February 01, 2011

Wildrose spending proposals short-sighted

posted by Diana Gibson

According to the Wildrose leader Danielle Smith, the Tory government should limit spending increases to the rate of inflation plus population growth and protract billions of dollars in capital spending to help balance the books (http://bit.ly/gESnpU). This shows a profound lack of understanding of Alberta's economy, spending levels and needs.

First, it fails to consider that aging alone will cost health care at least 1.3% beyond population growth and inflation. That does not include cost increases associated with pharmaceuticals and new technologies, both of which are currently the biggest cost drivers in the system. The Wildrose policy could necessitate denying access to new drugs and cancer testing techniques. Albertans have clearly stated in poll after poll that they would prefer to pay higher taxes or even premiums than see health care services cut.

Cutting the investments in infrastructure and spending in other areas is also short-sighted.

Alberta’s economy has grown 76 percent more than population and inflation in the past 20 years. The Wildrose proposal would not address the need to increase our social and physical infrastructure to keep pace with growth. That is reminiscent of the Ralph Klein approach that caused Alberta to enter the last boom with a serious infrastructure deficit, and forced us into the position where citizens were paying a 30% premium for building necesssary public infrastructure at the height of the boom. It allows for no counter-cyclical spending plans or long term vision.

The Wildrose proposed spending limits do not address the fact that Alberta is just emerging from a major recession and spent much of last year with an economy struggling to gain ground. Albertans and Alberta businesses spent this year grappling with the recession hangover, the impacts of which have been softened by public sector investments in social programs and capital spending. Spending beyond population growth and inflation was recommended by mainstream financial advisors and economists in institutions such as the International Monetary Fund. That spending would not have been allowed under the proposed spending limits.

The deficit is being funded out of the rainy day fund (Sustainability Fund). Wisely, Albertans saved for a rainy day and had surplus revenues set aside for sustaining the economy through a rough patch caused by the biggest recession since the Great Depression.

Managing a large and sophisticated world-class economy like Alberta's requires a more sophistiated approach than the simple black and white rules being proposed by Danielle Smith and her party; proposals based more on populism and idealism than pragmatism.

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