Bite the Bullet, Redford

2012-01-24 incompetence header

 

You know that State of the Province address that Ms. Allison Redford made tonight? About the “bitumen bubble”?

A party and a government can only be coy for so long.

Either you raise taxes or cut services to millions of Albertans. Or both. You can’t make a balanced budget exist out of no where, although the  Redford Conservatives have tried by calling their previous budget balanced by excluding capital funding. Skirting the fundamental problems with Alberta’s governing party can only go so far and a part in government can only run around the issue for so long before reality hits.

And that reality is that Alberta’s tax regime is a relic of a bygone era. It’s built not to be a consistent provider of funds to non-profits and it’s built to leave a budget crunch after every downturn in oil prices. When the price differential between oil prices on the world stage increases or there’s a glut in the market a government that bases almost a third of their spending on that resource, well, that’s setting up Alberta for failure from the get go.

In the last election the Redford Conservatives pushed for a vision that said the people of Alberta could have it all. And this is where the awkwardness of her TV State-of-Province comes from: she said she wouldn’t raise taxes and that she wouldn’t cut spending, in a time and period where if you don’t do either you send the province into billion dollars of debt.

So she’ll pass leadership of this province off to a bunch of academic and third party consultants, dodging the promises she has made and continuing on with the consistently and constant failures of the Albertan government that has been the mainstay of the PCs for the forty plus years. It’s more of the same.

Sadly, her broadcast sent the Albertan taxpayer another bill — this time for $55,000 — when she could have easily used a press announcement or a free public service announcement, which would give her the near same outreach to the Albertan public and protect the public’s purse. It’s called the Free Time Political Broadcasts Policy and it could have saved the taxpayer what would be another teacher in the classroom (at $58,000 for a freshly graduated teacher). So rather than another teacher in the classroom the Conservatives opted for a political announcement that could have been done cheaper and serve Albertans better.

One Response to Bite the Bullet, Redford

  • Alberta’s problem far exceeds what you describe here and simple cutting spending or raising taxes isn’t going to solve the core issue.

    When it comes to Alberta’s spending, it is needed and what few people seem to relate is that much of it is overhead for the development of the oilsands in the first place. Our oilsands are having a labour shortage and we expect/want to bring a bunch of new people here but as is we already can not afford to support the ones we have here.

    We’re twinning highways that if it weren’t for the massive transportation needs of the oilsands workers and equipment, wouldn’t need to exist. Alberta has the highest power consumption out of all the provinces in Canada, not because we watch too much TV or have heaters, but because of industrial activity. The sad reality is the oilsands cost a lot to produce before you even start looking at the actual input requirements themselves: massive amounts of natural gas, water, and electricity.

    The reality behind the oilsands is that they have an EROEI ratio of 3:1, and that ratio is constant no matter what price oil goes up or down to. Up until recently oil had been uni-directional with later prices always eclipsing the prior ones, however we are now stuck in what’s known as “the bumpy plateau” which is playing out with extremely volatile prices which jump up and down between $80 and $100 in short intervals.

    Alberta’s entire oilsands economics model was reliant on the run up of oil prices due to the small energy returned on energy investment margin. The quick and exponential rise in oil price masked this slim margin by allowing us to produce the oil at a lower input cost than we eventually sold it for. This exponential rise is over and as a result our margin has returned to a measly 3:1 ratio. Comapred to the needed spending to handle oilsands overhead the 2:3 return provides almost nothing in terms of royalties to the government when all is said and done.

    If you include items like gas cards (writeoffs) for supporting industries, power subsidies, etc, it looks a lot more like we’re paying them then they are paying us. Nevermind the environmental cost on top of all this.

    Its not Alberta’s tax system that is broken, its our entire business model down to it’s core. It’s completely based on a market environment which no longer exists as we will never see a run on oil prices exponentially rising to $120 and beyond, and if they do.. well, our problem will then be “who can afford it?”

    Alberta has a gambling addiction, a bad one, and you don’t hand over even more money to a problem gambler.

    A tax for every occasion: http://canadiantrends.blogspot.ca/2013/01/a-tax-for-every-occasion.html

    Oilsands prosperity is a lie: http://canadiantrends.blogspot.ca/2012/11/oilsands-prosperity-is-lie.html

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