Canada West Foundation Blog

by: Robert Roach, Senior Researcher and the Director of The West in Canada Project

Majorities are not evil
Majority governments are the norm in Canada, so it is a bit odd to hear a large number of commentators acting like a Tory majority is some sort of evil aberration out of Tolkien’s Land of Mordor. It is true that the Harper government will be able to pursue its agenda without the restrictions of a minority Parliament, but this is exactly the same as it was for Trudeau, Mulroney, and Chretien. We are back to business as usual and not—as some seem to think—out on a crazy limb that will break and send the country into freefall.

In addition, majority governments like to win more than one majority. Hence, while they can pursue their vision for the country without constant fear of a non-confidence vote, they tend to keep one eye on the next election cycle. In other words, radical policies that will alienate large chunks of voters remain unappealing regardless of majority status.

Regional fault lines remain
From a regional perspective, the outcome of the election is very interesting. You barely need two hands to count the Conservative seats in Quebec whereas the NDP have become the de facto representatives of Quebec in the House. This is a new dynamic. In some ways, Quebec has become like Alberta in that it has chosen to side with the opposition rather than the government. Not that long ago, it was Alberta MPs who had only a small presence on the government side of the House.

On the bright side, a Harper majority likely means that the federal government will do as much as it can to advance Senate reform (full reform still requires the provinces to get on board). This is good for the country, good for Quebec and good for the West. A properly designed Senate has the potential to ensure that regional representation does not depend on which party forms the government in the House. Maybe, just maybe, Canada will finally start to fix this broken part of our political system. Maybe.

The Rise of the NDP
Given the nature of the Canadian system, the Official Opposition in a majority Parliament is largely irrelevant in terms of policy. They have an important job to do trying to keep the government’s feet over the coals, but they can’t block government legislation. In this sense, it matters little which party forms the opposition. However, the rise of the NDP is important for several reasons: 1) it is the first time in Canadian history that the Liberal party finds itself in the third party position and it remains to be seen if it can recover; 2) the fuzzy mandate that Layton has from Quebec voters will be a factor but it is impossible to say how this will play out; and 3) the ideological differences between the Tories and the NDPs are relatively clear and will present Canadians with a black and white set of alternatives to watch over the next four years.

The West is Still In
This election shows that a party with a leader from the West and a strong base of support in the region can, by also appealing to Ontario voters, form a majority government. Regardless of your political stripes, the Harper government is not a bad thing from a regional perspective. A government with a strong western base will have a natural connection to the region’s needs and unique circumstances. Because they are governing a nation rather than a region, these needs will not always take precedence, but they should be at least understood and given a fair hearing. This does not mean that governments without a strong western base can’t do this, but in reality, it is much more likely when they do.

By: Jacques Marcil, Senior Economist

This is the season of budgets and baseball spring training. While there is no true link between the two, one could not help think of Alberta Finance minister Lloyd Snelgrove as a relief pitcher.

Snelgrove was brought in last month as an emergency caretaker minister of Finance in replacement of Ted Morton, who resigned to join the PC leadership race. (One of the worst-kept secrets in Alberta is that Morton essentially resigned because his views on government cost-cutting were too drastic for outgoing Premier Ed Stelmach’s taste.)

There were no real surprises in the February 24 Alberta budget. Usually, the absence of surprises is considered to be a positive sign. Is this the case here? Yes and no.

On the expense side, the 2010 approach is somewhat repeated: sustained financing for health, education and other “social” ministries, with modest cuts to the other ministries to offset this. This results in program spending increases of 0.5%, 1.3% and 3.1% over this year and the two following years.

On the revenue side, nothing much is done except some service fee increases. However, Snelgrove expects Alberta revenues to grow solidly on their own, reflecting very positive forecasts for economic growth and for natural resource royalties. The latter are expected to jump by 23% and 16% in 2012-13 and 2013-14 respectively. (This is not impossible, but who knows?)

As a result, the province’s deficit gets erased by 2013-14, one year later than originally planned. This delay is not bad in itself given the severity of the recession in Alberta. The problem is that the balancing act is accomplished by drawing down most of the Sustainability Fund—a meager $1.7B is left in it by that date, one-tenth of what was in the Fund in 2009-10.

So the Alberta government has little margin of maneuver and lots of hope hanging on energy price forecasts. Past experience has taught Albertans that those prices are full of surprises, positive and negative. We might have reached the point where Alberta taxpayers have had enough of this uncertainty.

