Alberta Politics Thread

[Locke]

Originally Posted by Flash Walken

But why is it a foregone conclusion that increasing spending during an economic downturn is always a bad decision?

When the private sector is laying off tens of thousands of employees I don't think it's prudent for the other major employer in the province, government, to do the same, and there are studied economists who feel the same way. Further to this point, it's not just engineers in office buildings in Calgary being layed off, the construction industry in the province is in the toilet. That's an industry where public investment in infrastructure can actually make a tangible difference in the economic fortunes of communities all over the province.


http://calgaryherald.com/news/politi...cture-spending

This is a fun question, so lets do it.

The idea behind the Government spending money during a downturn is interesting, typically speaking this is an artificial 'kick start' to the economy. Its exactly what people like you want, its taking money from the people least effected by a downturn (the wealthy) and moving it into the hands of the people most affected by the downturn, the less wealthy.

The wealthy dont spend as much as the rest of us. When money moves from their companies to themselves they invest and save most of it, so once the funds move from the company to the individual the Government has had their bite at the cherry.

This is why intelligent and effective tax policy is incredibly important. Not just: 'Take MORE!!!'

Moving right along though, one does not stimulate an economy by hiring more Government workers, one does it by providing public works. Building Great Big Things.

Pave a road, build a bridge, manufacture a power plant.

Something that provides public value in the future when the economy rebounds but in the moment puts dollars into the hands of the people that spend them.

Thats how this works. If we're all going to bitch and moan about economic policy while pointing our fingers at the glorious concept of public deficit spending during a downturn, an economic theory thats pushing 100+ years, then we should at least do it properly.

Just hiring more Government workers isnt the answer. Having 3 secretaries for the Premier or more people working at the passport office or hiring 'Teacher's Aides' is not a solution, its the generation of 'Political Capital' and I dont know how many times I've been rejected at the pub or a restaurant because I couldnt pay my bill with 'Political Capital.'

You have to be smart about it because while you're looking to spend money to get it into public hands and keep the wheels turning and trains running you are bringing fewer dollars through the door so you have to be really careful with the ones you've got otherwise you dig a hole that you can never get out of.

[belsarius]

Originally Posted by CliffFletcher

But that's not the issue. The issue is how to narrow to enormous gap that has opened between government revenues and government spending. A balanced approach is to increase taxes while also cutting spending. And when we cut spending, once we're past the ever-popular 'cut waste', we have to decide whether to cut A) capital spending on infrastructure, B) the breadth of services offered (classrooms and hospital beds), or C) public salaries, which make up the bulk of operational spending.

Personally, I would be reluctant to cut A because we still have huge infrastructure needs to catch up to this province's rapid growth, and infrastructure projects create jobs without committing to ongoing spending. I would be reluctant to cut B, because again, we're still catching up on the growth of the province. I would favour C, but not to the extent that those cuts make it difficult to attract qualified teachers, nurses, etc. I happen to think public sector salaries in Alberta today are quite a bit higher than market rates, so they could be cut (or frozen) without a significant reduction in the quality of service.

Or I suppose we could take the Ontario approach and just keep running massive deficits and let our kids sort out the mess in 20 years, probably through draconian cuts and sweeping privatization.

And I think we are going to see C, but through freezes, not cuts. Management salaries have already been frozen for almost a year now. Word out of the teachers union is to expect a fight as the government wants to keep salaries the same for the next contract. AUPE just completed their contract so they have a few years before anything can be done.

The thing is I don't believe the public salaries are higher than market rates. Alberta still enjoys the highest weekly earnings of any province in the country, even with an 8.5% unemployment rate. Per capita the public service is expense but compared to the mean salary they are on par with other jurisdictions. Debt to pay expenses for the next 10 years would be disastrous, for the next 3 or 4 I think is acceptable to keep the economy growing.

[belsarius]

Originally Posted by Locke

This is a fun question, so lets do it.

The idea behind the Government spending money during a downturn is interesting, typically speaking this is an artificial 'kick start' to the economy. Its exactly what people like you want, its taking money from the people least effected by a downturn (the wealthy) and moving it into the hands of the people most affected by the downturn, the less wealthy.

The wealthy dont spend as much as the rest of us. When money moves from their companies to themselves they invest and save most of it, so once the funds move from the company to the individual the Government has had their bite at the cherry.

This is why intelligent and effective tax policy is incredibly important. Not just: 'Take MORE!!!'

Moving right along though, one does not stimulate an economy by hiring more Government workers, one does it by providing public works. Building Great Big Things.

Pave a road, build a bridge, manufacture a power plant.

