acknowledges the complainant while nonetheless disagreeing with him.

Dave Hancock vs free trade

The attendees of the P"C" party of Alberta convention in Red Deer this past weekend helped clarify for the voters their view of fiscal conservatism, as "Several resolutions on spending controls were rejected, including adopting legislation limiting year-over-year spending increases to the rate of inflation, plus population growth..."

Could it be any clearer? The Wildrose Alliance platform contains a plank, a plank that, in my view, would be the cornerstone of the platform if associated with anti-cyclical tax reforms that would put serious (windfall revenue denying) teeth into it: "The Wildrose Alliance believes Alberta will limit growth in program spending to the rate of inflation and population growth of Alberta." This very same Wildrose Alliance plank was considered by the P"C" Party and rejected. At least they are consistent... these P"C"s are the people who increased government spending 191% between 1996 and 2008 while the population grew 34%. Plus ça change, plus c'est la même chose.

What are the stakes here? Jack Mintz does not believe that even limiting spending to population growth plus inflation will be sufficient to both avoid both deficits and higher taxes. No economist of note who has taken full account of Alberta's future demographic challenge has disagreed. The implication is that continued government by the P"C" Association of Alberta would not mean just deficits and higher taxes, but LARGE deficits and/or MUCH higher taxes.

If that wasn't enough Red Toryism for you,

Members approved a policy from Education Minister Dave Hancock's Edmonton [Whitemud] constituency association calling for the upgrading of more oilsands bitumen in Alberta by blocking shipments to other jurisdictions. The province should take "whatever appropriate action is necessary" to achieve the goal, said the resolution, including legislating that bitumen be upgraded in Alberta.
"One of the things we want out of our oilsands is to have the value here," Hancock said, suggesting the proposal is consistent with government policy. While the province doesn't like to interfere with private business, "unless you engage in some way, bitumen is going to flow down the pipe," Hancock said.

It is absolutely true that unless government "engages in some way" ("engagement" being the Dave Hancock-approved term for coercive regulation) people will freely trade. That means exporting bitumen when the price is attractive and when the investment climate in Alberta has deteriorated to the point that the corporate finance number crunchers conclude upgrader projects within the province are lower NPV than in other jurisdictions. Now the government COULD change elements of those NPV calculations by 1) reducing the marginal effective tax rate (METR) on new investment to a more competitive level and/or 2) reducing the risk adjusted discount rate by not changing energy industry policy every time the populist winds shift and/or 3) stop crowding private investment with continued high levels of government spending that inflate the cost of business inputs, including labour. Not one of these options were acknowledged. Rather, Dave Hancock's Whitemud constituency association reckons coercive, trade restricting regulation needs a place at the table, a contention that would have been of limited interest to non-Whitemud voters were it not for the fact that the rest of the convention-attending, Stelmach-supporting P"C" membership decided it would make a great policy plank for their party. BA Energy spends more than a half billion on an upgrader near Fort Saskatchewan, goes bankrupt, and the problem wasn't the escalating cost of doing business but insufficient government "engagement"? Perhaps Hancock's idea of "engagement" also includes a massive corporate welfare scheme that would send billions of taxpayer dollars down the rat hole. After all, if they can find billions for boondoggle carbon capture projects, surely they can find billions for boondoggle upgrader projects that would create more carbon to capture! Of course, these upgraders will also suck so much juice from the grid we'll need a massive new power transmission line project... you see how it all fits together?

If the government is not going to allow the private sector to export bitumen, are they going to allow the private sector to give out-of-province investors a return on investment? If Hancock can't tolerate gooey black stuff "flowing down the pipe" how is he going to keep his paws off an actual cash flow? Longtime readers of this blog know that I'm a frequent critic of the Prime Minister and what I see as a "firewall" mentality. But if there has to be a wall, I'd take Harper and Ted Morton's mostly symbolic social "firewall" around Alberta over Dave Hancock's economic firewall any day of the week and twice on Sundays. It is the expectation of being able to eventually take out a return on investment that creates the confidence to put the initial job-creating, economy-building investment in.