You can’t have your cake and eat it too—Albertans have long enjoyed low taxes, but if they want to enjoy the same level of services as other parts of the country they will have to start considering other sources of revenue for their provincial government.

Energy royalties are nice but they are irregular and unpredictable. The province pays for most of the steadily-growing cost of its services using rollercoaster energy money. If Alberta needs to reform its tax system, it should do so. Taxes are not an ideological issue, they are a practical one. Decisions on tax policy should be fact-based, period.

To return to my baseball analogy (a very agreeable thought when the windchill factor is -36ºC outside), walks are “bad things” but even the best pitcher sometimes has to issue an intentional walk depending on the game situation. No one likes taxes, but sometimes we need them.

Given the unpredictability of Alberta politics (a misnomer until a few years ago), maybe now is not the time to start complex discussions on what size of government Albertans want, or about what taxes are needed for its proper functioning.

Thinking again about it, maybe it is the right time.

So here we are, deep in deficit again.  It’s easy for some to say that Canada’s deficit and debt remain quite manageable compared to those of other Western economies.  The problem is, the debt and the deficit could both have been considerably easier to deal with.  Mr. Flaherty’s government tinkered with the GST rate in 2006 and 2007 for reasons that were more political than economic, and now you can see the result.  If you know a single Canadian economist who thought that lowering the GST rate was a good idea, and if that economist doesn’t happen to be a Prime Minister, you are a very lucky person. Go buy a lottery ticket right away.

In fact, a simple calculation shows that if the GST rate had remained at 7% the government would have faced only four years of deficit instead of the seven (and counting) it now has to deal with. From 2006 to 2015, the government’s cumulated deficits will add $141 billion to the debt, $92 billion of which could have been avoided with an untouched 7% GST rate.  Do you know anyone who fundamentally modified their consumption habits because of those extra GST pennies they saved each day? If you do, you should get another lottery ticket.

Unfortunately, budgets are as much about politics as they are about finances.  The current budget is an example of such politics in motion.  If you put aside temporary stimulus spending, this government (with a small g) looks determined to gradually reduce the size of Government (with a big G) by shrinking both its revenue and expenses.  This represents an ideological shift as much as a financial one, hopefully with better outcomes than the changes to the GST.

Posted By: Jacques Marcil

Much has been made of the recent defection of two Alberta Tory MLAs to the Wildrose Alliance Party. The defection brings the total number of Wildrose Alliance MLAs to three. Premier Stelmach’s Tories still control 68 of the 83 seats.

The fact that this is big news in the province highlights our lack of familiarity with opposition to the ruling party. While it’s true that the Wildrose Alliance has swiftly gone from the margins of provincial politics to leading recent public opinion polls (and surpassing the longsuffering New Democrats for the third largest number of seats in the legislature), a brash new leader and a couple of floor crossers should not (and do not) add up to a revolution.

With that said, the Tory leviathan has rarely shown so many weak spots. As a result, we have gone from being unable to even imagine one of the opposition parties usurping the Tories to a whole lot of water cooler pontification about the wave of change that is about to break over the province.

Whether you are a died-in-the-wool Tory, a long-time Liberal, a devout New Democrat or part of the upstart Wildrose Alliance, you should appreciate that a solid opposition is a good thing for democracy in Alberta. The Liberals have done what they can for many years, but they have not exactly been an effective opposition party. No matter who forms the government, an effective opposition that has the potential to take power increases both the vitality and accountability of the political process.

Will the Wildrose Alliance be able to play this role? Could it even form the next government in Alberta? At this point, no one has any idea what will happen—there are way too many variables and too much time between now and the next election to make an accurate prediction. Those who claim otherwise are either having a little fun throwing around predictions or they are seriously delusional.

The uncertainty about what will happen, however, is a huge change! We used to know exactly how things would turn out in Alberta politics (at least in terms of which party would be running the show) and now we don’t.

Most provinces are used to a semi-regular change in the governing party whereas most Albertans either were not alive or cannot remember that last time it happened (1971). Hence, and regardless of which party you support, it is not surprising that the current good fortunes of the Wildrose Alliance have been a shot in the arm of political discussion in the province. Nonetheless, it is far, far too early to tell if this will be a drop in a bucket or the wave of change some are predicting. We will just have to wait to see.

Posted By: Robert Roach