Something that provides public value in the future when the economy rebounds but in the moment puts dollars into the hands of the people that spend them.

Thats how this works. If we're all going to bitch and moan about economic policy while pointing our fingers at the glorious concept of public deficit spending during a downturn, an economic theory thats pushing 100+ years, then we should at least do it properly.

Just hiring more Government workers isnt the answer. Having 3 secretaries for the Premier or more people working at the passport office or hiring 'Teacher's Aides' is not a solution, its the generation of 'Political Capital' and I dont know how many times I've been rejected at the pub or a restaurant because I couldnt pay my bill with 'Political Capital.'

You have to be smart about it because while you're looking to spend money to get it into public hands and keep the wheels turning and trains running you are bringing fewer dollars through the door so you have to be really careful with the ones you've got otherwise you dig a hole that you can never get out of.

You are not wrong, but I don't think you give enough credit to the teachers aide. In the long term public works are a much better value for money however in the short term to stimulate every dollar spent helps.

That teacher's aide will shop at the local store requiring them to hire staff. That staff pays taxes and shops and increases the need for more jobs. This has a cumulative effect that will help stimulate the economy. The difference between them or the construction worker is stimulus vs investment. Both together move the economy forward and have their place. The fact that a large chunk of the deficit is due to capital works shows the NDP understands this and is not just borrowing to keep the lights on.

Hiring an unsustainable amount of staff isn't going to work I agree, but I disagree that the teachers aide doesn't assist in the help of the economy.

[corporatejay]

Originally Posted by belsarius

You are not wrong, but I don't think you give enough credit to the teachers aide. In the long term public works are a much better value for money however in the short term to stimulate every dollar spent helps.

That teacher's aide will shop at the local store requiring them to hire staff. That staff pays taxes and shops and increases the need for more jobs. This has a cumulative effect that will help stimulate the economy. The difference between them or the construction worker is stimulus vs investment. Both together move the economy forward and have their place. The fact that a large chunk of the deficit is due to capital works shows the NDP understands this and is not just borrowing to keep the lights on.

Hiring an unsustainable amount of staff isn't going to work I agree, but I disagree that the teachers aide doesn't assist in the help of the economy.

The problem is those jobs created aren't temporary. They linger as to do the benefits that go along with them and the pensions that entitle them to it.

You are talking about millions of dollars in the longer PER PERSON. Conversely, if you jam a couple of billion into the economy on infrastructure projects that you need anyway, it's temporary like ripping a band aid.

[belsarius]

Originally Posted by corporatejay

The problem is those jobs created aren't temporary. They linger as to do the benefits that go along with them and the pensions that entitle them to it.

You are talking about millions of dollars in the longer PER PERSON. Conversely, if you jam a couple of billion into the economy on infrastructure projects that you need anyway, it's temporary like ripping a band aid.

If they were hiring for the sake of hiring I would agree, but from everything I've seen or heard any hiring is to fill a need, not just for stimulus. My point was more that they provide it and letting people go would hurt that effect. I am by no means saying they should increase the size of the public service by 15% just to help the economy, but by maintaining hiring levels and having some increases where required (like nursing homes) is not detrimental and will help stimulate things.

[Cowboy89]

Originally Posted by belsarius

You are not wrong, but I don't think you give enough credit to the teachers aide. In the long term public works are a much better value for money however in the short term to stimulate every dollar spent helps.

That teacher's aide will shop at the local store requiring them to hire staff. That staff pays taxes and shops and increases the need for more jobs. This has a cumulative effect that will help stimulate the economy. The difference between them or the construction worker is stimulus vs investment. Both together move the economy forward and have their place. The fact that a large chunk of the deficit is due to capital works shows the NDP understands this and is not just borrowing to keep the lights on.

Hiring an unsustainable amount of staff isn't going to work I agree, but I disagree that the teachers aide doesn't assist in the help of the economy.

Alberta imports most of it's consumer goods from elsewhere. Net/ net considering that 100% of their salaries have to be raised from Alberta tax dollars or raised in the Debt capital markets with Alberta as debtor it will lead to massive leakages of those funds flowing out of Alberta to elsewhere.

The economy needs capital investment to get money flowing the other way from other jurisdictions. Which means that we need investment opportunities that are competitive for the marginal investment dollar. Making it more expensive to run a business in Alberta to employ teachers aides, or beef up Service Alberta run completely counter to that end. And before the Flash Walken's of the world start harping about how our taxes are much lower than 'Canadian standards' I would point out that:

A) the marginal investment dollar is global not just domestic

and

B) Other Canadian jurisdictions at the moment are awful at attracting investment as well so being more like Ontario & Quebec is not a selling feature

[Igniter]

Originally Posted by Cowboy89

Alberta imports most of it's consumer goods from elsewhere. Net/ net considering that 100% of their salaries have to be raised from Alberta tax dollars or raised in the Debt capital markets with Alberta as debtor it will lead to massive leakages of those funds flowing out of Alberta to elsewhere.

