Sooner or later, all conversations about the Alberta economy in the modern era come down to one key question: Where the hell did all the money go?
I guess you could rephrase this: Where the hell is all the money going? Regardless, it's been going somewhere and, over the past couple of decades, that destination has been a matter of lively discussion among Albertans and other Canadians.
This question is so often asked because, while Alberta is known to be rich -- Alberta's GDP per person in 2008 was $81,121, compared with $44,121 for the rest of Canada -- to those of us who live here it feels poor.
Whether it's the shabby condition of downtown Edmonton, our rundown capital city, our pothole strewn streets, the constant sight of desperate street people, the Third World conditions in our Emergency Rooms, the periodic mass layoffs of teachers, university professors and health care workers, or the unending whine by Conservative politicians that we simply can't afford quality health care, good education or other public services, it always feels as if the whole lot of us are just one paycheque away from the bread lines.
Here we are, plunk in the middle of the snowbelt, and most years even how we're going to afford to clear the streets is a constant source of worry and debate.
As a weird counterpoint to this constant refrain, we are also constantly reminded how lucky we are to live here in the Richest Place on Earth, the Very Best Province in the Whole Wide World, etc. etc.
So if we're so rich, how come we're so poor?
Well, now we know the answer, thanks to an important book by former Alberta Liberal Party leader Dr. Kevin Taft, who has been described in this space as the best premier Alberta never had. Follow the Money, Where is Alberta's Wealth Going? was published with the assistance of the Alberta Federation of Labour by Detselig Enterprises Ltd. of Calgary. It costs $12.95, and it's also available as an e-book.
The AFL also financed the production of a short video documentary about Taft's research by filmmaker Tom Radford.
Before he became an MLA in 2001, Taft was an education professor at the University of Alberta. After the 2008 election, in which the Alberta Liberals under his leadership were badly trounced by then-premier Ed Stelmach's Progressive Conservatives, he threw up his hands and resigned the leadership of the party.
This was probably a mistake, as the Alberta Liberal leadership was then held for a spell by David Swann, a well-meaning but ineffectual Calgary physician, and more recently was captured by Raj Sherman, the former Conservative who is now leading the party away from its long-held principles and away from its remaining core supporters.
But if Taft's departure from politics was a bad thing for Alberta's Liberals, it's not necessarily a bad thing for the rest of us, as he's recast himself as an author on political and economic topics who has the skills and credibility to definitively answer such questions as the ones posed above. What's more, he manages to do it in a readable way without sounding too much like a Liberal Party partisan -- even going so far as to confess that he was wrong as Liberal leader to join the chorus that bays constantly for less spending on public services.
Working with researchers Mel McMillan and Junaid Jahangir and relying heavily on Statistics Canada's CANSIM (Canadian Socioeconomic) and Financial Management System databases, Taft makes a case that I doubt can be effectively challenged by the government's spokespeople, its apologists among the legions of far-right "think tanks" that serve as the Greek chorus for Alberta's perpetual state of scarcity and crisis amid fantastic wealth, or far-right entities like the Wildrose Party that demand ever more vigorous attacks on public services.
Before we give away the ending -- it won't surprise you -- let's talk about the places Taft was able to establish pretty convincingly are not getting our money:
1. It's not going to government spending. While government spending in Alberta is incompetently managed by the Tories, gyrating between throwing money at problems to massive and disruptive cutbacks, over the long term our government spending is close to the Canadian average.
2. It's not going to public services. "As a society, Alberta spends a steadily shrinking portion of its increasing prosperity on public services."
3. It's not going to education. Comparing five-year averages to smooth out individual years' ups and downs, K-12 education went up 2 per cent, total, over 20 years.
4. It's not going to health care. When you adjust for the size of the provincial economy, spending on health care puts Alberta last in the country. No matter how you measure it, "health care spending in Alberta and Canada is on a gradual long-term upward trend that is well within reason." Over the long-term, smoothed out with five-year averages, health care spending in Alberta has been rising at about 1.2 per cent a year.
5. It's certainly not going to housing and social services.
6. It's not going into savings. You can tell from a glance at one of Taft's many useful charts that, as he puts it, "Alberta's natural resource treasure wasn't going into the Heritage Fund," or any other savings pool.
7. And most of it's not going to personal incomes. Over the last 21 years, average personal incomes in Alberta rose about 35 per cent, accounting for inflation.
