Ralph Klein: fiscal hero or leper?

The notion that Alberta has something to teach the rest of Canada about fiscal management is absurd

By: Linda McQuaig

  Being born into a rich family is an advantage that people often prefer not to emphasize, hoping instead that others will attribute their wealth to talent, brains or hard work. This obfuscation rarely works however. Deep down, we all have a sneaking suspicion that the life story of someone like Corneilus Vanderbilt would have turned out rather differently had he been adopted at birth by, say, a family living in a Calcutta slum.
 

Electricity deregulation should raise questions about Klein's competency in running the provincial economy

  Oil poses a similar problem for governments in Alberta. Sure, it's nice to have lots of the stuff, particularly at budget time, but there's a risk that some observers will get the wrong impression and think that a huge supply of oil and gas is the reason the province is so rich and its finances look so good. For right-wing commentators, there's the added fear that the so-called Alberta advantage might appear to have no connection whatsoever to the province's right-wing economic policies. Indeed, it might look like Ralph Klein's menu of privatization, tax cuts and deregulation had about as much to do with Alberta's current cornucopia as astute management had to do with the Clampett family's rapid rise to prosperity in The Beverly Hillbillies.

Polishing Ralph's halo
  It must have been with this in mind that the National Post dispatched one of its top tax-rage reporters to get to the bottom of the story of Alberta's financial situation, in the run-up to today's (March 12) election. The basic thrust of a massive full-page story last week on Alberta's prosperity, written by Luiza Chwialkowska, was that Alberta's current financial success is not just due to its massive energy revenues, but also to its smart right-wing economic management.
 

Without its oil and gas revenue, Alberta would actually be running a deficit this year of $4.1 billion

  There apparently wasn't room in the story to give much space to the Klein government's financial mismanagement. Chwialkowska does refer to its electricity deregulation scheme as "bungled" and concedes that this has been at least partly responsible for the province having to spend $4 billion in energy rebates to consumers. But oddly, the matter is considered only worth a passing reference. Indeed, the entire subject of what Ralph Klein has done wrong is squeezed into one short paragraph towards the end of a 52-paragraph story, and then it's back to how well managed the economy has been.
  But hold it. Isn't there a lot of money at stake here? The cost of the rebates specifically for electricity was about $2.3 billion. If Alberta had to shell out $2.3 billion because the Klein government "bungled" electricity deregulation, isn't that a horrendous indictment of Klein's fiscal management of the province?
  Come to think of it, isn't that about the same amount that was unaccounted for in the HRDC scandal? Doesn't that $2.3 billion impose a horrible burden on Alberta taxpayers now and into the future? Isn't that the kind of burden that normally prompts the Fraser Institute to calculate the ongoing costs - in this case, about $700 - for every man, woman and child in the province. No doubt analysts at the Fraser Institute are busy compiling such a number as part of their value-free commitment to advancing the cause of sound fiscal management, and they'll release it any day now... or soon... maybe.

Is Ralph fit to mind the popcorn stand?
  In fact, the whole issue of electricity deregulation should raise questions about Klein's competency in running the provincial economy. There was no need to deregulate. Alberta had long enjoyed a cheap and ample supply of power through its regulated system, providing a genuine Alberta advantage. Klein's decision to deregulate was largely ideological. The results have been widely considered disastrous, with even industrial consumers up in arms over power rates that have doubled or tripled.
 

With big enough energy revenues, even a klutz like former Alberta treasurer Stockwell Day looks like a financial whiz kid

  What is truly absurd is the popular notion, encouraged by the right at every opportunity, that Alberta has something to teach the rest of the country about fiscal management.
  Let's just look a little more closely at that ridiculous claim. Alberta's revenues from natural resources amounted to $10.3 billion in this fiscal year, out of total provincial revenues of $25.3 billion. It's amazing how handy $10.3 billion is when you're drawing up a budget. There isn't a premier in the country who wouldn't look like a fiscal genius if he had those kinds of energy revenues to play around with.
  Take away those revenues and Ralph Klein starts to look like a bit of a loser. Consider this: without that oil and gas revenue, Alberta would actually be running a deficit this year - of $4.1 billion, according to David Perry, a research associate at the Canadian Tax Foundation. That would be a whopper of a deficit these days - bigger indeed than the combined deficits of every other province in the country! Even British Columbia, the Right's favourite whipping boy for its profligate ways, is running a deficit only about one-eighth that size. Alberta would be the fiscal leper of the country.
  Or here's another way to look at it: if B.C. had $10 billion in oil and gas revenues this year, it would be enjoying a surplus of about $9.5 billion!
  So if there's a lesson we can all learn from Alberta, it's that, with big enough energy revenues, even a klutz can look good at managing a provincial economy. How else would we get sucked in to thinking Stockwell Day was a whiz kid? Imagine him managing the economy of New Brunswick or Quebec or - God forbid - Canada.
  But to say that the Klein government has something to teach the rest of the country about fiscal management is like saying the rest of us could learn a thing or two from Cornelius Vanderbilt about how to avoid bank overdrafts.

Linda McQuaig is an author and journalist. This column, reposted with permission, appeared in the National Post.

Posted: March 12, 2001

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