Budgeting for the oil bust in Saskatchewan and Alberta

The resource price bust is already a few years old but it’s still hitting parts of Canada hard. Two guests talk about the impact of the downturn on fiscal policy in the Canadian prairies and what this augers for the bigger question of a transformation of the economy away from fossil fuels. First I speak with Charles Smith, associate professor of political science at the University of Saskatchewan. He is the co-author, with Andrew Stevens, of a great analysis of the Saskatchewan budget, titled “Building the “Saskatchewan Advantage” : Saskatchewan’s 2017 Austerity Budget” over at the Socialist Project Bullet. Next, I speak with Ian Hussey, research manager at the Parkland Institute, a social democratic thinktank in Alberta. He contrasts the Alberta NDP’s more stimulative approach to public finance; however, there remain many questions about the scale of the shift and the need for real climate action.

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Why Alberta shouldn’t look to Norway, and why that’s a reason to Leap

One of the clearest memories I have from my only trip to Norway is the repeated failures at hitching a ride. What appeared to be an unbroken string of brand new Audi’s and BMW’s whizzed by my friend and I, dirty and sweaty after a few days hiking and camping in the mountains. “Where am I that the comforts of our rich assholes are the rights of common citizens?”, I remember thinking.

You’ve probably seen at least one article saying that Alberta should be more like Norway. I don’t want to rehash that debate. But I think we’ve gone about it the wrong way and seeing why can tell us a lot about today’s sparring over the Leap Manifesto.

Comparing Alberta unfavourably to Norway for squandering its oil wealth has been a familiar trope of media and progressive organizations, especially since the oil price crash (here’s just the CBCToronto Star and Globe and Mail). The comparison has become so ubiquitous that it has also spawned a cottage industry of counterarguments from the right too. In short, Norway has been putting away the money it gets from oil in a sovereign wealth fund since 1990. The fund is now the world’s largest and worth over $1 trillion. Alberta’s fund, although older and actually the inspiration for Norway’s, is a paltry $15 billion. (Norway and Alberta have similar populations.)

The funny thing, however, is that Norway’s gigantic fund doesn’t pay for much of what the government does. Taxes do that. Take a look at the numbers. Public revenues in Norway at all levels of government are equal to over half of GDP (nearly 55% in 2014). Meanwhile, federal, provincial and local government revenues in Alberta make up somewhere around 30% of provincial GDP. That’s a massive difference. Alberta tax rates are lower: on individuals, on corporations and on consumption. In addition, the Norwegian government not only owns a majority share in its largest oil company, Statoil, but also taxes oil profits at a much higher rate. A special tax on “excess profits” takes the top marginal corporate rate on oil corporations to 78%. (more…)

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Linda McQuaig is right, but there’s more to it

Since her common-sense quip that most of Canada’s tar sands reserves will have to stay in the ground, Linda McQuaig has been vilified by much of the political establishment and (rightfully) defended by a minority of voices in the media. That the facts of climate science vindicate her has made little difference to the debate. Is this because McQuaig’s comments have inadvertently scratched at a nerve that goes far deeper?

In what would be a world very different from our own, we can imagine a fairly straight line going something like this

Climate science → Climate regulations → Fiscal policy → Just transition

First, climate scientists tell us that 85% of tar sands reserves (given how high-cost they are) will most likely have to be left in the ground if globally we are to limit warming to two degrees. In response, the Canadian federal and provincial governments slowly stop subsidizing oil development, stop funding oil-related infrastructure and prepare for industry phase out (by for example, increasing royalties as extraction nears a limit). Next comes a big push for developing green projects, whether funded through direct spending or incentives. As the oil jobs and industries wither, new green jobs, new green industries and compensating income transfers take their place. Voila: just transition level unlocked!

Have a laugh first, then ask, where is the major stumbling block between this make-believe world and our own? For now politicians are acting and being berated for differing at the first step: brushing off the problem and effectively denying the climate science. Yet beyond Petroleum Correctness is a set of increasingly onerous political and economic constraints. (more…)

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