So where is it going? It's going to corporate profits, of course. And the greatest corporate profits are in the oilpatch, naturally. In fact, so much of our money is going into corporate profit that we're actually selling our collective property at a loss to pad the corporate bottom line!
"Profits in Alberta have grown at rates simply unknown in other jurisdictions, often well beyond double the rates in other provinces and the United States," Taft writes. "There is no such largesse for public services, and the government is drawing down public savings rather than building them, doing nothing to prepare for the future.
"The transfer of public wealth to private shareholders is blistering, and our own government, rather than fighting like an owner, or even thinking like an owner, is just happy to find investors who want to cash in." (Those investors, Taft notes as an aside, are often state-owned companies from such places as China, Abu Dhabi and Korea. Which makes our "ethical oil" what? Semi-ethical?)
We're giving away our resources, people, and we're getting very little in return. "It was going to profits," Taft summed up in his conclusion, "and it was doing so at an astonishing rate."
How astonishing? Corporate profits were up 317 per cent in the same period health care spending rose 28 per cent, incomes were up 35 per cent and education spending increased 2 per cent!
One question Taft says he couldn't answer from the data he worked with is where all the money goes once it flows into these bloated corporate profits. But you and I don't need a book to tell us the answer to that one: It leaves the country for places where it does nothing for Canadians.
No wonder, when you think about it, why corporate special interests and their paid representatives in Canada are so aggressive in defending their right to rapidly export even more of our resources via pipeline to wherever -- the environment, the rights of Canadians, and due process itself be damned! This does not, however, explain why so many of our Conservative Western Canadian politicians behave the same way.
Taft's highly readable work is important to Canadians who don't live in Alberta, because the philosophy of government in Alberta is now in the process of being exported to the rest of Canada, thanks to Prime Minister Stephen Harper, and because the way we are developing our resources has profound implications for the economies of other Canadian provinces. Our mighty oil-pumped Loony, for example, is contributing to the decline of the manufacturing economy of Central Canada.
Moreover, Taft's conclusions are also not going to be something that you'll hear reported very enthusiastically in the media, either here in Alberta or anywhere else in this country. Was it just a coincidence that at the same time Taft's book was being released, a "research paper" worthy of a Grade 9 class project that argued Alberta was paying its public employees too much was being released to massive media fanfare by a claque of neo-Con ideologues associated with the University of Calgary? Whatever the motivation, that was the research that got all the publicity.
No, if you want to read what Taft and his research partners have to say, you're going to have to make an effort find it yourself. If you come across a review, it's most likely to be on a blog like this or in an alternative publication.
Talk to your bookstore, ask the reference desk at your public library to order it or purchase the book online. It's worth the effort.
This post also appears on David Climenhaga's blog, Alberta Diary.
rabble.ca, Tues Jan 31 2012
The tax-reform elephant in the room: Stelmach's fate a cautionary tale for politicians who dare touch royalties
It is the most contentious, the most polarizing and perhaps the most important topic in Alberta politics - which is why it will probably never be an issue in the upcoming provincial election.
It's just too controversial and divisive and, for politicians, potentially suicidal.
The only politician to embrace it is Liberal MLA Kevin Taft and he is only doing so because he is retiring from politics and doesn't have to worry about being re-elected.
It is the issue of tax reform, specifically making the energy companies pay higher royalties.
No political party has embraced this issue and even the New Democrats are being careful how they approach it.
But the issue is out there as part of a pre-election campaign called "Better Way Alberta" on radio ads, in mailboxes and on the Internet.
The $200,000 campaign - being run by the Alberta Federation of Labour and the social lobby group Public Interest Alberta - is trying to spark some interest in an issue that most politicians won't talk about, either because they're opposed to it or they're afraid of it.
After all, Ed Stelmach pretty much killed his own career, undermined his party's popularity and fostered the birth of the Wildrose party by introducing a new royalty regime on energy companies.
Actually, introducing the regime wasn't the problem. Increasing royalties to give Albertans their "fair share" of royalties was initially popular in 2007.
It became immensely unpopular after the collapse of energy prices during the economic meltdown in 2008 when critics and energy companies blamed Stelmach for driving away business.
Stelmach was simply guilty of bad luck and bad timing.
He reversed direction on royal-ties several times but his popularity never recovered.
His fate is a cautionary tale for Alberta politicians who know that the two surest ways of getting in trouble are to talk about a provincial sales tax and raising royalties, even though both options are supported by many economists. But then again, most economists are not running for election.
