Friday, February 20, 2015

Even the Fraser Institute Can't Look the Other Way But It Can't Tell the Truth Either.

There's a bumper sticker line that could double for the provincial motto of Alberta:  Dear God, Please Give Us One More Oil Boom and, This Time, We Promise We Won't Piss It Away.

Now, with another boom gone bust, Alberta has fallen back into a raging deficit and even the uber-Right Fraser Institute can't bite its tongue although it can't face facts either.  Naturally, the neo-liberal Fraser Institute sees workers' wages, especially government workers' wages, as the culprit.

Ten years ago, before the boom started in earnest, Alberta spent $8,965 (in 2013 dollars) per person in program spending. This does not include capital spending on items like hospitals, schools and roads.

The report argues that had the province increased program spending in the following years at the rate of inflation plus population growth, it would have spent $295 billion on programs over the next nine years.

Instead it spent $345 billion, a $49-billion difference.

So where did the money go? Mark Milke says a lot went to public sector wage growth, which in some years grew at nearly twice the rate of inflation.

"When you take these wage deals and unreformed pensions and start to multiply them by 200,000 people in the provincial public sector in Alberta, then over time, you get these big numbers."

Between 2006 and 2008, Alberta contributed $4.5 billion to the Heritage Savings Trust Fund. Nothing has gone in since then, and the fund's total sits at $15 billion.

In Alaska, a minimum of 25 per cent of resource revenues are deposited into its Alaska Permanent Fund. The income generated from the fund can be used by the state government, but not the principal. As of June 2014, the fund stands at nearly $64 billion US.

In Norway, 100 per cent of net proceeds from resource revenue are supposed to flow into a fund. According to Milke, that doesn't happen every year, but Norway has gotten close to that ideal. The Norwegian Petroleum Fund sits at $759 billion as of Sept. 30, 2014.

Of course, being the consummate neo-liberal Hack Shop, the Fraser Institute steers well clear of facts that don't fit its 'blame the workers' narrative.  While the Fraser report extols the success of Norway, for example, the authors deceivingly avoid the heart of that story - that Norway negotiated far higher royalties for its oil; that the government wisely (and in keeping with Peter Lougheed's advice) did not take oil revenues to into current accounts but, instead, used hefty income taxes to support the generous services it provides to its people. 

Lougheed, perhaps the last sensate premier Alberta has seen, knew that taking oil royalties into general revenue would create a dangerous government dependency on an insecure source of funding.  When boom turned to bust the government and people of Alberta would be dropped into a stinking mess.  Lougheed also warned that injecting that windfall revenue into the economy would overheat the economy, cause real wealth to evaporate as prices soared, and leave the province already wounded when oil prices plummeted.

Everything Lougheed foretold has been demonstrably proven - by both Norway and Alberta.  Too bad the Fraser Institute is so intellectually compromised that it can't tell the simple truth.


Grant G said...

Alberta`s gravytrain is caputsky.

Anonymous said...

The problem was that they let the oil companies have the resource and they didn't do what Trudeau wanted.

Anonymous said...

10 percent tax rate
Hire from norway

Richard said...

The other facts they omit is adjusting for production cost of bitumen vs. Norway's or Texan oil, the infrastructure and service deficit in Alberta from the numerous previous rounds of cuts which in fact calls for spending above and beyond pop+inflation to make up the difference, as well as the difference in infrastructure requirements. Alberta requires a lot of people to extract what is comparatively a small amount of bitumen.

Anonymous said...

Richard...unlike Newfoundland´s production. Anyong.