At the 2010 P"C" Party AGM, perhaps the Edmonton Whitemud P"C" constituency association will propose that the government take "whatever appropriate action is necessary" to ensure Albertans consume Alberta-grown bananas. Mr Hancock could explain that Albertans want "to have the value [of banana production] here." Indeed, Albertans might have to go without any bananas that aren't home grown because foreigners decided not to trade with us after we are refused to part with our bitumen (we'll trade you some worthless stuff we Albertans don't want instead... what? not interested?) If the government does not "engage in some way," you get all these free traders influencing production and investment decisions, and that's apparently just too much to bear for Dave "give me my financially and environmentally dubious upgraders" Hancock.

Dave Taylor vs Mel Knight

Dave Taylor challenged the provincial Energy Minister quite effectively in this Youtube clip from Question Period, IMO. Sadly, the government is in fact notorious for using taxpayer money for promoting what many observers believe are partisan ends.

I would like to see an opposition member stand up to challenge the government on why it is bringing back a retail bond program when it was terminated in the 90s because of its cost to the taxpayer relative to wholesale issuance, but the topic is probably too arcane.

conservative fiscal policy and meaning it

While the greatest dangers of the financial crisis may no longer be acute, chronic fiscal challenges remain for most western democracies. Demographic change in particular means that higher levels of saving and investment, both publicly and privately, are necessary if standards of living are going to continue to improve.

What are the options for ensuring this?

The #1 priority in my view is continuing with tax reforms which have been occurring in most jurisdictions (Alberta not being one of them) that encourage the shifting of income from consumption to savings and investment. Even if governments were to start diverting massive amounts of their tax revenue away from consumption by holding the line on services and building up financial and physical assets, tax revenue is only a fraction of a jurisdiction's total public and private income and the private sector's contribution, or lack thereof, to the capital stock, whether it be financial or be physical (property, planet, and equipment) has more impact.

But leaving aside further discussion of these tax reforms for another day and restricting our analysis to the income going to government, how can concerned citizens ensure that their governments are going to be genuinely conservative with the resources allotted to them? Although balanced budget legislation is a possibility and is the first proposal I will review, it is but one of many.

Balanced budget legislation

The two basic drawbacks to "no deficits" legislation are the same two problems we will encounter with a lot of proposals, and that is that 1) the policy deals with a flow instead of a stock and 2) governments can and do ignore such legislation. re point (1), a balanced budget requirement can help in that it sets a target minimum contribution to the stock of capital over a period, namely that it be non-negative (zero or higher). But there is nothing inherently problematic with a negative contribution (withdrawal) from the capital stock over some short period since that does not necessarily mean that the total contributions to and growth of the capital stock over the long term will not be superior to some other jurisdiction which makes a null or a positive contribution over every period. Nonetheless, even if the red/black distinction is ultimately an arbitrary accounting measure, it is still an occasional target, and as the Nudge book I mentioned in an earlier post points out, targets have value. The book's authors note how public urination facilities became a lot less messy when users where given something to aim for. Indeed, one could note that Alberta's current fiscal mess started when government revenues cycled upward and former Alberta premier Ralph Klein lost his target.

Legislation that limits government spending to inflation plus population growth

Again, this would set a target for a periodic flow instead of for the stock that actually matters, but it is a superior target to the balanced budget target since it does not mandate cuts at the worse possible time (during a recession) and mandates less spending proportionate to the economy at the best possible time (when the economy is growing quickly). In an interview with the Canadian Taxpayers Federation in September, then Wildrose Alliance leadership candidate Danielle Smith supported this target but added a proviso that spending also not exceed GDP growth. While this response had the virtues of garnering an A+ grade from the CTF and ensuring that the size of government shrinks relative to the economy not only when real GDP per capita is growing but also when it it shrinking, most economists would consider this additional restriction a mistake. The proviso ultimately undoes the advantage over the balanced budget target by being pro-cyclical: forcing government spending cuts when the economy is shrinking. While left leaning economists like Paul Krugman were demanding massive stimulus spending earlier this year, centrist organizations like the OECD were also urging national governments to pass large stimulus packages, and conservative economists like Greg Mankiw were not opposing the stimulus spending per se but rather acting as the voice for skepticism about how effective the particular proposed stimulus expenditures would be. It was generally recognized that "inaction on sound stimulus is indeed harmful." In almost no case was any prominent economist calling for prompt cuts to government spending. As another writer for the Economist notes, "Faced with growing demands on unemployment assistance, [when] states are forced to cut spending elsewhere... this is procyclical behaviour, which may act to increase unemployment further, forcing additional budget cuts, and so on." When one sets aside ideology for evidence based policy, the evidence from the Great Depression suggests that cutting back government expenditure at the same time that consumer expenditure is in decline creates the grave risk of an economic death spiral. Adding the GDP proviso is unnecessary, because when real GDP per capita growth (GDP growth less inflation and population growth) is negative that is by definition temporary (if real GDP per capita is in permanent decline the whole point of economics would be defeated). In other words, the size of government is also a stock, such that whether it is shrunk in every accounting time period is not ultimately germane to the real objective. Real GDP per capita will increase over the long term, meaning that over the long term the size of government relative to the economy will be reduced without adding a further constraining proviso to the inflation + population growth limit. I would also argue that the GDP deflator should be used in the place of "inflation" (I've equated the two in my discussion here) but that's a technical objection.

