Thursday, October 15, 2009

Forward to the Past

Well excuse me if I am not surprised that Steady Eddie Alberta's CEO produced a TV show last night that announced nothing new. In fact while some folks bemoan the premier for not being Ralph Klein, including King Ralph his-self, Steady Eddie is living up to his name.

In fact he is the ghost of the Tories Past, the actions of his government are just a rehash of Klein's fiscal renovation, of the 1990's. The government is cutting hospital beds and freezing hiring of nurses and doctors, just as Klein did. The are cutting back funding to schools, just as Klein did. They are cutting funding to post secondary institutions just as Klein did. They are calling for a wage freeze for two years for all public sector workers just as Klein did. The debt and deficit hysteria that launched the Klein regime has returned like Marley's ghost to haunt the Alberta Government. Having no plan Steady Eddie returns to the past to find solutions to the Tories Made In Alberta Recession.

Blaming the economic crash of last year for Alberta's current deficit is of course par for the course, all governments have used the crash to explain away their economic mistakes. But in Alberta that crash should have been expected, since we have experienced boom and busts before, and those who had like former Premier Peter Lougheed warned that the Alberta Government led by his old party, had no plan to deal with the boom. And of course it had no
plan to deal with a crash.

The failure to invest the Heritage Trust fund or to fund it adequately led to the current deficit. And yet those in charge of investing both the Trust fund and the new AIMCO investment fund (made up of your and my public sector pension funds) lost the province billions, that now make up part of the current deficit. It was this investment failure that has cost the province much including outrageous buy outs and bonuses to these same fund managers.

The province's Heritage Savings Trust Fund lost the $3 billion between March 2008 and March 2009 in the economic downturn, and currently sits at $14.3 billion. The record loss sent Alberta into a deficit for the first time in 15 years. It was the biggest loss in the fund's 33-year history.

two AIMCo executives earned a combination of more than $5 million last year even as the funds they managed -- including the Heritage Savings Trust Fund -- lost more than $7 billion.

The collapse of oil and gas prices of course added to the deficit but not to the degree that the bad investments of our surpluses did. In fact the decline in natural gas production in the province began back in 2001 and is something that could be planned for, if you had a government that was not adverse to planning.

The problem, however, is that production in the Western Canadian Sedimentary Basin (WCSB) is declining. Production peaked in 2001; the vast majority of the country's natural gas is produced in the WCSB. According to Canada's National Energy Board (NEB), Canada's marketable production peaked around 17 Bcf/day in 2001.

Sadly, no amount of drilling is going to reverse the decline. Production declined in 2005, despite having a record number of well completions in the WSCB. Take a look for yourself:

Western Sedimentary Basin Well Completions

If we take a look back, 2005 should have been a huge year for Canadian natural gas. That year, we saw the most active Atlantic hurricane season in recorded history. Fifteen hurricanes blew past us. Five became Category 4 hurricanes and four reached Category 5, including Katrina and Wilma.

That same year, Canada imported 3.7 Tcf of natural gas to the U.S. However, Canadian production of marketable natural gas fell 1.7%, compared to 2001 levels. According to NEB projections for 2009, natural gas production will sit at 5.5 Tcf — 12% lower than in 2001.

Add to that the expansion of infrastructure projects, that under Klein had been halted, as labour costs increased during the boom and you have another reason for the deficit.

Finally we have the creation of Hospital Boards, which were to have been publicly elected and were for one term and then when to0 many liberals and dippers were elected the boards were fired by Klein and replaced with Tory hacks. Steady Eddie's first act as Premier was to follow in Klein's footsteps, firing the regional boards and forming a super board, the cost of which was again payouts resulting in the new super board having a half billion dollar deficit.

And while Steady Eddie announced a wage freeze for senior government managers it means little when in fact these same managers racked in bonuses worth $6.7 million last year. And we suspect that even if he follows through with MLA and cabinet salary freezes its after the cabinet gave itself and the Premier a 34% increase last year.

The other reason for the deficit is that Alberta is business friendly. The cost of doing business in this province is nil, zilch, nada. The working class taxpayers in Alberta shoulder the burden of business costs. And thanks to the generous tax breaks to business the burden of the deficit is shouldered by you and me, and the solution that some are suggesting is the dreaded of all taxes the sales tax.

The Progressive Conservative government, in power since 1971, has long had a hands-off approach to business. Foreign investors have long been attracted by the lack of sales, payroll or capital taxes, low income taxes and competitive corporate taxes, at 29 per cent and dropping to 25 per cent by 2012. Despite a current deficit, overall net direct and indirect debt is low, totalling C$1bn or 0.3 per cent of GDP on March 31, according to a recent Moody’s report that gave Alberta a triple-A debt rating.

Like the mythical debt and deficit crisis of the Klein years this too is a short term recession, with a temporary deficit. And like then the deficit will be paid off by cutting public sector funding and freezing wages rather than taxing the capitalists. Nothing new here just as there is nothing new with the Tired Old Tories still in power.


Your Pension Plan At Work


Your Pension Dollars At Work

P3= Public Pension Partnerships

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1 comment:

Nancy said...

This is thorough and detailed. Your approach attracts me. Keep posting!!

This is Ibrahim from Israeli Uncensored News