Elsewhere:

Alberta Blogs

aaron.braaten [at] gmail.com

@abraaten.

Archives

Concerning the Frequently Repeated Myth of High Government Spending in Alberta

I was just checking the latest howler from the School of Public Policy at the University of Calgary, written by Ken Boessenkool, also known as Stephen Harper’s pointman for GSK and Taser International. The “paper” is a prime example of policy thinktanks committing serious errors of omission in a quasi-academic paper meant to sway public opinion. The paper is entitled: Does Alberta Have a Spending Problem?, and follows the usual non-sequitir logic used by critics of Alberta’s government to make their case for budget cuts.

The paper discusses: “four possible explanations for Alberta to have significantly higher program spending than other provinces. First, it adds local government expenditures to the mix as some provinces push down their spending to the municipal level. Second, it takes a look at relative levels of capital spending, acknowledging that Alberta has higher pressures on the capital side on account of the net inflow of population. Third, it asks whether demographic differences might explain Alberta’s higher spending. Finally, it asks whether relative costs in Alberta justify the province’s higher expenditures. In short, two of these arguments help justify Alberta’s higher spending, one is neutral and the other suggests that the per capita Financial Management System data from Statistics Canada understates the level of provincial overspending. While there is some validity to each of these arguments, the paper concludes that, together, these possible explanations are not enough to close the gap between spending in Alberta and in other Canadian provinces.

In short, it is reasonable to conclude that if Alberta wanted to have per capita spending in line
with the other nine provinces, it would have to reduce its spending by $5 billion dollars.

To sum it up, the paper examines four reasons for Alberta’s high levels of program spending per citizen, taking into consideration four possible distortions or drivers:

1. The possibility that governments have offloaded government program delivery to municipalities.
2. Differences in capital spending requirements (because the half of Newfoundland that has moved here forgot to bring their roads, schools and hospitals with them).
3. Demographic differences (older people cost more than younger people, but Alberta’s population is younger, so we would expect this not to apply).
4. The fact that construction costs are so high in Alberta, as the province has to compete for construction trades with the oilsands developers.

But here is what the report did not include (click on graphs to enlarge):

1. Canada’s highest spending provinces are also resource rich oil provinces with very high levels of output per person.

AlbertaCanAffordIt

When all the provinces are ranked according to their total levels of program expenditure (increasing from left to right), we can see that Alberta is in the middle of the pack in terms of overall total program expenditures, yet first in terms of output. If Alberta were a person, she would be the millionaire on the corner who still lives in the same house she grew up in, and drives a Chevy Caprice instead of a BMW. ( I am using total expenditures, which do include interest costs on debt, but I will get to this later).

The point is that Alberta can afford its high levels of expenditures, given its income. Not only can it afford the spending, it is in better shape than any province in Confederation. This is a point I have been trying to inject into the public debate for the past year, but it always falls on deaf ears, especially amongst the economically illiterate media types, whose misrepresentations are repeated by Henry, Martha and their representatives in government.

Let me be clear: Sure, Alberta has high levels of spending, but measured in terms of affordability, this province can definitely afford it because of our high levels of output. When you look at spending in the context of provincial output, the actual burden the government places on its taxpayers is small.

Spendingpercentgdp

The above graph shows each province’s expenditures (both the total amount (in blue), and the amount net of interest costs that actually goes towards program delivery (purple)) as a percent of GDP.


2. Alberta’s Total Expenditures are more effective, because hardly any of that money is going towards servicing the interest cost on the provincial debt.

If you take total program expenditures, and subtract the amount that actually makes it to program delivery, the amount leftover goes to the banks and institutional holders of provincial debt. This is a province’s “debt servicing cost”. Because Alberta has such low debt (I know, I know – the capital bonds, right?), the difference between the two amounts is small.

DebtServiceCostPC

DebtServiceVSTotalSpending

I find this one a little crazy. The government of Quebec must spend almost ten times as much per person on just paying interest on its provincial debt compared with Alberta. Where, oh where to get those extra funds? It’s a good thing Alberta has all that money, isn’t it? Come to think of it, the both Boessenkool’s and my analysis don’t take those nasty equalization transfers into consideration.

3. Total Spending levels per capita are not an accurate way to measure “fiscal conservatism”.

In the Calgary Herald coverage of this report, Boessenkool is quoted as saying: “(Ontario Premier) Dalton McGuinty is 40 per cent more conservative than Ed Stelmach”.