Legislation that requires a proportion of revenues (often a subset such as supposedly "non-core" revenues, e.g. natural resource royalties) be saved or invested

This target is part way between the above two targets, since while it shares with the inflation + population growth limit the advantage of not requiring cuts during a recession, under this target both spending and saving would grow in lockstep during boom times without an upper limit such that spending growth could still be very high. Again, when at economy is peaking an expansionary fiscal policy just encourages increased prices, and the increase in government purchases shifts resources away the private sector, a phenomenon known as "crowding out."

Combining a capital stock associated limit on spending (excluding infrastructure spending) with mandated revenue hedging

This proposal is my favourite since it has what I believe is an enormous advantage over the other proposals, namely, that governments will not be able to ignore the target because they simply will not have the money to violate the target. In the Alberta of 2007, for example, the government's positions in currency and energy futures would have been marked to market and the government thereby required to plow its windfall royalty income into international hedging markets. In 2009, we would see billions coming back to the province from these same markets. I would exclude infrastructure spending since this constitutes physical investment. While it is possible to invest poorly, and indeed the Alberta government has a consistent pattern of buying high and selling low by choosing to "buy" infrastructure assets when the market is at a top, it is still investment, and by mandating hedging the government's discretion to "buy high" will limited. Stock associated limits to spending could be akin to the covenants that bondholders demand from issuing corporations with respect to the health of their balance sheets as opposed to just their income sheets, or they could be the sort of constraints relatively sophisticated regulators apply to financial institutions (see Basel II), e.g. limits informed by Value at Risk modeling.

"Stock" associated limits to spending discretion may prove too complex to constitute a political campaign plank relative to a readily understandable limit like no more than inflation plus population growth, but hedging, while complex to explain in detail, is quite straightforward as a concept and the general idea that the citizens of Alberta are bondholders and shareholders in their government is also a fairly simple one. Should a politician's pay be tied to the size of the Heritage Fund à la a private sector executive's? The corporate analogy is worthy of consideration, not least because it could ensure more professional and competitiveness-oriented management.

I believe that this is THE challenge of our age. Do we leave something behind for the next generation or not? If we are serious we will not just talk about how we intend to start showing some willpower with respect to the cookie jar, we will explain how it will be placed outside of our reach.

UPDATE October 26:

The Wall St Journal notes that after posting a $1.4 trillion deficit in 2009, the US House of Representatives is now moving on spending bills that would grow domestic programs by a further 12.1% in 2010. The WSJ also observes that "real family incomes fell by 3.6% last year" and the point I wished to make about spending growth that is higher than GDP growth but no higher than inflation plus population growth is that this would or could maintain government services for consumers whose real incomes are falling. Although government would grow relative to the economy during this period of decline, there would no increase in real government services per person and the proportionate growth in government would be temporary. If government services are to be cut back as opposed to just kept from growing further, they should be cut back when real incomes are rising.

