By Dori Modney (@Dori_Modney on Twitter)

Pros and cons of another deficit budget – U-of-L Prof weighs in

Mar 16, 2017 | 8:09 PM

LETHBRIDGE – The 2017 provincial budget unveiled on Thursday afternoon, didn’t come with any big surprises, as the government had already let it be known that spending and another deficit was in the cards.

When the deck was dealt, the Fraser Institute said the government had “squandered another opportunity to take corrective action and turn the province’s finances around.”

While the institute concedes the government had inherited a difficult situation, it was still the third deficit budget in a row, which “fails to address any of the province’s serious fiscal challenges.”

The budget continues a trend of big spending, with a forecast $10.3 Billion deficit.

While some in the province are happy not to see cuts to social services and more spending on education, there are those who warn of the consequences of all the spending.

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LethbridgeNewsNOW.com went to the University of Lethbridge and spoke to Political Sociologist, Dr. Trevor Harrison, for some perspective on where the government is taking Albertans.

Harrison admits there aren’t any great surprises in the budget and he sees the government as staying the course….

“As past governments, as well, relying on the price of oil to come back again, but they’ve also really ramped up infrastructure spending and there’s obviously good jobs in that and they view this as a good time to keep as many Albertans as possible working, rebuilding the infrastructure that’s going to be needed in the future”.

Harrison says from a fairly standard economic view point, what the government is doing is not unusual.

The province’s opposition Wildrose Party has noted the government’s financial issues do not relate to revenue but spending, and the increased spending will come back to haunt Albertans.

Harrison says that eventually we will have to pay for the debt.  The government could raise taxes but are loathe to do that – they could look for efficiencies and seem to be taking pride in the cuts to the salaries to of CEOs of various agencies.  However, he says if they cut too deep, they run the risk of putting the province further into a recession, which is the fine balancing act they are trying to deal with.

“As with past governments, they are kind of relying an awful lot on (the price of) oil to come back and that may be a problem assumption, and they’re looking for that proverbial fix, which is diversification, and that comes across in much of the budget document as well.”

When it comes to creating jobs, Harrison notes it isn’t something that can be done over-night. 

“With infrastructure spending, there will clearly be jobs created and the government is putting a lot of stock in innovation and transitioning the economy.”

Many Albertans look at the Carbon tax as nothing more than wealth redistribution and/or a disguised consumer tax. Harrison says the results of the tax won’t been seen until later down the road and he doesn’t see it as an ‘off the wall idea’, as many American states and European countries have already instituted the same tax, which is expected to prompt people to transition their behaviour towards more optimum practices – similar to putting a tax on cigarettes, you hope that’s going to lead people to stop smoking and it’s hoped the carbon tax will get people to adopt more energy efficient, low carbon technologies.

“Part of the idea, of course, is that through innovation, you’ll have companies step in and create the new kind of jobs in the new economy but, again, we’re not going to see the proof of that in the next year, or two years – it may even take five years or ten years but, this is the way the rest of the world is going, it’s not just Alberta.”

In the meantime, the province will continue to subsidize for-profit companies as they attempt to create energy innovation. That money is borrowed, and comes with interest payments which puts the province on the negative side of the ledger. The question is, how much of a negative can Alberta handle?

Obviously, any time you have to put out money to service a debt is a concern and the government has had it’s credit rating rolled back.  However, Harrison contends Alberta’s situation is still very good when compared to other with other provinces and the government can borrow money at relatively low rates.

“Debt to GDP ratio in Alberta is still very, very low compared with the rest of the country, and even lower than some parts in the United States – its something to watch out for but, it’s not the disaster – it’s not the iceberg looming in front of us.”

(Dr. Harrison is Professor of Sociology, in the Faculty of Arts and Science at the University of Lethbridge, Research Affiliate of the Prentice Institute for Global Population and Economy and Director of the Parkland Institute.  He and his colleagues from the Alberta-based Parkland Institute are embarking on a six-year research project that will examine the corporations and individuals driving fossil fuel extraction in Western Canada, and their resulting political influence.)