If Alberta were booming the way it was back in 2014, the federal government would not be running deficits and every provincial government in Canada would have more revenue.
That’s the sobering conclusion of an analysis by School of Public Policy economist Trevor Tombe released this week. I think it is one of the most important observations that has come out of this campaign. What it means is if every federal leader were campaigning hard to get Alberta’s groove back, it would go a long way toward helping them generate the revenues needed to pay for the grandiose political promises they keep announcing.
Here’s a simple formula that politicians must remember. In order to spend money on social welfare programs, there has to be a vibrant private sector that creates wealth that can be taxed. Wealth doesn’t just exist out there in the ether waiting to be collected. Without private businesses and private sector workers generating revenue, there will be no money for existing social programs, let alone any new ones. Importantly, without Alberta generating the kind of wealth it has historically, a federal balanced budget is a pipe dream.
Tombe asked the question: What would the Canadian economy look like if Alberta’s growth had kept pace with the growth rate in our closest neighbour, British Columbia?
He discovered this: “Canada’s economy would be roughly $130 billion (5.7 per cent) larger, its unemployment rate would be 0.8 percentage points lower, and the federal deficit nearly $13 billion smaller.”
Numbers alone don’t do justice to the whole story, so let’s unbundle that a bit.
If the federal deficit were $13 billion lower, we’d be close to a balanced budget. That means the amount added to the overall federal debt would have been lower. If the nation as a whole had a GDP that was $130 billion higher, the debt-to-GDP ratio would have also been better.
But there are other benefits that result from Alberta doing well.
Tombe told me that when Alberta was at its peak in 2014, we employed approximately 150,000 out-of-province Canadians. What does that mean? Well, it means they generated good incomes here but their home provinces benefited from the tax revenue. Remarkably, 10 per cent of those out-of-province workers were from Newfoundland and Labrador, which explains why commentator Rex Murphy is such an enormous fan of our province. If you’ve seen Rex speak you will have heard the personal stories he tells of people who found new life and new careers in the oilpatch in Alberta after the cod fishery collapsed. When Alberta is not booming, it is not employing those out-of-province workers and that means their provincial governments are also not getting those extra personal income tax revenues.
One other important factor is interprovincial trade. It turns out that when Alberta is doing well we buy a lot of stuff from our provincial neighbours, disproportionately more than any other province, in fact. In 2014, there was $380 billion in internal trade and Alberta was responsible for $75 billion of it. By comparison, Quebec — with double Alberta’s population — only bought $63 billion from its provincial neighbours. Why does this matter? Well, when Albertans buy goods and services from Ontario, Quebec and other provinces it generates economic activity in Ontario, Quebec and those other provinces. That means there is more corporate and personal income they can tax, too.
In Alberta, we don’t even ask for others to buy an equivalent amount of stuff from us in return. We’re just happy we can benefit from the exchange.
That’s why it’s so odd, disturbing in fact, that all the progressive parties are campaigning against Alberta’s success. The Green Party is campaigning to crush Alberta by pledging to shut down the oilsands in the next 10 to 15 years; the NDP is campaigning to choke us off from the rest of the world by demanding the Trans Mountain pipeline expansion never get built; and, the Liberals have agreed to grant us just one last pipeline (the Trans Mountain) before essentially shutting the door to any more development through the passage of the Bill C-48 tanker ban and the no-more-pipelines Bill C-69.
It’s almost as if these parties think that wealth generates itself. It doesn’t.
Alberta is only too happy to create it for the benefit of all Canadians. If only they’d let us.
Danielle Smith is a radio host on 770 CHQR. She can be reached at [email protected] .