But I may have been imprudent to take issue with Danielle Smith in this context. As Don Martin observes in a revealing National Post column, "Ms. Smith was on an Ottawa talk show with me this week and, even though it was still pre-dawn darkness in Calgary, she batted every question out of the park..." The contrast with Sarah Palin being interviewed by Katie Couric (to take one of the most infamous episodes) could not be sharper. The takeaway fact with her is that she is one of the sharpest policy minds in politics, yet getting that most elementary of messages through the North American noise machine will be enough of a challenge without bothering with nuance. This morning Danielle ended up on the website of the Charleston (South Carolina) Daily Mail as "the Sarah Palin of Canada." How does this end up in the mainstream media? The Charleston Daily Mail writer uses the Canadian media as cover:

I figure the Canwest News Service knows something about Canada and the news service has declared Danielle Smith, the new leader of Alberta’s Wildrose Alliance, the Sarah Palin of Canada.

In fact the Vancouver Province writer who is cited here put a big question mark at the end of its "A Sarah Palin for Canada" headline, not a period. But with respect to which MSM outlet surrendered its gatekeeper role to the commercial appeal of another "Sarah Palin" headline that would indeed be Canwest since it was their writer who made a story out of a blogpost by 22 year old Colorado Springs blogger Adam Brickley. The meme was then picked up by Global TV Edmonton and the Examiner.

return of Alberta Capital Bonds? Say it ain't so.

Watching the premier claim on YouTube tonight that "[o]ur savings during the good years were substantial," I felt indulgent: he's entitled to one lie. But when he went on to repeat the claim and insist that "we were well prepared going into this recession," I could only think where is Joe Wilson when you need him?

The biggest head shaker of in-the-red-Ed's teleprompted performance, however, was his declaration that "[t]his is a good time to bring back Alberta Capital Bonds." Persons interested in a second opinion may wish to contact my brother, Kevin Dell CFA, who manages the City of Edmonton's debt portfolio, or either the chief of the Domestic Debt Management Section of Finance Canada's Financial Markets Division or her highly capable boss, Wayne Foster, who is Division Director and who happens to be my former section chief. But given that these people are all current government employees, they may be uninclined to speak freely. So allow me to be frank: this is a taxpayer boondoggle. Yes, I know: you're shocked that such a thing could come from this government. Just take a deep breath!

In 2004 Cap Gemini Ernst and Young delivered its independent review of Canada's retail debt program to the Department of Finance. CGEY noted that between 1997 and 2003 the Canada Savings Bond program cost $1 billion, and concluded that, going forward, winding down the program would save Canadian taxpayers $650 million over 9 years. "This conclusion is supported by research and analysis that assessed franchise value, value to government, value to investors, environment, organization, and design."

The premier says that a relaunch of Alberta's retail bond program "will be a real way of showing your support for our communities and our faith in the future." How about showing your support for our private sector, Premier Ed, by not introducing a government product to crowd out the private sector's offerings and, most importantly, conserving taxpayer dollars by sticking with the lowest cost option for debt financing? Here's what your own Finance Department has to say:

In 1996, the name was changed from Alberta Capital Bonds to Alberta Savings Certificates. By 1997, ... we stopped selling the certificates because we developed even more cost-effective ways to raise money.

Federal Finance Minister Ralph Goodale rejected the independent recommendation to wind down the retail debt program because he was aware of polling that indicated that Canadians liked their CSBs. This dubious rationale has apparently now migrated to Alberta, and is especially galling for me since the primary reason I left Ottawa to return to Alberta is because I reckoned Albertans would be more open to the sort of sound, fiscally prudent, corporate friendly policy that the civil servants at Finance Canada wanted to pursue.

growth in personal bankruptcies by province

my submission to the Alberta Electoral Boundaries Commission

Thank you for giving Albertans an opportunity to address the question of effective representation in the Legislative Assembly.

In 2009 the Assembly added subsection (3) to s.12 of the Electoral Boundaries Commission Act:

The Commission may use more recent population information, if available, in conjunction with the information referred to in [earlier] subsection[s].

