I just returned from a business trip to Washington DC. It was hot, sticky, confused and angry—hot and sticky because 200 years ago some bright light decided that the best place to locate the capital was in the middle of a subtropical swamp; confused and angry because Americans had finally realized that unless Obama and the Republicans agreed to increase the $14.3 trillion debt ceiling prior to Aug 2, the US would default on its Treasury bonds. Alternatively it could meet its debt service obligation by chopping social security, old age pension payments and welfare cheques. Talk about being between a rock and a hard place.
I’m not going to review the arguments in favour of raising the debt ceiling, holding the line or switching to Plan B. Suffice it to say that this issue has been badly mishandled. Moody’s and S&P placed the nation’s AAA bond rating on review for a possible downgrade, America’s economic health is now being discussed in the same breath as that of Greece, Ireland and Italy and Michele Bachmann has become the newest darling of the Tea Party.
Compare this to a situation closer to home. It’s become blindingly obvious that Alberta cannot continue to use resource revenue to cover the 30% shortfall in the cost of public services. The question is not will Alberta run out of cash but when. One solution that has surfaced is raising taxes. The Conservatives have said this is out of the question. Sound familiar?
Is there anything we learn from the American experience that will help us work through this problem? Let’s start with a few basic questions.
Didn’t Obama, Congress and the Senate see this coming? Of course they did. However anyone bold enough to raise the alarm was no doubt warned off. Not only is this a complex problem it’s a political hot potato and politicians as a rule would rather keep their heads down and hope that the problem will somehow self correct.
Lesson #1: A government owes it to its people to identify critical issues early and bring them into the political process for reasoned analysis and debate. Well, guess what, the Premier’s Council did just that in its May 2011 Report on Economic Strategy, but the politicians, particularly the PC leadership hopefuls, are not eager to address the issue.
Once it became obvious that the debt crisis could not be ignored, how was it communicated to the population? The government’s communication process is unclear, however international publications like The Economist carried the story for months, but it didn’t hit the mainstream media in the US until recently. One might argue that the corporate owners of media outlets were simply trying to protect their political cronies, but it is more likely that the media needs time to understand a story of this complexity and reduce it to bite-sized pieces which will catch the attention of the audience.
Lesson #2: The media relies on its overarching right to publish without state interference. In return for this right, the media has an obligation to expend the intellectual horsepower necessary to understand and communicate a complex story accurately and effectively. Or to put it more succinctly—the media must do its job. In Alberta’s case, the press gets a tick in the box. The media presented the findings of the Premier’s Report (as well as countless other reports published by various think tanks) which suggested that increased taxation may be the solution to the 30% revenue shortfall and asked the politicians to comment. The politicians ducked the question or suggested that it was premature.
Who became engaged in the debt crisis story once it became public? Was it just opportunistic politicians or did the general population call their politicians to account? This is where the US experience gets really interesting. Some segments of the population became engaged and others did not. The level of engagement depended on two things; whether a potential downgrade of the national debt could impact their lives and whether they were represented by a national organization that could lobby effectively on their behalf.
Here’s an example. AARP, a non profit organization for Americans 50 years and older, quickly recognized the potential outcomes of a poorly managed solution to the debt crisis. In May it sponsored TV ads warning of cuts to Social Security and Medicare. In June the ads turned derisive (why cut Social Security and Medicare but continue to sponsor pickle research and shrimps running on treadmills). In July AARP representatives flooded the halls of Congress dropping off “I am NOT a pushover” buttons and reminding congressmen that AARP represents 50 million seniors which equates to 50 million votes.
At the other end of the spectrum is a segment of the population that is utterly disengaged. The complacent group includes professionals and businessmen who are aware of the issue but don’t have the time or the inclination to give it much thought. But then again the professional/business class can afford to be complacent. They have access to decent medical care and certainly don’t expect to be dependent on social security or welfare any time soon. They are confident that the politicians will come up with a solution in the next 2 weeks because the failure to do so is unthinkable.
This manana world view is a serious concern. Had this group focused on the issue when it emerged and pressured their congressmen to address it a solution may have been found and the crisis averted.
Lesson #3: No one can afford to be complacent in the face of a critical issue. Do your research and make your voice heard, if not for your sake then for the sake of your children.
Albertans, unlike their American neighbours, still have time to transition out of a bankrupt public service funding model to one that is more sustainable. But we must start the dialogue now. We must identify all of the options and analyse them in an unbiased, non-partisan way. Should we reduce services by 30% so that the non-resource revenue stream will be sufficient? Should we raise taxes? Should we generate additional revenue through levies or user fees? These are difficult questions which will require thoughtful analysis and ultimately buy-in by all Albertans.
Albertans have learned Lessons #1 and #2, now we need to focus on Lesson #3. It’s time to set aside our complacency and find a solution to the revenue shortfall problem. That’s the only way to avoid our own version of a hot, sticky, confused and angry summer.