Stop digging a financial hole

By Little Bow MLA David Schneider

* The following article was co-compiled by a small group of Official Opposition MLAs, who each week, get together to talk through a legislative policy issue. As part of the process, a short commentary is compiled and then edited.
Bankers have an old saying, “If you find yourself in a financial hole, the first thing to do is stop digging.”
Everyone knows people who’ve been in dire financial straits. And everyone knows someone who’s gotten into trouble with credit cards or borrowing for vehicles and other mechanical “toys.” When the banker calls to tell someone their credit rating is getting into trouble — driving up the cost of borrowing — ordinary people rein in their spending and re-establish financial priorities.
Recently, two of the largest and most reputable credit agencies in North America told Albertans and the world the Alberta government is in a financial quandary and is failing to act. In mid-January, Moody’s Investors Service (one of the world’s largest providers of financial research, risk analysis, and credit ratings) changed the rating for Alberta’s finances from “stable” to “negative,” indicating if the province’s NDP government doesn’t take action to stop the financial hemorrhaging, the situation will get worse. Also recently, for the same reasons, Dominion Bond Rating Service (another big gun in the financial research and risk analysis business) also downgraded Alberta’s long-term financial picture to negative.
On the heels of these warnings, instead of announcing the provincial government will bring its spending into line, Finance Minister Joe Ceci foolishly said, “We will not make reckless cuts that would simply make a bad situation worse.”
In a media release, Ceci insisted he and the government have “taken important steps” to ensure the province comes out of this financial mess. Their solution? Increased government spending on infrastructure, including $34 billion in brand new expenditures — with borrowed money.
Ceci and the government believe the remedy for Alberta’s ballooning debt and excessive spending is more debt and even more spending.
According to Ceci, they’re perfectly comfortable if the province has debt equal to 15 per cent of provincial GDP, which means debt of $50-$60 billion? This is madness. There isn’t a responsible business or farmer anywhere in the province who (after being warned by his banker) immediately embarks upon a brand new massive spending spree, running it all up on credit cards. This is the same approach taken by the Ontario NDP when Bob Rae surprisingly became premier in the 1990s. In one term of government, Rae took an axe to the integrity of Ontario’s finances, pushing its overall debt to more than $100 billion. And this was roughly the same time Ralph Klein was paying off Alberta’s debt in full. The Ontario treasury has now been looted and ravaged by Bob Rae — and by Kathleen Wynne — so much so that Ontario taxpayers are shelling out $11-$12 billion in interest every year. This is more money than all Albertans combined paid in personal income tax in 2014-15, money for which Ontario taxpayers get absolutely nothing.
In Alberta, the government is hobbling along, insisting it’s a victim of oil pricing. It isn’t. Most provinces collect nothing or next to nothing from annual oil and gas royalties, and Alberta collects more than those who do. So even with oil at $30 a barrel, Alberta has a financial advantage unavailable to other provinces. In all truthfulness, our province’s financial crisis cannot be blamed on oil prices. It’s a fiscal dilemma that is entirely due to government overspending.