I would encourage the Commission to give force to the Assembly's evident desire to address the problem of obsolete population data by reading this added subsection broadly. "Population information" may be defined to include PROJECTED population information. The use of projected numbers would help preclude an undermining of the spirit of the population variance limits. The 25% variance limit has been on the books for many years, yet in practice provincial elections have been held under conditions whereby these limits are routinely exceeded. Several suburban and exurban ridings had populations in excess of 40% of the provincial riding average in the 2008 election. On election day, the number of names on the list of electors for Airdrie-Chestermere was in excess of 165% of the number of electors for another riding. Unless the well established fact that suburban and exurban areas are the fastest growing is taken into account, the votes of these Albertans will again be at risk of counting for less than half of what the votes of some other Albertans count for in a provincial election held prior to the next redistricting. I understand that some currently expect the Wildrose Alliance Party to be especially competitive in suburban and exurban areas in future elections and that this party had no input into the selection of Commissioners (and, even if it did, the section 2 subsections mandating the appointment of a "resident outside a city" to match a "resident in a city" would operate despite Statistics Canada's indication that the province was more than 80% urban 8 years ago). I nonetheless trust that the Commission can appreciate that fair electoral boundaries in Alberta would be boundaries that are fair in the future, when elections are actually held, as opposed to just today.

I would also note that although the Act permits population variations of as much as 25% higher or lower than the provincial average, or even 50% lower (meaning Albertans resident in these ridings could have as much as 2.5 times the representation of Albertans in other ridings, and this prior to the growth considerations I point out above), there is no prohibition against the Commission drawing boundaries that yield substantially more equitable variances. If my suggestion to employ projected population data is rejected, the application of a more stringent variance than the maximum allowed by the legislation would reduce the likelihood that the maximums will be exceeded come election time.

goin' ta California

... dreaming of the moment when everything looks right ...

From this week's Economist:

[California's] roads and schools are crumbling. Every year, over 100,000 more Americans leave the state than enter it....
Ballot initiatives, the crack cocaine of democracy, have left only around a quarter of its budget within the power of its representative politicians. (One reason budget cuts are inevitable is that voters rejected tax increases in a package of ballot measures in May.) Not that Californian government comes cheap: it has the second-highest top level of state income tax in America (after Hawaii, of all places). Indeed, high taxes, coupled with intrusive regulation of business and greenery taken to silly extremes, have gradually strangled what was once America’s most dynamic state economy. Chief Executive magazine, to take just one example, has ranked California the very worst state to do business in for each of the past four years.

As if on cue, the past week's news about California's continuing descent into failed state status coincided with Alberta Premier Ed Stelmach promising "As long as I'm premier of this province, there will be no tax increases ... No tax increases, period." Apparently the Premier felt a show of authority here was necessary to convincely shoot down the tax hike trial balloons launched by the notorious lefties in his caucus: "Just Monday, Sustainable Resource Development Minister Ted Morton said taxes are inevitable because the shortfall in this year's budget is so great."

You'd think the Premier could have summed up his presser with, say, something like "read my lips: no new taxes", just to underscore how immovable he is on the topic. Instead we got "So just to close: cold beer, hot day, during very difficult economic times." Got that? You should: Ed said he was "very clear" no less than seven times.

Stelmach approval ratings steady

A Leger survey of 900 Albertans has found that 40% disapprove of Ed Stelmach's performance, unchanged from February 2008. In Calgary disapproval has actually dropped, from 50% to 46%.

The bottom line is that for all the criticism being directed his way by the chattering classes, the Premier is not looking much more endangered politically than when he won almost 90% of the legislature's seats.

This is not to say that there are not some warning signs. Only 5% of Albertans say their opinion of Stelmach's performance has improved, and among those who say their opinion has worsened, more university grads say that than college or institute grads, who are in turn more likely to say that their opinion has worsened than persons with only a high school diploma. But given that Stelmach's voting appeal was badly underestimated by the commentariat in February and March of 2008, I would be hesitant to conclude that he's in much trouble now.

That doesn't necessarily mean the opposition should give up, however. When I worked at Finance Canada Paul Martin's office was just a floor above the Financial Market Division's offices and my immediate supervisor had considerable personal experience dealing with him in the back and forth over writing his speeches. It followed that several of us at Finance had a pretty good idea of Paul Martin's failings, which were #1 an obsession with optics, #2 a temper, and #3 an unclear idea of what he wanted besides becoming Prime Minister. We knew that his sterling reputation for fiscal management had more to do with the senior civil servants than with Martin and his political people. Yet the speed with which this skeptical insiders perception bled out into the general public was remarkable. The catalyst seemed to be the calling of the election campaign (or perhaps the anticipation of an imminent election campaign) . Come next election, more Albertans will be paying attention, and so it is that Stelmach has reason to be concerned about the current displeasure of those who are paying attention.

expect hard caps re emissions, not "intensity based"

Apparently the Alberta Tories are taking issue with their "Conservative" brethren in Ottawa. Amongst other things, they complain of not being informed about the possibility intensity-based targets for reducing emissions may be scrapped.