I’m excersising my own normative judgement when I say this, but to me, fiscal conservatism implies a measure of affordability. This point requires us to examine a previous graph again:

Spendingpercentgdp

Alberta’s government progam expenditures per person count for 12.9% of its GDP per person. Ontario, on the other hand, spends 16% of its per capita GDP. Examined in this context, Ontario is 24% less fiscally conservative than Alberta.

The logic that Alberta must somehow get its spending in line with other less affluent provinces is quite absurd to me. If my neighbour gets a promotion at his job or a bonus for his hard work, why does it follow that he must maintain his same level of monthly expenditures, or bring them more in line with everyone in the neighbourhood? Anyone who did this to their neighbour would get a swift kick, a punch in the face or laughed off as some communitarian looney tune who needs to mind their own business. Yet this is what Boesenkool suggests – that even though its expenditures relative to its income are the most fiscally conservative in the nation, Alberta ought to reduce its spending because in absolute terms, it makes the neighbours envious.

Even more astounding to me . . . why is this coming from one of Harper’s own Economic Hitmen? It’s totally unexpected and out of line with the “Hands off Alberta” approach characteristic of the Harperite U of Calgary economics crowd. It almost seems like this sort of “made for politics” fact-spinning study was meant to re-enforce the meme that Albertans are flying too high, that the Tories are drunken sailors, and only a Wild Rose Alliance type can solve the mess, when really it’s a complete strawman, a dead duck and a non-issue all in one.

Where might I agree with Boessenkool? I don’t agree with the road he takes to make his point, but I certainly agree that Alberta needs to find more resource revenue stability from other sources. I even agree with what I perceive as Boessenkool’s intent behind writing this paper – that Alberta can’t leave its fiscal fate so dependent upon these sources, because they aren’t here to stay, and we had better get our ducks lined up before that day arrives (faster than most think). Natural gas is on the decline in this province, and for years it’s been our financial bread and butter. Conventional oil is fading, and the high cost of bitumen production leaves little room for government taxation. Were it not for these resources, Alberta, Saskatchewan, Newfoundland and British Columbia would look like the rest of Canada. Come to think of it, if we were to subtract the fiscal effects of resource revenues from these provinces, Boessenkool’s arguement might even hold some water. But to do so would reveal a revenue problem that’s far worse than our so-called spending problem.

February 11th, 2010

It should be an interesting day.
PressTV.ir: ‘Iran will deliver telling blow to global powers on Feb. 11′
CNSnews.com: Iran’s Leader: Feb. 11 To Be ‘Demise’ of ‘Capitalist System’
Daily Star (Lebanon): Iran’s countdown to February 11
PressTV.ir: US starts large war game in Pacific
The US launches its largest military exercise in the Pacific in cooperation with [...]

Watergate Jr., Bush Sr. to Whitehouse, Panetta to Israel for meetings.

4 NABBED IN ESPIONAGE AT OFFICE OF HOMELAND SECURITY COMMITTEE MEMBER
SENATE BURGLARY: CIA DOMESTIC BLACK-OP TEAM ARRESTED
Mysterious Bush-Bush-Obama meeting at the Oval Office this morning
Secret CIA-Mossad meeting, preparation for new war?

Did Haiti get HAARPed?

Check out the SFBayReview today:
Now before you call me crazy or say I’m a “conspiracy kook,” remember this is the same U.S. military that dropped two atomic bombs on Nagasaki and Hiroshima, two non-military targets, when they had no idea how much damage they would cause! This is the same military that dropped tons of [...]

UBS about to fail, China-US trade wars, Iran heating up. Should be a good week.

Granted, there may have been several other bloggers wondering during the fall of 2008 what sorts of doom was in store for Swiss banking behemoth, UBS. But let’s take a review of two old blog entries, shall we?
Grandinite: UBS Watch: $54bn Colon Cleanse , UBS About to Fall?
Well, today this is on the news:
Swiss [...]

Unrestricted Warfare, Friday, January 29th

I’m not saying these events are necessarily connected, but something big may be happening here.
1. AP: China suspends military exchanges with US
BEIJING (AP) — China suspended military exchanges with the United States, threatened unprecedented sanctions against American defense companies and warned Saturday that cooperation would suffer after Washington announced $6.4 billion in planned arms [...]

TweetLog – Grandinite’s Twitterings For The Week

RT @CBCMoney U.S. wage gains hit 27-year low http://bit.ly/9Ykl6T #
YouTuber: F*CK THE AMERICAN DREAM!!!!!! WAKE YO ASS UP!!!!! http://is.gd/7iRfI <- actually a good rant about #money and #Haiti #
I had no idea US exporters who boycott #Israel can be fined at least $50,000 http://is.gd/7iQpB #
George Carlin ~ The American Dream http://is.gd/7iNsD #
RT’ing @abraaten contributes [...]

