How Ottawa’s Affordability Crisis Is Impacting The Election
The Alberta general election is being fought against the backdrop of an affordability crisis.
An affordability crisis that we would argue is primarily being driven by federal government policy.
A whole series of federal laws, regulations, and mandates are pushing prices up and stretching household budgets in Alberta and across Canada.
We’ll start with government spending, one of the things that most obviously impacts affordability for regular citizens.
More spending by the federal government might be nice for those the government spends the money on, but for the rest of us it just reduces what we can buy for ourselves. Higher levels of government spending lead to higher taxes in the long run, and higher taxes make it harder for regular taxpayers to get ahead.
Eventually, the government runs out of room to raise taxes in a politically acceptable way to voters, and they must resort to printing money instead. That means more money chasing scarce goods, which drives prices up, creating inflation.
Governments that abandon fiscal discipline also put central banks in a more difficult position when it comes to keeping prices in check. In addition, as the federal government expands and does more and more things, more of the burden of paying for that expansion falls on Alberta.
Alberta has contributed over $600 billion net to the rest of the country, with about half of that total coming in just the last 15 years. Whether it be through equalization or various other transfer programs, you can bet that as more lavish social programs are introduced, Albertans will be paying for them.
Energy policies, and the complex regulatory regime designed to restrict the development of energy, are another huge driving force in the affordability crisis. Affordable energy powers every other industry, so any restrictions on energy development push up prices. More restrictions mean higher prices across the board.
The Impact Assessment Act is perhaps the most obvious example of this. Passed by the federal Liberal government in 2018, the Act gives the federal government the final say on any major project being constructed not just between provinces but even within provinces.
A gravel pit outside of Stettler, a major energy project in the northern reaches of the province, or a highway from Grande Prairie to Fort McMurray - all could be restricted or even blocked by the federal government on the grounds of their environmental impact. This means that the federal government now controls all significant industrial development, circumventing provincial jurisdiction.
The federal government isn’t just making the development of new projects impossible; they’re also imposing new taxes on the resources we generate from existing projects, specifically by applying carbon taxes to everything. This obviously impacts direct costs like the price of gas for your car and electricity for your home, but also indirect costs for everything else you buy.
Almost everything you purchase has to be manufactured in a plant that is now also paying a carbon tax, shipped on a truck paying a carbon tax, stored in a warehouse paying a carbon tax, and sold in a shop paying a carbon tax.
To make matters worse, the price of the carbon tax isn’t fixed. No, it’s set to go up every single year!
The federal government is also threatening Alberta with two “net zero” targets that could be devastating to our economy.
To help meet a national commitment to net zero by 2050, the federal government has committed to capping all oil and gas emissions in Canada by the end of this year. Had the level of the emissions cap been reasonable, this might have been theoretically possible with enough time and technological developments, but the cap being proposed by the federal government is so stringent and the timelines so tight that it would, de facto, also be a production cap, which would be incredibly harmful to Alberta’s economy.
Then there are the moving goalposts of the federal government's net zero electricity grid targets. Ottawa had previously committed to seeking a net zero electricity grid by 2050. Last year, however, they announced their intention to move that commitment up a full 15 years to 2035.
What will that cost Alberta? A report by Alberta Electric System Operator (AESO) states that the infrastructure required to reach net zero in such an aggressive timeline will cost taxpayers $52 billion, while another report predicts that the economic cost of doing so - i.e. the lost GDP caused by increased energy costs - could reach as high as another $35 billion.
The plan would also increase every Albertan’s electricity bills by at least 40%.
Saskatchewan Premier Scott Moe has taken a hard stand against the federal government on this adventure, calling the ambitious plan “impossible” and “unaffordable.” Even the Saskatchewan NDP thinks the plan is “unrealistic.”
To top it all off, the federal government is also preparing to impose their “Sustainable Jobs Plan,” otherwise known as the “Just Transition”. The Just Transition is an ideological job retraining program that explicitly aims to eliminate the oil and gas industry entirely. According to a leaked government memo, the Just Transition will lead to hundreds of thousands of job losses, and we know how difficult it is to afford things when you don’t have a job anymore!
The combined impacts of all of these made-in-Ottawa policies are driving up prices, and Albertans are feeling the pressure. When you add it all up, is there really any surprise that we’re in an affordability crisis, and that this has become a major issue this election?
Voters are looking for leaders and policies who will push back against these onerous federal mandates, save Albertans money, and make Alberta affordable again. Both parties claim to have solutions to these problems, with varying degrees of credibility.
Let's take a look...
When it comes to government spending and budgeting, the UCP has introduced a new fiscal framework that requires annual balanced budgets, limits spending increases to only the rate of population growth and inflation, and sets out a fixed allocation of surplus cash to repayment of the debt, savings, and one-time initiatives, but only if those initiatives do not lead to permanent increases in government spending.