Intensity-based targets will have to be scrapped in favour of absolute targets if the strategy is to go with cap and trade, and it looks like Obama wants to go cap and trade (any cap and trade system would have to be continent-wide lest caps be evaded by emitters hopping borders). I looked at the dynamics of developing a carbon market while at Finance Canada and, in a meeting with TSX people from Toronto and Montreal, heard those potential market-platform-providers clearly tell Mark Carney (who happened to be at Finance at the time) that they could not and would not support intensity-based targets. The reason why is straightforward enough: it becomes next to impossible to price credits without hard caps. It is going to be difficult enough to get a market going when the caps are decided by politicians. But if they are furthermore intensity-based, the level of uncertainty is going to enormous. An academic might think it nonetheless doable, but few in industry would think that. If you thought the tranches of a mortgage-backed-security were difficult to price, just try an emissions credit that derives its value from an intensity-based cap.

A cap and trade system with hard caps would, of course, be a vastly greater cost to Alberta than other jurisdictions because of the presence of large emitters here. Had the Stelmach government understood the situation, they would have gotten ahead of this by signing on to a national carbon tax (something I've long advocated, as readers of this blog would know). A carbon tax would be bourne by Canadians in proportion to consumption, and therefore far more regionally equitable than by production. As an aside to those who believe climate change is a hoax, support for a carbon tax does not necessarily mean support for the idea that climate change requires fiscal action. We have to get taxes from somewhere, right? Why not get it by taxing consumption like on sales of SUVs instead of taxing everyone's personal income? We should be taxing consumption instead of income and investment anyway. Whenever I say I support a carbon tax I mean a revenue-neutral tax.

Instead of trying to head off a cap and trade system, Stelmach has tried to impress environmentalists by throwing billions of Alberta taxpayer dollars at the boondoggle of carbon capture. Needless to say, no one has been much impressed since there isn't a fully operational working example of successful carbon capture anywhere on the planet, and Alberta's own energy executives have said carbon capture will be extremely expensive on a per barrel basis (hence BIG subsidies would be required to implement it!).

Guess which province's citizens have the highest level of discontent with their govt's economic management?

Q: How would you rate the performance of your provincial government when it comes to managing the economy?

Alberta:

poor 43%

neither 28%

good 29%

(sample size 149, MOE +/-8)

This is the worst score in the country.

Given that the Stelmach government is studiously ignoring what both business and academics (e.g. Jack Mintz) have to say, this should not be entirely surprising.

Bill 44

I am reluctant to say anything on the subject of the proposed provincial legislation that would allow parents to pull their kids out of school on days when religion and sexuality, including homosexuality, are to be discussed/taught. Why? Because an enormous mêlée, ideally between "ordinary" Albertans and eastern, big city elites is exactly what the governing Tories want. Govern from the left the vast majority of the time, but keep the right onside by occasionally throwing out red meat on some hot button social issue that the left attacks, which in turn provokes every conservative foot soldier to step up and defend the Stelmach government. The band of brothers is cemented in the trenches opposite those dastardly lefties, you see. These tactics are of course well honed by the equally cynical Harper Tories in Ottawa. Never mind the fact that if this is a kulturkampf, the Stelmach government is working for the enemy in terms of the broader war by securing the real prize, the curriculum, for the social liberals.

But I will step into this donnybrook to note that the controversy makes little sense to me. If social liberals are concerned that kids who miss a class or two on gay rights or what have you will grow up to be problem citizens in a pluralistic society, shouldn't they be horrified at the fact parents can pull their kids out of not just a class or two, but the entire school system? If parents can opt out of 100% the public school system and that is acceptable, how is it unacceptable to opt out of 2% of the public school system?

Wildrose Alliance to choose new leader

I haven't blogged in more than a month, which is a good recipe to discourage any regular readers, but my excuse is that I was travelling in South America and the internet connections were often dodgy.