Neither is Bill Moore-Kilgannon, executive director of Public Interest Alberta. "Alberta has a broken tax-and-revenue system," he says. "The wealth we need to fund quality services is here, but the cupboard is bare because our politicians have made it bare."
The argument presented by the Better Way Alberta campaign is that the province has a revenue problem, not a spending problem - the exact reverse of the argument made by parties such as the Wildrose.
"As a result of years and years of ill-advised tax and royalty giveaways to corporations and high-income earners, the government has blown a gaping hole in the revenue base needed to fund the services that Albertans value, like education and health care," says the campaign's professionally designed web page. "The solution, then, is not to hack and slash at services that Albertans value and which are already only modestly funded. The real solution is tax and royalty reform to fix the hole in our revenue base."
Besides raising energy royalties, that solution includes scrapping the province's flat tax on personal income and replacing it with a progressive tax that would make the wealthy pay more.
Only the New Democrats have expressed sympathy for the Better Way campaign, but in his efforts to attract non-traditional supporters, NDP Leader Brian Mason is choosing his words carefully these days, saying he is not out to attack energy companies.
Liberals are playing coy, refusing to say what their stand is until the election campaign starts but the party has being moving further to the right, not left, under leader Raj Sherman and he'd sooner embrace a cactus than the Better Way campaign.
That leaves it as a bit of a political orphan, a cause without a rebel.
The campaign might stand a better chance of sparking debate if the folks behind Better Way could run their ads during the upcoming election - but they can't because the government passed a law after the 2008 vote in response to an anti-government ad campaign that happened to be run by many of the same folks as this time.
The group behind the 2008 ads - Albertans for Change - included the Alberta Building Trades Council, the Alberta Union of Provincial Employees and the Alberta Federation of Labour. At the time, they insisted the ads (which targeted Stelmach for having no plan to fix education, health care or the economy) were aimed at sparking debate, not sup-porting a particular political party.
In the end, the ads were not particularly effective. If anything, they backfired, inadvertently allowing Stelmach to play the victim to big labour.
Even so, the government didn't want the unions to launch a similar campaign during another election so they passed a law designed to prevent any organization with deep pockets from attempting to sway public opinion via advertising during an election campaign.
That's why the Better Way campaign is underway now ... and why it might be long forgotten by the time the election campaign starts.
Edmonton Journal, Tues Jan 31 2012
Byline: Graham Thomson
When will Harper stop thinking as an oil CEO and start acting like he is prime minister of Canada?
VANCOUVER, BC, Jan. 27, 2012/ Troy Media/ – One of the most startling assertions contained in Natural Resources Minister Joe Oliver's controversial open letter, which was released on the eve of public hearings into Enbridge's tanker and pipeline proposal to B.C.'s West Coast, concerns how he equates shipping oil to Asia as unquestionably being in the "national interest."
There are at least five key reasons why he's wrong.
1) Protecting B.C.'s coast is about protecting B.C. jobs. According to a B.C. government report, more than 45,000 people are permanently employed by B.C.'s coastal seafood and ocean recreation industries. We're not just talking the fishing fleet, but also processors, anglers and tour operators. Enbridge's pipeline and tankers project will create 560 long-term jobs in B.C., but an oil spill could wipe out 45,000 jobs – in other words, B.C. would be risking 80 jobs for every one it stands to gain.
2) Canada's already got a bad case of Dutch Disease. When a currency becomes tied to the price of a single commodity, such as oil, due to a rapid surge in exports, it frequently causes job losses in the manufacturing sector. When this happens, it's called Dutch Disease. A recent University of Ottawa study found that Dutch Disease was responsible for 42 per cent of currency-related job losses in Canada between 2002 and 2007. That works out to about 140,000 jobs lost in the manufacturing sector because of the rapid expansion of the oil sands.
3) Exporting raw bitumen exports Canadian jobs. A recent public opinion survey by ThinkHQ shows 84 per cent of Albertans would prefer to see oil sands bitumen refined in their province. Further to that, 81 per cent of Albertans think the government should be taking steps to increase the amount of oil sands upgrading and refining provincially.
Even the Alberta Federation of Labour, which represents 29 unions and 145,000 workers, has spoken out against Enbridge's tankers and pipeline proposal because it would export unrefined bitumen – and 50,000 high-quality jobs – to China. Dogwood Initiative is not prescriptive about whether new refineries should be built or where (because we believe local people should make those decisions), but one thing is certain: it never makes sense to sell the wood and buy back the chair.