TweetLog – Grandinite’s Twitterings For The Week

The most awesome thing I have seen this week, besides my daughter’s first steps: #opensource #rally car: http://is.gd/6Ogu2 #
Forbes: #Economics of #Olympic #Gold: Professor predicts medal counts with 94% accuracy using econ data: http://is.gd/6OfI9 #
My last name is basically the Old Norse word for #biochar: http://is.gd/6LbkA #
Globalresearch.ca alleges SOUTHCOM held #earthquake disaster simulation day prior [...]

Chavez: US weapon test caused Haiti earthquake

History Channel: Electromagnetic Warfare

http://en.wikipedia.org/wiki/Bell_Island

Share International Makes its Big Announcement: Maitreya has begun the ‘open mission’

Jeez this guy is depressing. Perhaps he’s trying to be somber, but I would think the Saviour of the World would inspire a little more joy than Benjamin Creme conveys in this video.

Share International:
Maitreya steps forward
The way prepared by His Herald the ‘star’, Maitreya, the World Teacher, has given His first interview on American [...]

Huge Solar Flare coincides with another Earthquake in Haiti

TIME.com: Haiti: New 6.1-Quake Sends People into Streets
(PORT-AU-PRINCE, Haiti) — A powerful new earthquake struck Haiti on Wednesday, shaking buildings and sending screaming people running into the streets only eight days after the country’s capital was devastated by an apocalyptic quake.
The magnitude-6.1 temblor was the largest aftershock yet to the Jan. 12 quake. It [...]

TweetLog – Grandinite’s Twitterings For The Week

spaceweather.com: Solar Eclipse Gallery: http://is.gd/6kYni #
lens flare. LOL @heidilore OMG WHAT THE HELL IS THIS ON SOHO http://tinyurl.com/yky7sgd #
RT @hurtinalbertan wht 2 expect when not a corporation that has Gov in its back pocket http://bit.ly/4uJS1S #ableg #cndpoli #gov20 #roft #
Morton: “Spending Buffet” coming to an end. That includes MLA pay raises, right? Right? http://is.gd/6kX1D [...]

Was the Haitian Earthquake Caused by a Top-Secret Weapon?

I was reading http://www.worldreports.org/news yesterday, and spotted something interesting in Christopher Story’s January 13th analysis:
• At 10:52 pm on Tuesday 12th January 2010 it was reported to us that the consequences of non-compliance with completion and closure of the Settlements payments by the end of this week may be dramatic. We have been advised what [...]

TweetLog – Grandinite’s Twitterings For The Week

Globe and Mail: #Canada’s Minority Dictatorship http://is.gd/5V1k5 #canpoli #
@KyleHarrietha RE: http://is.gd/5V0wi Yes, there is something very odd about it. The scientist quoted wrote this book: http://is.gd/5V0Cj in reply to KyleHarrietha #
DW: ‘Monster’ German employee database goes online http://is.gd/5UQIR #ELENA #
Hey Google, about this: http://is.gd/5UPsE Remember the last time a tech company got into the [...]

Vancouver 2010 Security Paranoia

A moving picture is worth at least a million words, so I am blogging with videos here.

Yemen, You’re Up Next

Take note of the fact that the three western nations attacked by al Qaeda . .
US (9/11)
UK (7/7)
Spain (3/11)
. . .have closed their embassies in Yemen:
http://www.timesonline.co.uk

TweetLog – Grandinite’s Twitterings For The Week

Slate.com asks: Why do so many Finns own firearms? http://is.gd/5J7Pz #guns #
Watching @reallesstroud (Survivorman): Getting Off the Grid: http://is.gd/5IYc7 (vid) Airs Jan 11 on SCN: http://is.gd/5IYfO #
8 CIA agents dead. http://is.gd/5IXVo 5 Canadians http://is.gd/5IXW6 Related to this? http://is.gd/5IXUq http://is.gd/5IXUU #afghanistan #
NYE: Jay Z’s “on To The Next One” – NBC Rockefeller predictive programming? http://is.gd/5IXxX http://is.gd/5IXzj [...]

Happy New Year 2010

2010 just screams this variation of boy scout’s motto to me:
“Hope for the best, prepare for the worst”.

Moving forward to 2010 . . .

. . . some more high weirdness.
Holy Wars

Bargaining

METHOD AND APPARATUS FOR CREATING AN ARTIFICIAL ELECTRON CYCLOTRON HEATING REGION OF PLASMA

ENDGAME