kenney

A Recovery & Self-Defense Budget?

The Kenney government presented its budget as part of a larger effort to recover Alberta’s fortune from the damage done by the Notley government and to defend the province against continued strangulation at the hand of Trudeau’s federal government. Whatever one thinks about Notley and Trudeau, the Kenney-story is patently false. Stirring up resentment might pay at the ballot-box, but the policies pursued behind the smoke and mirrors it creates can do harm to the people these policies allegedly serve.

It wasn’t Rachel Notley

The Kenney-story starts with the claim that the Notley-government created piles of debt that weighs heavy on entrepreneurs’ propensity to invest. Fact is that government revenue, like in any other oil producing country or region, took a hit when oil prices plummeted from 105 USD per barrel West Texas Immediate in July 2014 to 45 USD in January 2015. The oil price had bottomed out before Notley was elected in May. Nothing she did in office caused the oil price collapse. Oil prices are hovering around an average of close to 60 USD ever since, no matter who is in office in Edmonton, Ottawa or elsewhere.

In 2014, when the oil price peaked, the government ran a 0.3 percent surplus compared to GDP. Revenue shortfalls turned this into a 1.9 percent deficit the next year. Contrary to the Kenney-story, this wasn’t the opening act of an unprecedented accumulation of debt. By the end of Notley’s term in office, Alberta’s debt-to-GDP-ratio stood at 7 percent, followed by British Columbia with 15 percent. At top of the list: Newfoundland with 47 percent.

It wasn’t Justin Trudeau either

High debt-levels in Newfoundland and other eastern provinces lead to the second part of the Kenney-story: Albertans struggle harder than anybody else because they have to pay Eastern Canada’s bills and are denied access to the world market.

There surely are Albertans who struggle, either because they can’t find work, don’t have access to unemployment benefits or because wages are too low to pay the bills. However, these are not the problems the Kenney-government has on its agenda. Their concern is not the plight of many at the bottom of the social ladder, let alone the stark contrast between them and the few rich at the top. Their concern is the exploitation and suppression of Albertans by Eastern Canadians.

If one isn’t interested in the distribution of income and wealth between the rich and the poor in any jurisdiction – one looks at averages. In 2017, the average income in Alberta was 78,214 CAD. The highest of all provinces, only the Northwest Territories, registered even higher incomes: 108,065. At the bottom of the list: Prince Edward Island with 44,180 CAD. Even after taxes, which include monies going into fiscal transfer payments, average incomes in Alberta are substantially higher than in any other Canadian province. The reason that a lot of people struggle in Alberta is not because they are exploited by people in the East, it is because of inequalities within the province.

But they won’t let us sell our oil

One of the reasons that average income in Alberta are the highest amongst the Canadian provinces despite the collapse of oil prices in 2014/5 is that many of the workers who lost their jobs over this went back to their home provinces in the East. Another reason is that the oil industry in Alberta, though only creating around six percent of jobs in the province, is generating solid profits for its shareholders, including those residing in Alberta. In 2015, in the midst of collapsing oil prices, the five largest oil companies operating in Alberta paid record dividends of 5,079 million CAD. This figure dropped to 3,320 the following year, but was already back to 4,159 in 2017, above the 3,941 paid out in 2013, the last year of booming oil prices.

Apparently, these profits are still not high enough to trigger investment, employment and prosperity for all. At least not in the Kenney-story that charges Trudeau with not building the Transmountain Pipeline and thereby impeding Alberta’s oil exports. Even if one disregards environmental concerns, as Kenney and his cabinet members proudly do, the argument is wrong. A little-known fact, but a fact nevertheless, is that the existing Transmountain Pipeline operates well below capacity. Which might be one of the reasons that Kinder Morgan was happy to sell it to the Trudeau government. Before the deal, Kinder Morgan stock languished at 15 USD per share. After the deal was signed, it swiftly rose to 18 USD and now sits around 20 USD. Meanwhile, the federal government sits on the bill for a project for which, as the existing pipeline operating below capacity indicates, there is no demand.

Beyond smoke and mirrors

Kenney’s budget spin is plain wrong. Notley did not cause a fiscal crisis and Trudeau is not strangling the province. If anything, both tried to appease the oil lobby but didn’t get the electoral rewards that the Kenney government uses to push cuts through parliament before too many people notice that it is these cuts, not Notley and Trudeau, hurt them. These cuts will make work and life more difficult for everybody but the few rich, but particularly those at the bottom of a society already plagued with inequality and insecurity. The former is the result of an underdeveloped welfare state, the latter by the province’s overreliance on the oil industry. These problems can be fixed – by stopping Kenney’s scapegoating, curing widespread tax-phobia and building a diverse economy.

Ingo Schmidt

Assistant Professor, Labour Studies