4) Half of Canada is reliant on foreign oil. Most of eastern Canada is currently dependent on foreign oil from declining or volatile reserves in the North Sea and the Middle East. If our government really cared about the best interests of Canadians, they'd be at least considering Canadian domestic energy security. Instead, they are selling off our oil to foreign oil companies and pushing to allow them to ship it to Asia on supertankers through an ocean environment that Environment Canada rates as the fourth most dangerous body of water in the world (which also just so happens to be one of the last remaining pristine places on the planet).
As former senior federal government geologist David Hughes writes in his 30-page report submitted to the joint review panel: "The proclivity to liquidate these resources as fast as possible in the name of economic growth is a very short-sighted policy practised by the Alberta and federal governments at the expense of the long-term energy security of Canadians."
5) What's the hurry? It is former Alberta premier Peter Lougheed who says that we should go slower on oil sands/pipeline expansion and use the oil we have left in the ground wisely. And one of Canada's top investors, the 85-year-old Stephen Jarislowsky, has said: "Long term, I think oil in the ground is a good asset."
Enbridge's pipeline and tanker scheme is predicated on the assumption that oil sands production could (and should) be tripled in less than 25 years – that calculation goes beyond even the Canadian Association of Petroleum Producers' predictions. Without that expansion, there is no oil to fill West Coast pipelines.
Given the plethora of unaddressed environmental and social concerns related to oil sands developments (as pointed out by six independent reports in 2010 and 2011), Canadians should be thinking long and hard before embarking on further rapid expansion. After all, this is a valuable non-renewable resource that we only get to dig up and use once. Let's use it in the best interests of Canadians, not for the short-term gain of multinational oil companies.
Every time you hear the federal government say "national interest," insert "corporate interest" and you'll see a clearer picture. The prime minister is abdicating his responsibility to serve in the best interests of Canadians – and Canadians, such as University of Alberta political economy professor Gordon Laxer, are right to be asking: when will Harper stop thinking as an oil CEO and start acting like he is prime minister of Canada?
Emma Gilchrist is a former Calgary Herald reporter who is now the communications director for Dogwood Initiative, a Victoria-based non-profit that brings together British Columbians to reclaim decision-making power over their air, land and water. Sign Dogwood's petition at notankers.ca.
Troy Media, Fri Jan 27 2012
Byline: Emma Gilchrist
Tax and royalty giveaways have led to deficits and unwarranted pressure on services, says new campaign: Coalition calls for “Obama-style” debate on taxes and royalties In lead-up to ...
EDMONTON – Ever wonder why Alberta, Canada's wealthiest province, is running a $3-billion deficit and saying it can't afford to maintain middle-of-the-road spending on vital public services?
That's the question that a coalition of labour and community groups want Albertans to start asking in the run-up to the next provincial election, expected to be called within the next two months.
"Why in a province as wealthy as Alberta is the talk always about cuts and freezes to things that Albertans value, like education and health care," asks Gil McGowan, president of the Alberta Federation of Labour (AFL).
"The truth is the only reason our government is running deficits and talking about cutbacks is because they've blown a hole in the revenue base we need to fund services. The cupboard is bare because Alberta's irresponsibly low royalty and corporate tax rates have made it bare."
In an effort to highlight the unnecessary damage caused by years of tax and royalty giveaways, the AFL has teamed up with Public Interest Alberta (PIA), a network of community groups and activists, to launch an advocacy campaign on tax and royalty reform called the Better Way Alberta campaign (click here for Backgrounder).
"Albertans are being told they have no choice but to accept cuts to things like post-secondary education and various services for the disadvantaged or expand public health services to our growing seniors population" says PIA Executive Director Bill Moore-Kilgannon.
"But the truth is we DO have choices. By re-establishing a progressive tax and improving our royalty rates, we could generate the money we need to maintain the kind of high-quality services that Albertans need to face the future with confidence."
"What we're trying to do in Alberta is what President Barack Obama is doing in the U.S.," concludes McGowan. "And that is to make the upcoming election campaign a forum for a discussion on tax and royalty fairness."
