Conservative Snake Oil

For thirty years, neo-conservatives have been selling a myth. From Ronald Reagan, through George W. Bush to Stephen Harper, they have pitched the idea that they know how to manage government finances. Berating the "tax and spend" heresy of a previous generation, they have claimed that they will lead their fellow citizens to the Promised Land.

The problem is that facts invariably prove them wrong. The latest example of conservative bunk is the recently released Alberta budget. Alberta -- the  Land of Milk and Honey -- will be running a deficit this year.

It's not all Alison Redford's fault. Albertans have been raiding the Heritage Fund for decades. Frances Russell writes:

Alberta has deposited just 5.4 per cent of its resource revenues in the fund since its inception, a fact that has gone largely unnoticed by the province’s population. Almost all the money was spent helping successive Conservative governments party hearty on above-Canadian-average levels of public services while boasting long and loud about Alberta’s status as the nation’s lowest-tax jurisdiction. Albertans not only don’t pay a sales tax but also enjoy a flat income tax, the latter another gift from the ebullient [Ralph] Klein and his provincial treasurer, former Canadian Alliance leader Stockwell Day.

That's certainly not what the late Peter Lougheed intended when he established the fund. Its purpose was to “provide prudent stewardship of the savings from Alberta’s non-renewable resources by providing the greatest financial returns on those savings for current and future generations of Albertans."  But those who followed Lougheed disregarded that mission.

According to a report recently released by the Fraser Institute:

From 1977 to 2011, the Alberta Heritage Fund’s cumulative net income was $31.3 billion. But the amount transferred out of the fund was $29.6 billion — “meaning virtually nothing was set aside for inflation-proofing to keep the principal intact in real terms,” the report’s authors say. “Despite Alberta’s tremendous natural resource endowment, the Fund equity (valued at cost) as of 2011 was a mere $14.2 billion.”

That's not what the Norwegians, those pie eyed and socialists, did. They banked their oil revenues:

The Norwegian Ministry of Finance forecasts that the fund will reach NOK 4.3 trillion ($717 billion) by the end of 2014 and NOK 6 trillion ($1 trillion) by the end of 2019.^[4] In a parliamentary white paper in April 2011 the Norwegian Ministry of Finance forecast that the 2030 value of the fund would be NOK 7.4 trillion ($1.3 trillion). A worst-case scenario for the fund value in 2030 was forecast at NOK 2.7 trillion ($455 billion) and a best case scenario at NOK 19.6 trillion ($3.3 trillion).^[5]  

It's truly amazing that conservatives are still selling this snake oil. But what is more amazing is that so many people are still buying it.

This Is Competence?

Stephen Harper likes to claim, as he did in Davos, that his government is a shining example of prudent financial management. That boast, Lawrence Martin writes is the Globe and Mail, in as believable as Sun TV's recent citizen reaffirmation ceremony.

From 2007 to 2011, Canada’s economic performance put us in the middle of the pack in GDP growth among 34 industrialized countries. Our unemployment rate is currently rising and nearing the U.S. level. It’s true that, comparatively speaking, we’re doing well on a number of other economic indices. But given the advantages the Conservatives enjoyed when they took office – the big surplus, the well-regulated financial sector, the natural-resource-laden riches – how much of an accomplishment is it? When you start a race a lap ahead of the field, how hard is it to be among the leaders?

The Harperites are very good at dumping information down the memory hole. But, Martin writes, it's good to recall a little history:

Let’s recall the two-point GST cut that tore a giant hole in the revenue base, accounting for a good deal of the deficit. Let’s recall the prerecession spending – having inherited a $13-billion surplus, the Harper/Flaherty team spent so excessively that we were close to a deficit by the time the recession began. Let’s recall the slashing of corporate tax rates and the government’s easing of mortgage rules and backing of risky loans that further bled the treasury.

Put it all together and what it shows is that, with more prudent fiscal management from the same guy who lectured other countries on debt in Davos, we could have coped with the recession without driving our treasury into a large deficit hole.

Martin ends his article by quoting an official at the finance department. When asked what the Harper government had done well, he answered, "The PR."

Indeed. Stephen Harper runs a superbly competent PR machine. He does not run a competent government.