Lessons from the Lone Star State: Comparing the Economic Performance of Alberta and Texas

Summary

• This bulletin compares the economic and fiscal performance of the Canadian province of Alberta and the American state of Texas in recent years and provides a brief discussion of how different policy choices may be contributing to the divergent outcomes observed.
• While Alberta suffered a steep recession starting in 2014 followed by a period of tepid economic recovery, Texas’s economy has performed substantially better, and has returned to strong economic growth and low unemployment.
• Despite the severe negative effects of the oil price downturn of 2014, Texas’s economy still grew in inflation-adjusted per-person terms in recent years, albeit at the slow annual average rate of 0.2 percent. By comparison, inflation-adjusted per person economic growth in Alberta was meaningfully negative at -2.4 percent annually.
• Employment growth has also been much stronger over the past three years in Texas than in Alberta, averaging 1.7 percent from 2015 to 2018 compared to 0.6 percent in Alberta.
• Weak economic performance in Alberta compared to strong results in Texas has contributed to very different fiscal outcomes in the two provinces. Alberta has consistently run large deficits and accumulated substantial debt, whereas Texas has not.
• While many factors have influenced the divergent economic outcomes between Alberta and Texas, it is noteworthy that during this period the two jurisdictions have taken markedly different approaches to public policy. In Alberta, spending-fueled deficits, increasing taxes, and the perception that its oil and gas investment climate has become unwelcoming have all, to varying extents, hindered Alberta’s ability to compete.