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For more information:
Gil McGowan, President, Alberta Federation of Labour (780) 218-9888
Bill Moore-Kilgannon, Director, Public Interest Alberta (780) 993-3736
ABCDEGFQ: Critics turn to the alphabet song to underline concerns about Alberta’s tax and royalty structure
EDMONTON - A pair of left-leaning advocacy groups have teamed up on a new pre-election advertising campaign to attack the Alberta government's tax and royalty structure.
The $200,000 campaign from Public Interest Alberta and the Alberta Federation of Labour makes the case that budget deficits run by the province are due to the government's unwillingness to get more revenue from high-earning individuals, corporations and energy companies.
"We are here to say Alberta has a broken tax and revenue system," Bill Moore-Kilgannon, executive director of Public Interest Alberta, said Wednesday.
He made reference to U.S. President Barack Obama's state of the union speech Tuesday, in which Obama called for the wealthy to pay more.
The Better Way Alberta campaign features a website, betterwayalberta.ca, a mail-out, and a series of radio ads that will run over the next two weeks, mostly in Edmonton.
Alberta Federation of Labour president Gil McGowan called the campaign "cheeky." One of the radio ads features a fake foreign oil billionaire praising the Alberta government for its tax policies, while another features a shot at education cuts by depicting a child struggling to sing the alphabet song.
The campaign cannot run when the election is called due to new rules restricting third-party advertising. McGowan said his group is consulting with lawyers to see if the website can remain operational during the election, expected this spring.
The AFL was involved in the Albertans for Change campaign during the 2008 election that targeted the Conservatives for having "no plan." Since the Conservatives won that election with another huge majority, McGowan said his group learned a lesson to "focus on issues rather than personalities."
He said Better Way Alberta is designed as a challenge to all political parties to declare the positions on various questions, such as whether they agree with Alberta's flat-tax rate and whether royalties should be raised.
"We're not trying to paint anyone as a bogeyman," he said.
Many of the arguments and statistics used by the campaign are from the work of Liberal MLA Kevin Taft in his new book, Follow the Money.
Edmonton Journal, Wed Jan 25 2012
Byline: Karen Gerein
It's no secret that Alberta's finances were mismanaged for years under Ed Stelmach and that the situation has only become worse since Alison Redford took office. That the richest province in the federation has the second highest per capita spending and is expected to run a $3.1-billion deficit this year, while depleting the reserves it had built up in good times, is a case study in fiscal mismanagement.
The obvious solution would be to decrease government spending, in order to bring it in line with the national average, while maintaining low tax rates as an incentive for businesses to grow the economy, which would serve to grow the tax base as well. But not if you ask former Alberta Liberal leader Kevin Taft who, in a new book produced in partnership with the Alberta Federation of Labour, argues that Albertans are being "played for fools" by greedy corporations that are making windfall profits, while the government scavenges for pennies.
But Mr. Taft doesn't blame the corporations, he blames "the trustee of the people's wealth — the government of Alberta — for failing every citizen and their future." The solution, according to Mr. Taft, is to throw out the province's policies of maintaining low corporate taxes and a competitive royalty regime, and start collecting a fair share of revenues for Albertans.
Now where have I heard that one before? Oh right, Ed Stelmach made the same argument when he first came to power in 2006. He tried increasing oil royalties and — surprise, surprise — investment in the oil sector dried up. The Stelmach government was forced to do an embarrassing about-face and return the rates to their original levels.
Since that time, Alberta's economy has been recovering and it once again has the highest per capita GDP in the country. And the growth is expected to continue, according to a report released last summer by Scotiabank, which predicts the provincial economy will continue to outperform its neighbours this year. "Heavy oil output is being ramped up, with further investment and construction activity underpinning a multi-year period of solid growth," reads the report. "The manufacturing and service sectors will experience a positive spillover as physical and human capital are added to support the expansion."
Indeed, this is precisely how economic growth takes place. When oil companies are increasing production — and, in turn, boosting their profits — they hire more people, they buy more equipment and they build more facilities. This, in turn, creates business for construction and service companies that also hire workers and perpetuate the cycle of growth. It's no wonder that a StatsCan report released in December shows that Alberta is the top destination for Canadians and immigrants alike.
Most people would probably prefer to have prospering companies that provide jobs and put money in their own pockets, rather than a provincial treasury that's flush with cash. After all, the government would just spend it on a $25-million foot bridge, or some other useless infrastructure project. Most people, but not everyone.
