Spending cuts, not tax hikes, key to balancing the books in Alberta
In Alberta, to cushion the blow from falling revenues, some claim higher taxes will balance the books.
How soon we forget. Alberta tried that in the late 1980s. It didn’t work.
It wasn’t until the 1990s, when Alberta got serious about government spending reforms and reductions, that the budget was balanced. (Incidentally, that same decade, the NDP in Saskatchewan, the Progressive Conservatives in Ontario, and the federal Liberals also reformed and reduced budget expenditures to get to balanced budgets.)
People can quibble over what constitutes the “right” amount of government spending, but here’s an unavoidable fact. By 2004/05, Alberta’s per person program spending had already returned to early 1990s levels ($8,965) then continued to grow, hitting $10,967 last year. (All numbers are adjusted for inflation, so they are apples-to-apples.)
So today, on a per person basis, Alberta teeters more precariously on a high-spending cliff than in the early 1990s. Of course, the issues are different today. Two decades ago, debt interest formed a much larger share of provincial expenditures, and welfare needed serious reform. Now, on average, government employee wages are 6.9 per cent higher than private sector wages for comparable private sector work. And government pension plan costs are rising.
Whatever the government decides to do, Alberta has been here before. But tax hikes, modest spending reductions and hopes for a quick energy-based recovery were not enough to balance the books back then.
Faint hopes are unlikely to work any magic now. Deeper cuts to the spending side of the budget are unavoidable.
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