by Darcy Henton
Landslide mandate for Premier Klein is only slightly tarnished by this fall’s budget turnarounds
“Welcome to Ralph’s World.”
Ralph Klein couldn’t resist gloating over the March 12 landslide that all but wiped out the opposition and extended his Progressive Conservative Party’s 30-year reign. His Tories took 74 of 83 seats, coming tantalizingly close to predecessor Peter Lougheed’s incredible 75 of 79 seats sweep of 1982.
Despite widespread criticism of his electrical deregulation policy and fears that he planned to privatize health care in the province, 62% of the electorate signalled that King Ralph was the leader they trusted. The 15-member Liberal Opposition was halved and its scrappy leader Nancy MacBeth lost her seat and her resolve to ever unseat the king. The two-seat New Democrats failed to gain ground.
It wasn’t Ralph’s Team, the slogan of 1993 and 1997. This time it was all Ralph. It is his party and it is his province.
Welcome to Ralph’s World indeed.
“That was a very uncharacteristic thing for Ralph Klein to say, but it’s absolutely true,” says University of Lethbridge political scientist Peter McCormick.
“It was Ralph Klein’s popularity and Ralph Klein’s ability to shape the debate and carry opinion with him because there sure isn’t much of a team around him,” he says. “I really think it is Ralph Klein’s dynasty.”
Lougheed brought the party into power with his “Now” campaign in 1971, ousting the staid Social Credit Party. But it was Klein who saved the Tories from suffering a similar fate, says McCormick. When voters had enough of Lougheed’s successor Don Getty and the old guard Tories, Klein remade and redefined the Progressive Conservatives as deficit slayers.
“The Conservatives disappeared and the Ralph Klein party took over,” explains McCormick. “The Klein revolution was really a revolution of the Conservative party.”
Albertans love Klein’s folksy style and his willingness to admit that he makes mistakes. But they don’t all share his free-enterprise-is-always-best philosophy, particularly when it comes to health care. So it was helpful to have some cash to toss around before the election.
The Tories fertilized the election soil with $4.1 billion in energy rebates. Practically every Albertan over age 16 reaped the rewards of skyrocketing resource revenues and electrical deregulation. The outcry over the cost to families and businesses was quickly muted.
“They decided to buy their election victory,” sniffs Raj Pannu, New Democrat leader. “The price of each vote was $300, the cheque we all received. But there is no doubt the Tory strategy of subsidizing and taking the sting out of the sudden increase in electricity and natural gas prices worked.”
The money didn’t stop flowing after the election. The subsequent budget was a throwback to the Don Getty era. The 25% hike in spending shocked members of the business community.
“That was something we hadn’t seen any government in Canada do in the last couple of decades,” says Dan Kelly, prairie region vice-president for the Canadian Federation of Independent Business. “Even the most left wing of NDP governments have not increased spending in the way the Klein government did in the past year.”
Liberal Hugh MacDonald dubbed it “egonomics.”
“It certainly wasn’t common sense economics. The Conservatives got carried away.” With oil and gas revenues surging, Klein was bubbling over the possibility of the province paying off its remaining $6.6-billion debt by 2005, the province’s centennial.
There was money for new schools and colleges and state-of-the-art health facilities and roads. There were whopping salary increases for doctors and nurses and politicians themselves. The gravy train was roaring down the track.
Klein had been warned it would happen. Former University of Alberta economist Paul Boothe raised the alarm in 1999. With charts and graphs, Boothe, now a deputy finance minister in Saskatchewan, demonstrated to a Tory caucus gathering at Government House that previous Tory regimes had spent like drunken sailors during past booms. He urged restraint.
“They didn’t heed that warning,” said University of Calgary economist Frank Atkins. “Klein went a bit crazy there for awhile.”
It was enough to turn fiscal hawk Steve West over in his grave. But the tightfisted former treasurer was only retired; not dead. His successor, Pat Nelson, made a halfhearted attempt to apply the brakes in her first quarter report last August, but no one was listening.
In October, at the behest of Klein, she slammed on the brakes with both feet, slashing the budget in midstream by nearly $1.3 billion. Klein had tipped Albertans that the cuts were coming in a speech in Fort McMurray in the wake of the September 11 terrorist attacks on the United States.
“These are unexpected challenges caused by the startling unprecedented events of September 11,” he told about 400 people attending the annual premier’s dinner in the heavy oil town. “It would be foolish for any government not to be prepared to deal with the caution and unpredictability the global economy is facing.”
Nelson later conceded the cuts were likely coming regardless. “Prior to September 11, we knew the economy was starting to soften,” she says. “What September 11 did was accelerate the process even further.”
Nelson says the cuts were necessary to prevent the province from breaking its own law. In Alberta, it is illegal for the province to run a deficit. Fortunately for politicians, there is no stipulated penalty.
While political scientists like McCormick are skeptical of the sudden belt-tightening in light of the way the Tories spent earlier with reckless abandon, economists say the government had to act quickly.
“This is a prudent thing to do when times are tough,” says Atkins. “There are certain individuals out there who would say when you go into tough times you should be spending. This is ridiculous.”
Mike Percy, dean of Business at the University of Alberta, said Albertans are fortunate the province had a law that forced the government to put 75% of the surplus on the debt or the situation would be much worse.
“The 25% they did keep got built into expectations,” he says. “The government said it was one-time spending. Nobody believed them.”
As it is, the provincial government will be hard-pressed to prevent a breach of its deficit law, according to Ken Boessenkool, a former advisor to the provincial treasury. In a paper Boessenkool wrote for the C.D. Howe Institute, he notes that Alberta’s massive resource revenues had the “unfortunate effect of eroding spending discipline.”
“In the past two years, total real spending in Alberta has been growing at a rate of over 6% ï¿½ faster than any time in the past 15 years,” he wrote. To further exacerbate the situation, personal and business tax cuts announced by the province will further reduce revenue, he stated. With revenue expected to grow at a rate of one per cent and spending continuing at 6%, he predicts Albertans will be back in a deficit situation in three years.
McCormick says that challenge is made to order for Klein, who seems to flounder when times are good. “Tough times are better for him,” he said. “In a funny way, this is a better time for him politically.”