Tuesday, October 20, 2009

The Alberta Disadvantage

If a televised leaders' debate were held in Alberta today, Danielle Smith would likely mop the floor with Ed Stelmach, while making Liberal leader David Swann and NDP leader Brian Mason look like helpless waffling bystanders. She comes across as a bright, energetic, young, and knowledgeable about business and the oil patch. In pure political terms, she could be the next Peter Lougheed.

The problem is that she is not Peter Lougheed. Her party's basic message--that Alberta's problems stem from the ruling Progressive Conservatives having drifted away from the populist low-tax free-market philosophy of Ralph Klein and the Reform Party---is fundamentally flawed. Ralph Klein was the problem, not the solution. "The Alberta Advantage" largely consisted of using revenues from nonrenewable resources to subsidize current consumption. Unless of course you really believe that it was low taxes, and not high international oil prices, that was the principal source of Alberta's prosperity. Levelling the income tax and eliminating the sales tax and giving away Klein bucks merely made Alberta's public services, health care and infrastructure more completely dependent on oil revenues, accentuating the terrible rollercoaster of the past 3-5 years.

But if I am right, even if the government woke up to the truth tomorrow morning and fully corrected its policies (e.g. by bringing back medical premiums, a small sales tax and a more progressive income tax, in addition to the new royalty regime), it would only drive that many more voters into the arms of Danielle Smith and Company. Furthermore, the lower tax regimes recently put in place in Saskatchewan and BC, and improved capital and labour mobility due to the TILMA, mean that threats by business and professionals to move are not quite as easy to ignore as they once were. An avoidable situation has hardened into a dilemma for the government.

It's policy versus politics, and I think we all know which force is the stronger. For Ed Stelmach, "smelling the roses" has just taken on a whole new meaning.

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