The economy needs capital investment to get money flowing the other way from other jurisdictions. Which means that we need investment opportunities that are competitive for the marginal investment dollar. Making it more expensive to run a business in Alberta to employ teachers aides, or beef up Service Alberta run completely counter to that end. And before the Flash Walken's of the world start harping about how our taxes are much lower than 'Canadian standards' I would point out that:

A) the marginal investment dollar is global not just domestic

and

B) Other Canadian jurisdictions at the moment are awful at attracting investment as well so being more like Ontario & Quebec is not a selling feature

Exactly. Without local value creation, our economy becomes one big shell game... of wealth redistribution

I give my tax dollars, the government pays the teacher who then comes into my shop and buys from me. The cycle continues. There is no growth.

[Cowboy89]

Originally Posted by Igniter

Exactly. Without local value creation, our economy becomes one big shell game... of wealth redistribution

I give my tax dollars, the government pays the teacher who then comes into my shop and buys from me. The cycle continues. There is no growth.

It's actually worse than no growth, it's a net outflow unless 100% of the value chain of what you sell in your store is inside Alberta.

[Cowboy89]

Originally Posted by Locke

You have to be smart about it because while you're looking to spend money to get it into public hands and keep the wheels turning and trains running you are bringing fewer dollars through the door so you have to be really careful with the ones you've got otherwise you dig a hole that you can never get out of.

You raise a great point about infrastructure spending. Because the word 'infrastructure' gets thrown around as a buzz word to placate the populous into accepting fiscal deficits of grand sizes these days. In theory, if we're building things that we need anyway and accelerating their timeline's because the economy's slow and materials and labor are cheaper than yes this kind of investment is 'good.'

It's also good if we're building things that are public goods that only the public sector can do and their net benefit is higher than not investing, like say maybe some well-designed transit projects as an example, then maybe that can be 'good' infrastructure investments as well.

However, if we're spending money on building schools for the imaginary children of hypothetical inter-provincial migrants because after more than a decade of red hot growth the government hasn't adapted to the current economic reality

or

We blow money on things that are completely unnecessary or of dubious or immeasurable value to the province because the kinds of people making investment decisions are named Joe Ceci, then it's just wasting money.

[belsarius]

Originally Posted by Cowboy89

Alberta imports most of it's consumer goods from elsewhere. Net/ net considering that 100% of their salaries have to be raised from Alberta tax dollars or raised in the Debt capital markets with Alberta as debtor it will lead to massive leakages of those funds flowing out of Alberta to elsewhere.

The economy needs capital investment to get money flowing the other way from other jurisdictions. Which means that we need investment opportunities that are competitive for the marginal investment dollar. Making it more expensive to run a business in Alberta to employ teachers aides, or beef up Service Alberta run completely counter to that end. And before the Flash Walken's of the world start harping about how our taxes are much lower than 'Canadian standards' I would point out that:

A) the marginal investment dollar is global not just domestic

and

B) Other Canadian jurisdictions at the moment are awful at attracting investment as well so being more like Ontario & Quebec is not a selling feature

Which is why I don't advocate for nothing but government funded employees. It doesn't work or make sense. However focusing solely on marginal investment dollars is like preaching Reganomics. Investment in Alberta is not based solely on marginal investment, it is also based on the value of the underlying asset base. You could reduce the tax rate to 0% and you would get no more investment in oilsands than you are right now because regardless of your marginalized rate your rate of return would be negative with the cost of the asset so low.

Conversely invesment from a Wal-Mart is not dependent on the marginalized rate at all but consumer demand potential. If there is no consumer demand then even without a tax rate there is no investment. Keeping people working, even if it is temporarily financed by debt keeps the economy moving.

My point being it is a balancing act. You are totally correct that pushing the corporate tax above any comparable jurisdictions would limit investment opportunities but I don't think that has happened because the unemployment rate has stabalized instead of spiralling down.

The fact is the best way to avoid losing foreign investment is to diversify in order to ensure no one industry can tank the economy like the oil industry has done. The NDP want to value add, they want to diversify and they want to ensure we can get our product to market when prices rebound. All without hampering a floundering economy with less consumers.

