A Green Perspective on Debt

The Green principles of social justice and sustainability bear on public finance policy. Accordingly, it is the policy of the Green Party of Alberta to avoid incurring debt that would limit the ability of future generations of Albertans to meet their needs. We understand that, in the course of normal economic cycles, there will be years when government has to incur debt to maintain services, but believe that should be balanced by running surpluses in the positive side of the cycle.

Over the past thirty years, Alberta has gone through wide swings of surpluses and deficits, accompanied by episodes of extravagant spending and brutal retrenchment, because of our overdependence on revenue from petroleum royalties. We have currently run deficits in eight of the past ten budgets. The present government has taken this to a new level, projecting a $10.3 billion operating deficit for 2017-18. This is in addition to $6.0 B in borrowing for capital projects. Total annual revenue is expected to cover only 81% of operating costs.

The NDP government has no plans to reduce expenditures and no apparent strategy to increase revenues, other than to hope for a return to $100 oil. The UCP opposition denounces the deficit, but offers no solution other than cutting expenditures. The GPA believes that there is some opportunity for reducing expenditures, given that Alberta’s expenditures on a per capita basis are higher than in the three other large provinces, but that an across the board cut of 19% would have an unacceptably crippling effect on government services.

The obvious means to close the deficit gap is to find an alternative source of revenue, and the obvious source is a sales tax, as independent economists consistently point out. It is time for Alberta to start acting like a normal province and bring in a sales tax. A five per cent tax, harmonized to the GST, would bring in something in excess of $5B per year, and go a long way to closing the budget gap.

Alberta is not yet in serious debt trouble. Our projected year-end debt/GDP ratio is .138, the lowest of all the provinces. But we need to get our finances in order before we are in trouble, and to start weaning ourselves from oil and gas royalties, which will inevitably decline as fossil fuels are phased out.

Carl Svoboda – Public Finance

Comments 10

  • Absolutely true. It’s a goofy point of pride for successive Alberta governments to think that having no sales tax gives us bragging rights when we’re so economically irresponsible. It also tends to normalize deficits for individual Albertans, who are running up dangerous levels of household debt.

  • I have always suggested governments should expand non tax revenues as well. Of course this should only occur when there is no existing extreme heavy debt.

    Medicine Hat has some good examples of this. They own their own gas fields, generate electricity (like some other governments) and I have heard they have some sort of real estate development arm which has helped eliminate homelessness.

    In the past the Alberta Government was involved in businesses on a much grander scale. People may remember Alberta Government Telephones (AGT) , Alberta Liquor Control Board Stores, Alberta Gas Trunkline or Nova Gas Transmission. These profitable companies provided non tax revenues so tax levels could be lower- until the “non red” Conservatives flushed them down the toilet and sold them below market value like a bunch of fools.

    Our governments are involved in non controlling share holder ownership of numerous corporations. Stepping it up a bit and taking controlling ownership does not sound illogical to me provided such corporations are run profitably.

    Governments taking over corporations could be a benefit to the environment as well. For example, if Alberta owned a vehicle manufacturing plant, it could ensure vehicles are sold that run on alternative energy sources rather than dirty fuels like dirty diesel. If there was a Government controlled vehicle manufacturer and a Green Government in power years ago, chances are that electric vehicles would dominate the roads in our cities today and cancer rates would be lower as a result. Not only would government revenues have been higher but health care costs would have been lower. A win win situation.

    Our government must search for all opportunities to reduce the tax burden while maintaining all needed services for the people.

    Make way for non tax government revenues.

  • https://www.facebook.com/groups/1111509175543715/?ref=bookmarks Carl, will your provincial greens support *The Green Marshall Plan* Central bank money creation for green infrastructure (some of which certainly would end up supporting Alberta)?

    • My original post is from a strictly provincial viewpoint, and provincial governments have no power to issue fiat money. This was definitively settled when the Alberta Social Credit government tried it in the 1930s. A green Marshall plan may be a good idea from a national perspective, but I am not wise enough in the field of monetary theory to offer a useful opinion on it.

      • Carl, are you willing to educate yourself? Perhaps by reading the group description and links? Provinces can create fractional reserve money through owning a bank. If ALberta created a *green bank* lending and granting to benefit the ecology and provincial cash flow, all Albertan’s would benefit. There is no reason that a monololy on created money bailouts should be only for banksters and not the planet and people. I ask that your party consider a *Bank of ALberta* to do that. See this related link : https://en.wikipedia.org/wiki/Province_of_Ontario_Savings_Office

  • I would like a comment on the fair share argument Peter Lougheed used to put forth on oil royalties. Are we getting short changed on revenues from oil companies?

  • Sales taxes are REGRESSIVE taxes; that is, the burden of the tax falls DISPROPORTIONATELY on middle and lower income classes, who have to pay a larger percentage of their incomes for food and other necessities of life, and thus a larger percentage of their incomes on sales taxes.

    I have to say that I’m a little puzzled that Green Party people would advocate such a tax. This regressive quality of the sales tax may be why your province doesn’t have it; find out the history of it and you may discover that sales taxes were abolished (or never instituted) because advocates for labor and the poor put an end to them.

  • The proposed provincial sales tax would be harmonized to the federal GST, which does not apply to groceries, rent, or medical services. This mitigates the burden on lower income people.

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