Gunter

What Would Ralph Do?

By Lorne Gunter, Edmonton Sun

Alberta Premier Jim Prentice speaks about the 2015 budget and the financial problems facing the province at the Alberta Legislature Building in Edmonton on Feb. 11, 2015. (Codie McLachlan/QMI Agency)

Alberta Premier Jim Prentice speaks about the 2015 budget and the financial problems facing the province at the Alberta Legislature Building in Edmonton on Feb. 11, 2015. (Codie McLachlan/QMI Agency)

On Wednesday, Alberta Premier Jim Prentice announced a 9% cut in spending in the province’s upcoming budget, expected next month. The cut is a response to a projected $7 billion loss in government revenue in the coming year, the result of the halving of world oil prices.

Except it isn’t really a 9% cut. It’s actually a 5% cut, plus the cancellation of a projected 4% increase in the coming year to account for inflation and population growth.

But a 5% reduction represents real money. And cutting 5% beats how most other provinces would handle a similar crisis.

Alberta’s 16% decline in revenues is the equivalent of a $19 billion single-year drop in Ontario’s provincial budget. It’s not hard to imagine that Ontario’s free-spending, debt-ridden Liberal government would react to such a fiscal crisis by doubling down on deficit spending, jacking up taxes and growing the province’s already enormous public debt.

Only three times in the 12 years the Liberals have governed Ontario have they bothered to balance the budget – not once in the past seven years. And they have grown the province’s per capita debt from $11,000 for every man, woman and child to $21,000 despite large increases in population and taxes.

So things in Alberta could be worse – much worse – than a mere 5% budget cut in a year in which revenues are falling 16%.

Then I got to thinking WWRD. Recently I suggested the Alberta Tory government follow the lead of Evangelical Christians who ask WWJD in times of trial: What Would Jesus Do. Except Jim Prentice and his government should ask What Would Ralph Do – Ralph Klein, the legendary cost-costing premier whose bold budget-balancing measure saved Alberta from fiscal disaster in the early 1990s.

So while a net budget reduction – part real cuts, part foregone future spending – is nice, I wanted to prove that Ralph would have done it bigger, better and tougher.

Klein is unique among premiers. In his government’s first four budgets they cut spending by 28.3% after accounting for population growth and inflation – 28.3%. Mike “The Slasher” Harris, who is still reviled by Ontario’s left for his “devastating” cuts in the mid-1990s, managed only a 9% total reduction by comparison.

Ralph Klein is the gold standard by which fiscal conservatives should be judged.

So I got out my calculator, a pen, the Bank of Canada’s inflation statistics and the back of an envelope and I set about figuring what Ralph and his first finance minister, Jim Dinning, managed to chop out of Alberta’s budget during their first full year in office.

The amount of real money Prentice and his FinMin Robin Campbell are cutting, of course, is 5%. In 1993, their first year in charge of the treasury, Klein and Dinning cut 4.7% of actual spending.

Hmmm.

In their first year, the Klein-Dinning duo dropped provincial spending from $17.6 billion to roughly $16.8 billion. After adjusting for a rise in Alberta’s population that year of nearly 250,000 and an increase of 1.65% in inflation, what was the net reduction the Klein government achieved in Year 1?

Almost exactly the same 9% proposed by Prentice and Campbell. Prentice IS doing what Ralph would do.

The same groups – public-sector unions and opposition parties – that predicted the end of civilization as we know it when Klein-Dinning started making cuts are once again predicting the same doom from Prentice-Campbell.

But Alberta prospered under Ralph, so it will survive under Prentice, too.

lorne.gunter@sunmedia.ca

 


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