Paul Hinman has decided to step down as leader of Alberta's Wildrose Alliance party and I wish him well. Although there have been grumblings about his organizational skills he was keen and open to evidence-based policy. His performance in the leaders debate during last year's election was a highlight for me.

There has been considerable media speculation that Danielle Smith, until recently director of the Alberta wing of the Canadian Federation of Independent Business, may run for the party leadership. Link Byfield has been encouraging her to take the plunge and I would add my support. The first and most important reason for supporting a urban, business friendly leader is that the current government has cornered the market on populism. Populism is at the root of Alberta's (and America's) problems (why have Albertans squandered the Heritage Fund? why are Americans fat and indebted? to a large extent because they elect officials who indulge them... this is a column for another day...) and nobody plays the political game with greater cynicism and success than the Alberta Tories.

One of the most notable agendas of Kevin Lynch when he was Deputy Minister at Finance Canada (he later became Clerk of the Privy Council, Canada's highest ranking civil service office) was a reduction of corporate taxes. As someone with a PhD in economics, Kevin Lynch knew the arguments in favour. But business friendly policies are not popular. Corporations do not get a vote, and it is rare to see politicians advocate for lower corporate taxes. Jurisdictions like Hong Kong and Singapore are as business friendly as they are largely because populist politicians have limited influence there. Business hostile policies superficially appear to defend the "ordinary citizen", but usually end up hurting ordinary citizens by way of more limited wage and employment prospects, never mind investment opportunities. It is generally difficult to invent and produce the next problem solving widget apart from using the corporate form. Investments in property, plant, and equipment, things that move out the long run supply curve which is the ultimate solution to economic scarcity, are business investments (innovation also plays a role but this too is driven by how competitiveness-friendly government policy is).

Can Albertans appreciate the arguments for improving the province's business environment (which is currently internationally average at best despite the popular assumption that the province is "right wing")? Of course, but just like building of a sovereign wealth fund vs current spending, it is much easier to make the argument about the chickens when they have come home to roost. The Wildrose Alliance has been proven right on the royalties issue, given that the Tories have reversed themselves 110% as business left the province. We've also been proven right on spending, if one wished to style it as such, as the government is currently running a deficit and not just a one-off deficit but what looks to be a structural deficit for years to come. What's changed is simply that hazards that were previously warned off have gone from abstract and distant to concrete and immediate. This focuses the mind of even the populists. In my view, the party needs to continue down the (intellectual) high road: win over the media and the opinion leaders and the rest will follow. In theory the Alberta Liberals could seize this space. Indeed, at the federal level they appear to be doing that. But provincially the Alberta Liberals decided to make David Swann their leader and front man, which means they are not going to be wholeheartedly embracing a business friendly agenda anytime soon (one of my questions for Swann is why he decided to become a provincial politician if his biggest concern is for international issues like Darfur and Kyoto).

A business friendly Wildrose Alliance could potentially be well placed in Alberta, because it could reach the cosmopolitan urban voter by argument and the rural voter by the natural affinity between supporting competitiveness and "freedom". The correlation between freedom and competition is not one-to-one; the economist in me firmly supports the latter (competing on price and quality is what drives the process of getting more for less) whereas my support for the former is less intellectual and more ingrained in my being raised in a culture founded by fiercely independent pioneers. To an increasing extent I think a misguided obsession with freedom that is divorced from the idea of discipline (and by extension, competitiveness) is behind Alberta's and America's current problems: we are fat because we can drink pop in school cafeterias, we are in debt because we seek payday loans and others are only too eager to provide that service, we are free to innovate financial products whose complexity has no necessary correlation with economic competitiveness (in fact they obscure the price mechanism that govern real production), in short we are uncompetitive relative to, say, the Asian tigers because we are free to be undisciplined and therefore uncompetitive. But, as mentioned earlier, a discussion of this thesis in depth is another column. My point here is simply that whereas we can get educated urban voters to support, say, private property rights by discussing the Coase Theorem, rural voters would be inclined to support simply by virtue of their ingrained skepticism of the claims of the state. Both groups would support policy that preserves and creates incentives for self-starters and hard workers, the one group primarily because of the sound economic arguments and the other because of a sociological background heavily influenced by what Weber dubbed the Protestant work ethic. To a certain extent the anti-state-power temperament could be an obstacle, in that it can be anti-intellectual, not so much directly as indirectly by being skeptical of elites telling them what to do. But anyone who thinks signing on to simple redneck-ism is the way to go should look to the Republican Party south of the border to see the direction such a route is taking them: fighting a continual rearguard action all the way back to Alabama.

