Recent statements by Finance Minister, Ron Liepert, confirm my suspicion that politics is like a House of Mirrors. Not a transparent glass house (no stone throwing allowed), but the maze-like puzzle boxes you find at amusement parks and the midway. The challenge of the maze is heightened by mirrors and panes of glass which disorient the players who catch a glimpse of the real world beyond the glass but wonder if they’ll ever get there.
How did Mr Liepert create such an unsettling image? Surely you jest. OK seriously, consider this. In August Mr Snelgrove, interim Finance Minister, presented the Q1 financial report. It was a jolly report, full of optimism for the future. It predicted a balanced budget by the end of the 2011/2012 budget year due to an infusion of new revenues.* Mr Liepert, ever supportive, heartily agreed with him. At the time Mr Liepert was the Energy Minister responsible for the oil, natural gas and coal industries that would be creating these revenues. Presumably he had a solid understanding of the economic forces driving the industries in his portfolio.
Fast forward 2 months. Mr Liepert is stripped of the powerful Energy portfolio and now finds himself toiling in the unglamourous Finance portfolio. (No offense to all the accountants out there). Make no mistake, Finance is a powerful portfolio, but its influence is moderated by Treasury, now under Doug Horner. In the Cabinet’s order of precedence Mr Liepert is now 2 levels lower than the Energy Minister, sandwiched between Health and Education.
Mr Liepert is a feisty man. It took him 8 days to find his footing in his new ministry. On the 8th day he met with the press to announce dark days ahead. He said that although he had originally agreed with Mr Snelgrove’s Q1 financial report he was now “much less optimistic” that the PCs would be able to balance the 2011/2012 budget. He blamed this nasty turn of events on the deterioration of the world economy, its impact on energy prices and the Heritage trust fund and the fact that there was no “low hanging fruit” (eg. easy items) left in the budget to cut. Really? I would urge Mr Liepert to take a careful look at the $14 million budget of the Public Affairs Bureau (also known as the PC propaganda machine). But I digress.
At first blush, Mr Liepert’s statement sounds plausible—but think about it for a moment. What happened between August and October to cause Mr Liepert to make such a dramatic about-face. Did the world turn upside down in the last 2 months? Sure, the global economy is volatile, but what is the impact of that volatility on Alberta?
Here’s what some experts (who don’t have a political agenda) say about Alberta’s economic prospects:
- Gregory Ebel, CEO of Spectra Energy, a US natural gas company with interests in Canada says there’s a “gas renaissance” coming and if gas prices stay in the US$3 to 5, or $4 to 6 range (which forecasters believe is achievable) “everybody can win”.**
- Greg Stringham, VP with Canadian Association of Petroleum Producers (CAPP) says “We expect to see substantial growth, maybe not at the same pace we saw a few years ago, but at least we’ve come out of the recession in a manner that shows some growth in the oil business.” ***
This prognosis is borne out by the land sales statistics. The province of Alberta owns 81% of all of the oil, natural gas and other minerals in the province. It sells these resources to oil and gas companies in “land sales”. The number of land sales/year is a good indication of the industry’s confidence in the future. In 2006 revenue from land sales hit an all time record high of $3.43 billion due to heavy spending by the oil sands industry. Land sales revenue to-date is $3.24 billion—that’s just $200 million short of the 2006 record and there are still 4 land sales left to go before we close off 2011.
Now, I’m not an economist or industry expert, but it looks to me like the industry is feeling pretty optimistic about its future. Oops, watch it…you just walked into a glass wall! That glass wall is intended to deflect you from your destination, which in this case is a balanced approach to spending on public services.
Mr Liepert says he will table a budget in Feb 2012. In order to do so he needs to forge an alignment in caucus which balances the PC’s desire for a balanced budget against the public’s desire to protect public service spending. What drives this balance? The litmus test according to Mr Liepert is what caucus is prepared to “sell on the doorsteps…”
Of course! Developing a budget is ultimately a political exercise not a financial or economic one. Therefore the optimistic perspective of the industry experts is irrelevant.
Mr Liepert is simply fulfilling his mandate to ensure that the PCs are re-elected next spring. The biggest challenge facing the PCs today is trying to be more fiscally conservative than the Wildrose. How will the PCs justify a harsh budget when industry forecasters don’t support their position? Well, take a page from the Republican playbook—manufacture or exaggerate a crisis and run with it. In the US, it was the war on terrorism, in Alberta it may be the volatile global economy. The fact that economic forecasts don’t support the need to butcher the budget is irrelevant, we’re in the House of Mirrors afterall.
On Monday, Oct 24 the Legislature meets for the first time under Premier Redford. It will sit for 2 days. Ms Redford decided that the best use of her time was to discuss the global economic crisis. What? Let’s see whether Ms Redford uses this opportunity to set the stage for deep budget cuts across the board.
If she does, remember this: politics may be a House of Mirrors, but Government is not.
*Calgary Herald Oct 18, 2011, A4
**Financial Post, Oct 21, 2011, FP5
***Calgary Herald OnLine, Oct 20, 2011
****Daily Oil Bulletin, Oct 2011,