"There's nothing wrong with profitable companies. I want those in my pension plan, too," said Mr. Taft in an interview with the Edmonton Journal. "But profits in Alberta are at double the rate of anywhere else, including the U.S., that's what we are looking at." Well gee, that must be bad. Loot 'em!
On second thought, maybe penalizing businesses for being successful isn't such a bright idea. It's no wonder the Liberals have been shut out of power since 1921.
Financial Post, Thurs Jan 19 2012
Partisan political operators are battling to define the debate over one of the most explosive issues in the coming provincial election: Why can't a wealthy province like Alberta make ends meet?
The ruling Conservative party has passed deficit budgets four consecutive years, even though the province earned between $6.7 billion and $11.9 billion in natural resource revenue in each of those years. On Feb. 9, Premier Alison Redford is widely expected to introduce a fifth deficit budget.
A conservative, right-wing analysis released Thursday blamed the deficit on skyrocketing public-sector salaries, while a liberal, left-wing explanation released Tuesday blamed ballooning corporate profits.
Who to believe.
"The fiscal challenge facing the province is likely to be the dominant issue in the campaign," MacEwan University political scientist Chaldeans Mensah said Friday. "The general public is not open to increases in taxes; it's not in the culture of the place. But we are beginning to see - even on the political right, among conservatives - a questioning of over-dependence on natural resources, especially the oil sector.
"In other words: Is Alberta open to looking at maybe boosting its revenue sources?"
On Thursday, a research paper published by the University of Calgary School of Public Policy revealed Alberta's public-sector wage bill shot up 119 per cent since 2000 - almost double the rate of growth in the rest of Canada, which stands at 63 per cent.
The study was authored by Ken Boesenkool, a former adviser to Prime Minister Stephen Harper and founder of the Alberta Blue Committee, a group that aims in part to establish a "single right-of-centre political party" in Alberta. Co-author Ben Eisen is a senior policy analyst with the market-oriented Frontier Centre for Public Policy.
The pair explain that by 2010, wages and salaries for each Alberta civil servant were $83,326, a 103-per-cent increase from a decade earlier. Those wages took up 95 per cent of the increase in provincial revenues in the past decade, the report says.
The increase in the rest of Canada was 40 per cent.
"These numbers suggest that if the Alberta government is looking for ways of reducing spending to eliminate its deficit . they could do much worse than setting an objective of bringing their wages in line with those in other Canadian provinces," the pair says. "While this paper does not conclusively demonstrate that public sector wages in Alberta are too high, the data presented here - and the sheer size of the per-employee wage gaps - certainly place the burden of proof on those who claim that Alberta public sector wages are reasonable."
The release of that report came two days after former Liberal leader Kevin Taft released a book called Follow the Money, in which he highlights spectacular growth in corporate profits in Alberta.
The Alberta Federation of Labour, a left-wing labour organization, paid the $50,000 cost of publication.
The book, written with University of Alberta economist Mel McMillan and researcher Junaid Jahangir, also relies on Statistics Canada data, as well as government documents and TD economic reports.
Taft reveals that between 1989 and 2008, corporate profits increased from $4,400 per capita to $16,000.
During the same period, corporate profits more than doubled their share of Alberta's GDP, growing from 9.6 per cent to 22.8 per cent. By comparison, corporate profits in the rest of Canada hover at 12 per cent and in the U.S. corporate profits are historically 12 to 15 per cent of GDP.
"In this election, the province needs to have a discussion about how we will pay for public services," said AFL president Gil McGowan.
"The Wildrose party wants the election to be about deficits and cutbacks. We say it should be (about) the province's low royalties and low corporate tax rates."
The attempts to garner public attention in the weeks before the election is called for this spring may be an attempt to work around new laws that restrict third-party advertising during an election.
Under the new rules, spending is not restricted, but contributions are limited to $30,000 per donor in an election year, and forces third parties to be more creative about getting their message to the public.
Edmonton Journal, Thurs Jan 19 2012
Byline: Karen Kleiss
Alberta’s artificially low taxes could set off a “race to the bottom” that’s bad news for all Canadians, says prominent Alberta author and politician
New book shows Alberta wealth is going to corporate profits, not public services
How is it that a province as wealthy as Alberta is running deficits and says it must cut public services? Where is Alberta's huge wealth really going?
Those are two of the central questions that author Kevin Taft attempts to answer in a hard-hitting, fact-filled new book called "Follow the Money," released today in Edmonton. Taft is a best-selling author and former leader of the Alberta Liberal Party.
