Dept. of Economics Hosts Panel Discussion on the 2017 Provincial Budget

2017 Provincial Budget Post-Mortem held on March 23, 2017.

Robert Ascah, Staff Writer - 3 April 2017

On March 23rd, the Institute for Public Economics hosted a vigorous discussion on the recent provincial budget tabled the week before. Sparring before a crowd of about 60 attendees were: Gil McGowan of the Alberta Federation of Labour; Amber Ruddy of the Canadian Federation of Independent Business; Grant Robertson a retired, former Deputy Minister of Treasury Board; Dr. Elizabeth Smythe, Professor of Political Science at Concordia University; and Graham Thomson, the Provincial Affairs columnist at the Edmonton Journal. Bob Ascah, a Fellow of IPE, moderated the sometimes heated, but always respectful, debate.

A wide range of topics was covered and this short article can only do justice to some of the themes discussed. All presenters agreed that the Province was facing a serious fiscal problem and this problem preceded the current government's tenure. But what to do about it? Several discussants (Robertson, Ruddy) felt that too little attention was being spent on how to reduce the growth of government expenditure. An area of dispute was the question as to whether Alberta government spending was higher than in other provincial jurisdictions. McGowan held that spending was lower in Alberta relative to the economy than in other provinces. Robertson maintained that on a per capita basis, spending in Alberta was about a third higher than in British Columbia. (Robertson's slides) McGowan argued strongly that public spending should not be cut at all and that capital spending was serving to stabilizing the economy by providing wage income. This policy action was sustaining sales for businesses in Alberta.

Professor Smythe emphasized that cuts to government spending typically fell more heavily upon the female population responsible for providing social supports to families and children. This happened during the period of severe cuts brought in by Ralph Klein's government in the mid-1990s.

Also central to the topic of government spending was the salary and benefits paid to public sector workers. A little over 50 per cent of total program spending was consumed by salaries and benefits. McGowan maintained that public sector salaries were lower than private sector salaries. Ruddy maintained the opposite. She also observed the budget called for the hiring of another 3,000 workers. Graham Thomson mentioned that collective agreements for over 100,000 public sector workers were coming up this year. One participant from the audience questioned whether academic physicians, in particular, are better paid that in other provinces. Lower pay could induce good people to abandon the province. There was also disagreement over the need and scope of government cuts. Ms. Ruddy suggested the government institute a thorough review of regulations to ensure they were necessary and not an impediment to existing businesses or new businesses opening in Alberta.
Turning to the revenue side, discussion inevitably turned to the matter of instituting a sales tax for the province. Views varied as to the necessity, its level, and the mix with other tax sources. Thomson noted that the introduction of a carbon tax had attracted staunch opposition. Smythe noted the regressivity of a consumption tax on lower income families. McGowan acknowledged the necessity for the government to consider a sales tax although this was not organized labour's preferred position.

Another subject debated was the matter of the quickly escalating public debt (Ascah's slides). One questioner at the event queried whether it was correct to think of a province's finances in the same way as a family's. McGowan stressed that government did not have a fixed life expectancy and therefore could afford to run deficits. Robertson rejoined by worrying that this approach was tantamount to kicking the can down the road and to burdening future generations with debts and heavy tax loads. Ascah noted that governments do default as Alberta did in 1936 and that financial markets would ultimately have a say in pushing governments to move to balance.