“A chicken in every pot and a car in every garage,” promised Republican U.S. Presidential candidate Herbert Hoover during the Great Depression. He was keenly aware that Americans remembered the plenty of pre-Depression life and that they wanted it to return. He ran on a plan to turn around America’s economy, winning him the 1928 election. Famously, he was unable to make good on his promise and lead the country out of crisis.
Further north and nearly a century later, Alberta Premier Jason Kenney promised voters much the same. He knew Albertans longed to return to a time of budget surpluses, zero debt, no PST, “Ralph Bucks,” stratospheric wages and low unemployment. He ran on a platform to renew what was once known as the province’s “Alberta Advantage,” and won.
Albertans, in their desperation to have the good, old days restored, bought into his promise without fully analyzing whether the conditions that fostered the province’s prior prosperity could ever be brought back by one politician in a single government term.
Kenney argued that Alberta has a spending problem, not a revenue problem. Determined to eliminate the deficit by cutting spending, while further reducing the Alberta treasury’s revenue through eliminating the carbon tax and lowering corporate taxes, Kenney insisted that these measures, combined with reducing “red tape,” would restore investors’ confidence, create jobs and re-establish Alberta’s economic dominance in Canada.
In reality, Alberta residents and the province’s businesses have enjoyed among the lowest level of taxation in Canada, high investment confidence and, due to the legacy of regulatory reviews by the Klein and Stelmach administrations, businesses were never burdened with unnecessary bureaucratic barriers.
And Kenney knows it. He is hoping that his “trickle down” policies will be justified, if and when that fabled Alberta Advantage kicks in once again.
The truth behind the Alberta Advantage
So, what was really behind the elusive Alberta Advantage that every premier since Klein has hoped to rediscover?
Coined by Alberta Premier Ralph Klein, “Alberta Advantage” was a slogan intended to capture the Alberta Progressive Conservative government’s new austerity. Their message, a beacon, signalled to the world that Alberta was open to investment, eliminating deficits, paying off debt and cutting corporate taxes, and was prepared to privatize many government services. If that wasn’t loud enough, premier Klein put up a highway sign on the road to Edmonton saying “Think Differently.” It implied that his government knew which policy levers to pull to supercharge the economy, and that their political acumen was the driving force behind the Alberta Advantage.
The reality? The reality was a lot different.
To be sure, Klein’s government implemented some courageous policy decisions. It privatized liquor stores and registry offices, and although the moves were controversial, they have passed the test of time. Klein implemented charitable gaming, equally objectionable at the time, giving rise to a vibrant volunteer sector. The Assured Income for the Severely Handicapped (AISH) program was innovative in Canada in that era. Getting Alberta’s financial house in order by eliminating the deficit and paying down debt were also prudent, even though one can question whether the speed with which this was achieved and the infrastructure debt it created was well considered.
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None of these policy initiatives, however, were truly at the heart of the Alberta Advantage we all remember — they were merely made possible because another phenomenon, to a large extent external to government policies, was at play.
Royalty revenue from non-renewable resources was the secret that allowed Klein’s government to implement many of his innovative policies, keep taxes low, avoid PST, eliminate the deficit and pay off debt. These royalties, not policy, singularly constituted what we know as the Alberta Advantage.
Risky business
In the 1970s, Alberta politicians and industry leaders had a vision that led to establishment of the Alberta Oil Sands Technology and Research Authority. It took decades of strategic policy development and implementation, as well as government and private sector investment, to develop Alberta’s energy industry. It paid off.
Before Klein became premier in December 1992, the Alberta government’s treasury collected more than $2 billion annually in royalties from non-renewable resources (natural gas, oil, coal, etc.). By 2001, growing gas and oil commodity prices and increased volume of production spurred the Alberta government’s take on to $10.6 billion. In 2005, it topped at $14.3 billion.
Alberta’s debt repayment plan was ahead of schedule. Soon, surpluses became a problem. While other provinces and the federal government were experiencing financial pressures, the optics of Alberta being awash in cash were not good. Ironically, staunch fiscal conservatives in Cabinet and Caucus argued that Albertans, like the residents of Alaska in the U.S., should have the surplus distributed among us in the form of a dividend. These fiscal hawks (many of whom later migrated to the more conservative Wildrose Party, supported by Kenney) argued that surplus is an indicator of overtaxation, and that money doesn’t belong to the government (hence, it must be reimbursed to taxpayers rather than saved).
During a September 2005 PC Caucus meeting in Cold Lake, after Alberta’s deficits and debt were proclaimed to be eliminated, Premier Klein spontaneously announced a $400 Prosperity Bonus (“Ralph Bucks”) for every tax-paying Albertan. Albertans certainly felt the Alberta Advantage while spending their bonus in the already superheated economy.
Never to return
In Alberta’s euphoria, the risks of linking the province’s operating budget, and the Alberta Advantage, to a single source of royalty revenue from a volatile commodity were disregarded. Reports highlighting this structural problem in Alberta’s budget collected dust. Governments of the day failed to apply what they learned stimulating the growth of the oil and gas industries to other sectors, which could have lessened the province’s dependence on energy. The prevailing wisdom was the sun will not set upon Alberta’s empire, so long as we’re pumping oil.
Today, the Alberta government’s royalties from non-renewable resources sit at a considerably smaller $5 billion, and the prospects of any sudden improvement are slim.
There are no secret policy levers in the premier’s office that can increase world energy prices, on which filling our coffers and recreating the Alberta Advantage are dependent, no matter how much Albertans want to trust Premier Kenney. Building the oil industry takes slow, purposeful policy — not trickle-down economics and aimless hopes of luring an industry to invest in Alberta.
Kenney’s time would be better spent dusting off old reports and shifting his policies toward fostering an Alberta Advantage 2.0, and building an economy that isn’t founded on non-renewable resources.
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