The NDP, by contrast, criticized this fiscal framework. When they were the government between 2015 to 2019, the NDP increased spending, ran massive deficits, and accumulated more debt than all other Alberta governments before them combined. They don’t seem to have learnt their lesson either, as their “fully-costed” spending plan released during the campaign turned out not to be fully costed at all, owing to a $1 billion mistake in their calculations.
On the taxation front, both parties are making big promises, but with very clear differences. The UCP has said that their Bill 1, if reelected, will be an expansion of the Alberta Taxpayer Protection Act to ensure that any new tax would have to pass a referendum before being implemented. The UCP also plans to reduce personal income taxes by creating a lower 8% tax bracket on the first $60,000 of Albertans’ incomes.
The NDP, on the other hand, are outright promising to raise corporate taxes by a whopping 38%. Unlike their last term in office, this time, they are promising not to raise personal income taxes or introduce a sales tax, but then again, they said that about the carbon tax last time too.
There are also significant differences when it comes to equalization and transfer payments. The UCP have called for the removal of the principle of equalization from the Constitution, and the referendum they held on this question passed with 62% of the vote.
The NDP, meanwhile, opposed even holding the equalization referendum, and when the equalization formula was last renegotiated in 2018, the NDP didn’t even speak out against its extension.
When it comes to energy issues, the Alberta government challenged the Impact Assessment Act in court and won, and when the federal government decided to appeal the decision to the Supreme Court, the Alberta government argued the case in Ottawa too. The decision will be announced sometime after the Alberta election.
The NDP have claimed to also be concerned about the Impact Assessment Act, but just yesterday, it was revealed that their candidate for Airdrie-Cochrane, who is a lawyer, was at the Supreme Court arguing in favour of the law that’s been described as a “wrecking ball” to Alberta’s economy. The candidate claimed to just be arguing on behalf of his client. He’s refused to answer whether he personally supports the Impact Assessment Act, but as it turns out, he actually sought out and chose to represent them.
The UCP also abolished the carbon tax that the NDP implemented, and they continue to strongly oppose the imposition of a federal carbon tax.
The NDP, meanwhile, continue to claim that they were only forced to implement a carbon tax thanks to the federal government, but also that they will re-impose an Alberta carbon tax if they form government again.
On the subject of net zero, the UCP believe that Alberta can continue to reduce emissions by developing new technologies, without having to cap production of oil and gas. Emissions reduction has been happening for years already and will continue to happen - however, the UCP are concerned about the speed and stringency of a federal emissions cap, worrying - quite rightly - that the only way to meet the federal government’s net zero by 2030 goal is by slashing production and devastating our economy.
The NDP claim to support an emissions cap while opposing a production cap, but they are on board with the federal government’s plan, which would become a de facto production cap owing to the tight timeline. The technology required to meet the federal government’s goal isn’t even available yet, making a production cap the only way to achieve net zero in the federal government’s accelerated time frame.
Similarly, the UCP believe a 2050 goal for a net zero electricity grid is possible, especially with new technology like small modular reactors and hydrogen coming online in the mid-2030s, but the prospect of having to complete the transition by the federal government’s new 2035 target is impossible, and the UCP are opposed to this federal plan.
Rachel Notley, meanwhile, has actively supported and endorsed the idea of speeding up the net zero electricity grid deadline to 2035, with seemingly no understanding of the technical impossibility or cost of this goal.
Finally, the UCP also recognize that, while technology may be helping us to lower emissions, our energy industry is not going away, and neither are the jobs the industry creates. When the Trudeau Liberals revealed their plan to "transition" oil and gas workers into new “sustainable” jobs, the UCP quickly stood up to Ottawa and condemned the plan, which forced the federal government to delay its implementation - at least until after the election!
In stark contrast, the Alberta NDP actually implemented their own “Just Transition” when they were in government. They put together a blue-ribbon team of academics and environmental activists to write a report on environmental policy, and embedded in the report were multiple suggestions to implement a made-in-Alberta “Just Transition” to “help” coal workers "transition" into new jobs after the NDP shut down coal power plants. Studies conducted in the years following found the plans were a miserable failure, basically no new jobs were created for the workers, and the towns that used to rely on the coal power plants are still struggling to this day.
As you can see, even though we’re in the midst of a provincial election, it’s nearly impossible to get away from the federal government.
The combined effects of so many federal policies have been - and will continue to be - devastating to Alberta’s economy, unless Alberta has a provincial government willing to push back.
It is absolutely essential that Alberta elects a government that will stand up to the federal government and defend our people against policies that are driving prices up and destroying our energy-creating industries.
We cannot afford to have the Alberta government act as a doormat to Ottawa.
Keep that in mind when you cast your ballot!
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