The book exposes the "big lie" that spending on public services in Canada's richest province is out of control and that Alberta can no longer afford to fund things like education and health care at current levels. Oil is selling at $100/barrel, Alberta's economy is booming, and still the government is cutting services and running deficits.
"Alberta's energy resources are creating wealth on a scale and at a pace that is unprecedented in Canadian history," says Taft. "Those resources are publicly owned, but most of the wealth from them is being scooped off the table in the form of unprecedented profits for corporations. Money that is based on the development of public resources and that could be used to fund things that Albertans and Canadians value is, instead, being siphoned off to private investors. It's not public spending that is disproportionately high in Alberta, it is profits."
"This matters for all of Canada," adds Taft. "The Alberta government is only getting crumbs from the table compared to the scale of wealth being created. But those crumbs have been used to keep taxes so low that even Alberta can't afford to balance its books and pay for services any more. Unfortunately, Alberta's unsustainably low taxes put pressure on other provinces to follow, fuelling deficits and driving service cuts right across Canada. It is a race to the bottom that no government in Canada can win, or even sustain. And the losers in this race are clearly ordinary Canadians who are being told they have to accept less from the services which they value and need."
Taft's book, co-researched by economists Mel McMillan and Junaid Jahangir, was written independently. Publication was sponsored by the Alberta Federation of Labour and Public Interest Alberta as part of a campaign to start a public discussion about taxes and royalties in Alberta.
A short documentary film, produced by award-winning film-maker Tom Radford, has also been produced as a companion to the book.
Taft will be stepping down as a MLA this spring when an election is expected to be called.
"This isn't about politics, it's not even about the election," says Taft. "It's about showing Albertans that they're not getting their fair share of the wealth being created from the resources they own. And it's about drawing attention to public policies that are hurting Albertans and, indeed, all Canadians."
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For more information:
Kevin Taft, MLA-Edmonton Riverview (780-720-4479)
Gil McGowan, President, Alberta Federation of Labour (780) 218-9888
Bill Moore-Kilgannon, Director, Public Interest Alberta (780) 993-3736
Albertans are being "played for fools" by corporations making massive profits at the expense of provincial programs and services, says former Liberal leader and scholar Kevin Taft.
In a new book Follow the Money, published today, Taft explores the mystery of why one of the wealthiest jurisdictions in the world is experiencing deficits and program cuts while the profits of corporations in the province have climbed more than 300 per cent.
"It feels like we need a Danny Williams moment," he said referring to the feisty former Newfoundland premier. "We need to take control of government and make sure it is looking after the best interests of our resource owners."
Taft, who has spent a decade in Alberta politics, says he just wants to stir up "a more balanced debate" on taxation and royalty policies.
"We're leaving way too much wealth on the table and we're letting it flow out the door to investors on Wall Street or in Shanghai and Beijing," said the departing provincial MLA and author of four controversial books on Alberta government policy.
He writes that he doesn't blame corporations for making obscene profits. "I blame the trustee of the people's wealth - the government of Alberta - for failing every citizen and their future."
The book, created in partnership with the Alberta Federation of Labour (AFL) and Public Interest Alberta, questions the government's rationale for having the lowest corporate taxes in the country and a royalty program that focuses more on creating a competitive investment climate than collecting a fair share for Albertans.
AFL president Gil McGowan said the book is the beginning of a major campaign to spark a public debate about whether Alberta is getting its fair share for its resources and from the corporations profiting from its booms. "The real reason we have a deficit is successive Conservative governments have engaged in a race to the bottom in taxation and royalties," he said.
The AFL was one of several unions behind TV ads last election that attacked the Ed Stelmach government. The Tories subsequently passed a law to limit third party spending on election advertising.
The Stelmach government made an attempt to increase Alberta's oil and gas royalties, but many of the gains were rolled back in the face of angry opposition from the industry and a downturn in the economy.
Taft's book is based on research by University of Alberta economics professor Mel McMillan and Ph.D candidate Junaid Jahangir, who plowed through reams of studies and Statistics Canada tables to track Alberta's wealth.
Taft said Alberta better come to terms with the issue or its long-term future is in serious jeopardy. "For the next decade or maybe two we're positioned to do something really, really spectacular, but right now as a province and as a society we're really blowing it."