[Makarov]

Originally Posted by corporatejay

The problem is those jobs created aren't temporary. They linger as to do the benefits that go along with them and the pensions that entitle them to it.

You are talking about millions of dollars in the longer PER PERSON. Conversely, if you jam a couple of billion into the economy on infrastructure projects that you need anyway, it's temporary like ripping a band aid.

I disagree (to an extent anyway). Infrastructure investment isn't temporary like ripping a band aid. Large pieces of nfrastructure require tremendous amounts of maintenance and that maintenance is expensive (especially true for government where insufficient maintenance of publicly used infrastructure inevitably leads to injuries and significant lawsuits).

[GaiJin]

Originally Posted by belsarius

The NDP want to value add, they want to diversify and they want to ensure we can get our product to market when prices rebound. All without hampering a floundering economy with less consumers.

By making energy more expensive is a sure way to do that , amirite ?

[para transit fellow]

Originally Posted by GaiJin

By making energy more expensive is a sure way to do that , amirite ?

No

[Robbob]

Originally Posted by belsarius

That's a good point. I can see where you are coming from and I am not by any means saying the government spends as prudently as they should. Some days I hear stories that remind me of Office Space in it's ridiculousness. I can't believe how much some of the executives in AHS or the AER make and wish I had a way to cut back my spending on them.

For me it's the us vs them mentality against the public service. Most rank and file Teachers/nurses/beaurocrats don't do the job to make money but to help the public good, and I just can't get behind the attacks on them for getting paid to do a job that benefits society as a whole.

The AER is industry funded so I don't think it is quite fair to lump them in. YOU are right though some executives costs are up there. could be worse though, some of the execs in Ontario make 2 or 3 times more.

[corporatejay]

Originally Posted by Makarov

I disagree (to an extent anyway). Infrastructure investment isn't temporary like ripping a band aid. Large pieces of nfrastructure require tremendous amounts of maintenance and that maintenance is expensive (especially true for government where insufficient maintenance of publicly used infrastructure inevitably leads to injuries and significant lawsuits).

To Cowboy's point though. I'm referring to needed infrastructure that is being accelerated because labour and materials are cheap. Interchanges, transit projects.

[Locke]

Originally Posted by corporatejay

To Cowboy's point though. I'm referring to needed infrastructure that is being accelerated because labour and materials are cheap. Interchanges, transit projects.

Absolutely, the problem is that the NDP have shown that their deficit spending is on 'Operations.'

Thats bad. Thats screwing this theory up about as badly as you can.

Just employing people for the sake of employing them is a terrible policy, there has to be an end net benefit and the Government just hiring people doesnt provide that.

[corporatejay]

Originally Posted by Locke

Absolutely, the problem is that the NDP have shown that their deficit spending is on 'Operations.'

Thats bad. Thats screwing this theory up about as badly as you can.

Just employing people for the sake of employing them is a terrible policy, there has to be an end net benefit and the Government just hiring people doesnt provide that.

I'm arguing for spending during a recession as policy, not the implementation by this government.

[Makarov]

Originally Posted by Locke

Absolutely, the problem is that the NDP have shown that their deficit spending is on 'Operations.'

Thats bad. Thats screwing this theory up about as badly as you can.

Just employing people for the sake of employing them is a terrible policy, there has to be an end net benefit and the Government just hiring people doesnt provide that.

I take your point. However, it seems to presume that new hires are standing around doing nothing. However, if new staff are providing value like better educated young people, better maintained transportation infrastructure, healthier labour force, better organized bureacracy, it can have long term benefits for the province (just like new infrastructure).

[OMG!WTF!]

Originally Posted by Makarov

I take your point. However, it seems to presume that new hires are standing around doing nothing. However, if new staff are providing value like better educated young people, better maintained transportation infrastructure, healthier labour force, better organized bureacracy, it can have long term benefits for the province (just like new infrastructure).

Pretty big IF. What's more certain is that it gives you another 47k probable votes in the next election. "a healthier labour force"? Like we hire healthy people to watch over the sickies? We're not culling the heard here.

[Makarov]

Originally Posted by OMG!WTF!

Pretty big IF. What's more certain is that it gives you another 47k probable votes in the next election. "a healthier labour force"? Like we hire healthy people to watch over the sickies? We're not culling the heard here.

I meant to suggest that more doctors/nurses may lead to a healthier, more productive labour force throughout the province (not just in the public sector).

My broader point is in this: economic down turns can be a good time for the government to invest in the province (most here to seem to agree with this basic proposition). The costs/benefits of all such investments, whether in physical or human capital, ought to be assessed on a case-by-case basis.