Danielle Smith is urban and articulate, with a media friendly personality. Her resume is that of someone who understands the merits of sound, enterprise friendly policy. She would have my support as leader of the Wildrose Alliance.

the power of perception

Nate Silver cites an interesting Gallup poll re perceptions of Fed chief Ben Bernanke.

What is interesting is that a very significant number of people seem to have changed their views of Bernanke from 2008 to 2009. What´s different between 2008 and 2009 for those who self-identify as Democrats or Republicans? The White House. Ergo, now "we" are in charge, for Dems, and "they" are in charge, for GOP voters. If there has been a substantial change of policy views on the part of Bernanke, I have not heard of it.

This holds an important lesson for why the Alberta Tories are so hard to unseat in Alberta. For a serious threat to materialize, many Albertans would have to conclude that "they" are in charge, and "we" are not. I don't see that happening soon... Stelmach will often take a rhetorical jab at "Ottawa" but never the "Harper Conservatives". Never mind that these two terms refer to the same thing: federal policy. "Ottawa" is THEM whereas the "Harper Conservatives" (to many Albertans) is US. Stelmach won't even go so far as to object to equalization, because many Albertans see equalization as a "Canadian" program and "Canadian" is US.

Over the last decade, there has nary been a union demand or a spending request that the Alberta P"C" has not accomodated with no less enthusiasm that the most explicitly "socialist" of social democratic parties. Yet this has not stopped Stelmach from warning of "socialism" and condemning it. After all, "socialists" are THEM.

Alberta posts $4.7 billion deficit (with years more to come)

Not much to say here that I haven´t said before. It may be useful to note Rick Bell´s observations, however: after voting themselves a big compensation increase, running up enormous expense bills, a 110% reversal on royalties, and deficit spending, the Tories are polling HIGHER than the level that landed them an overwhelming majority some 13 months ago.

Jack Mintz makes an observation I very unsuccessfully tried to communicate in the last election campaign: "the province has often resorted to pro-cyclical fiscal policy". Professor Mintz goes on to hope that "the government introduces an innovative fiscal plan that deals with inherent weaknesses that arise from a province reliant on volatile resource revenues. All Canadians should hope Alberta gets it right." Sorry, Jack, but the Tories not only failed to decrease the discretion with which they can fritter away resource revenue, they increased it, removing "the $5.3-billion cap on resource revenues that can be used for budget spending".

"bad luck"?

"The royalty retreat is now complete", writes Don Braid in the Calgary Herald. Braid adds that "the whole royalty process has proved to be the most ill-timed public policy launch since the National Energy Program" because of "incredible bad luck".

Apparently the Tory govt is a victim of the fortunes of fate. No doubt the same logic will apply to running the province into deficit. Bad luck. Hugo Chavez is said to be having the same problem, with his brilliant policies at risk of being undone by the "bad luck" of declining oil prices!

Does the fact that the Wildrose Alliance opposed the royalty changes from day 1 that were to bring in an extra $1.4 billion a year and the fact the provincial govt has now pledged to REBATE more than $2 billion not raise questions about the Tory govt campaigning on a populist plank against Wildrose and then ending up coming around to adopting Wildrose policies anyway?

Sadly, this is the way public policy generally works. A government is elected on populist, anti-business rhetoric. It is then ultimately forced by the reality of what works and what doesn't to govern otherwise.

the sorry state of Alberta's sovereign fund

The Globe and Mail has a story on THE story that needs to be told in Alberta. The raiding of the Heritage Fund is the #1 reason I ran against the P"C" party as a Wildrose Alliance candidate a year ago. Finance Minister Evans says the government is going to spend its way into oblivion, anything that stops that slide must be "not at the expense of public services." Of course, ANY saving measure (or tax cut) is going to be at the expense of an increase in public services... in the short term.

See this Calgary Herald piece (or this one by some Fraser Institute economists) reviewing how Alberta arrived at its present state. "Shameful," concludes the Herald.