Calgary Herald, Wed Jan 18 2012
Byline: Darcy Henton
Alberta ‘leaving too much on the table,’ ex-Liberal leader says: With corporate profits three times the average in other provinces, why is Alberta struggling with a budget deficit, Ke...
EDMONTON — This province is a great place to do business, but if Albertans knew just how great, they might have some tough questions for the provincial government, Alberta's former Liberal leader says.
Corporations here pulled in profit at three times the rate, per capita, of the level any other province, says Kevin Taft's new book, entitled Follow the Money.
With all that wealth, there are questions as to why the province is struggling with a $2-billion to $3-billion deficit, squeezing public services and education and saving so little
Where did all the money go? That's the question Taft attempts to answer in this book written with University of Alberta economist Mel McMillan and researcher Junaid Jahangir using publicly available data from StatsCan, government documents and TD economic reports.
"There's nothing wrong with profitable companies. I want those in my pension plan, too," Taft said in an interview.
"But profits in Alberta are at double the rate of anywhere else, including the U.S., that's what we are looking at."
What does that mean for public services in Alberta? That's the issue, Taft said.
Taft's book, to be launched Wednesday night at the Garneau Theatre along with a video by Edmonton filmmaker Tom Radford. The event will kick off a pre-election campaign by the Alberta Federation of Labour and the advocacy group, Public Interest Alberta, said Gil McGowan, president of the AFL which covered the $50,000 to publish the book.
"In this election, the province needs to have a discussion about how we will pay for public services," McGowan said.
"The Wildrose party wants the election to be about deficits and cutbacks. We say it should be the province's low royalties and low corporate tax rates."
Public Interest Alberta boss Bill Moore Kilgannon said: "What Albertans really care about is high quality education and health care. But we should not base the number of nurses and teachers on the price of oil."
Taft's research suggests there's plenty of wealth in the province, but the provincial government is simply leaving too much of it on the table, he said. "We need to have an adult conversation about how to have the revenues to ensure the services. l
What's critical to understand is just how far ahead of the rest of the country Alberta sits with corporate wealth, Taft said. According to the 2005 and 2007 reports by TD Economics, corporate profits in Alberta as a share of GDP jumped to 22.8 per cent, compared with 12 per cent in the rest of Canada. In the U.S., corporate profits are historically 12 to 15 per cent of GDP.
The big jump in corporate profits here began in the 1990s, but accelerated in mid-2000s. In 1989, corporate profits in Alberta were $4,400 per person. By the mid-1990s, the number climbed to $7,000 per capita and from 2004-08, before the downturn, profits ran at $16,000 per person.
That's three times the average of $5,075 per person in the nine other provinces, Taft said.
Here's another historic view for comparison: In Alberta, corporate profits more than doubled their share of the GDP from 1989 to 2008 from 9.6 per cent to 22.8 per cent.
Some of those profits went into higher incomes for Albertans. Incomes here are up 35 per cent in the past 21 years after inflation is taken into account. Some of the money went into paying down government debt in the 1990s, Taft said.
But overall, the share of the wealth that goes into public services has shrunk from 23 per cent in 1989 to 14 per cent between 2005 and 2009.
So the next question, Taft said, is: Given the high profits in Alberta's corporate sector, is the government leaving too much money on the table?
That question is especially pertinent, given that the corporate sector's wealth mostly comes from companies developing publicly owned resources, particularly Alberta's vast energy reserves, Taft said.
"These numbers tell me we are leaving too much on the table. We have to channel the spirit of Danny Williams," said Taft, referring to former Newfoundland premier who drove a hard bargain with oil companies.
It doesn't necessarily mean Alberta needs to spend on public services, but it certainly means Alberta should do more saving, Taft said.
"My personal view is spending on public services is where it needs to be. We don't need to spend more, but we need to save. Otherwise, we face a painful reckoning in the future."
The most distressing number he said he uncovered was the falling value of the Heritage Fund, which is supposed to financially backstop Alberta when oil and gas run out.
In 1976, when it was set up, it was worth about $4,040 per capita and it peaked in 1982 at $9,870 per person. Now, it's at $3,934.
"That just drives home the fact we are selling the farm to live the high life today," he said.
Taft's book tackles a number of "myths" — first, that the province spends like drunken sailors. In reality, from 1989 to 1994, there was no increase in spending.
A second myth, he said, is that debt was dangerously high. While high, it was only half the average in the other provinces, Taft said.
Edmonton Journal, Mon Jan 17 2012
Byline: Sheila Pratt