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Provincial budget has impact for rising debt

Posted on March 12, 2014 by Taber Times

Last week’s provincial budget showed a ray of light for Albertans used to a long succession of deficit spending — the past six years have seen deficits in Alberta since the economic downturn of 2008 — with a $1.1 billion consolidated surplus.

However, those readying the brass band and about to hang out the bunting for a spontaneous celebration in the streets might want to calm themselves for a moment.

Considering the vast amount the Redford PCs are proposing to borrow on the capital side, set to push debt levels to $14.5 billion in 2014-2015, and later to $21 billion by 2017 —  a $1.1 billion surplus seems like a rather meagre number comparatively.

It might make sense to the fiscal gurus and communications spin doctors in Edmonton, but to the regular John Q. Citizen on the street, when you’re borrowing more than you have coming in, that spells troubles ahead when it comes to interest payments and making two plus two equal four. Frame it however you like, when you borrow money you always have to pay it back. That might sound like a simple maxim, but it often seems to be a concept lost on our present government.

Not to mention the fact the provincial government seems to be developing a serious addiction to deficit spending, that bane of all governments around the world that struggle incessantly with providing increasingly expensive services to increasingly larger populations, populations that demand more and more services as every decade passes.

No one ever suggested maintaining that balance is easy. On the other hand, eliminating structural deficits — where the Redford PCs seem dangerously close the precipice, if they haven’t fallen over already — should be a high-priority goal for any government. Only with our provincial government, steamrolling onward into higher and higher debt levels seems to be par for the course. The only problem with that concept is that someday our children’s generations will be called to account for the largess of their parents.

That being said, no one is suggesting the infrastructure needs of the province presented by Alberta’s steady population growth are not a huge problem it will be more difficult to address with every passing year if action is not taken to deal with it. The development of new schools and hospitals, the rehabilitation of highways, and other infrastructure concerns have been mounting as more and more people choose to settle in the province to take advantage of the economic blessings Alberta can offer.

On the other hand, there are ways to do things and ways not to do them. Our current provincial government has suggested heavy borrowing to fund Alberta’s pressing infrastructure needs is the right way at the moment to bankroll growth. A picture has been painted of low interest rates, Alberta’s sterling credit rating, projected growth in the economy, and a future greased with a still-oily windfall.

The problem with that assessment is successive governments in Alberta have been using the same lines — with only minor variations on a theme — to explain away the province’s financial decisions almost since the close of WWII. Some of those decisions led to a province blessed with a wealth of valuable non-renewable resources being mired in crippling debt in the past.

While the Redford PCs may yet be proved right with their formula of borrowing when it makes sense to borrow, very few people would probably suggest it couldn’t also be dangerous path to tread if the fabric of all the things they project need to go right might end up going wrong. Predicting the future can be a tricky game to play, especially with the province’s future prosperity riding that same knife-edge.

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