All politicians say they went into public life “to make a difference.” Ralph Klein actually did make a difference. He showed Alberta – and Canada – how to deal with runaway deficits and public debt.
The Klein model was a steroidal version of short-term pain for long-term gain. Rather than just level off the growth in spending, he made deep actual reductions. He imposed a 5 per cent salary cut on all public servants in Alberta, including teachers, professors and nurses. By moving quickly, he got results. If you try to get rid of deficits over a long period of time, the unexpected will always happen. Tax revenues will decline, or interest rates will go up – maybe both of those, with lots of other contingencies, too.
Quick action also prevented the special interests from organizing against the provincial government. Actions were taken before you could say “general strike.” And by cutting everything, he prevented sympathy-seekers from claiming victimization. Everybody was sharing the short-lived but necessary hardship.
Mr. Klein was not content with just balancing the budget. After that was done, he proceeded to pay off all provincial debt, and started to reduce the draws against the Heritage Fund. He also took advantage of high oil and gas prices to build up a Stabilization Fund to carry Alberta through the next period of falling resource revenues. This seemed like a good idea at the time, but sadly it just encouraged his feckless successors to procrastinate to the point where Alberta is now in almost as bad a condition as it was in 1992 when Mr. Klein became premier.
All this, it should be noted, was done without raising taxes. Mr. Klein saw clearly that Alberta’s problem was unrestrained spending, not insufficiency of revenue. Indeed, once the budget was balanced, he proceeded to enact tax cuts, such as the 10 per cent single-rate provincial income tax that is one of the best features of government finance in this province. He also made a bargain with Jean Chrétien to kick start oil sands development. Alberta would reduce royalties while the federal government would reduce corporate income tax rates on producers in the oil sands.
Mr. Klein’s achievements in Alberta affected all of Canada. His quick action became the inspiration for budget-balancing measures undertaken by Mike Harris in Ontario and Mr. Chrétien at the federal level. It was particularly instructive to other politicians that Mr. Klein and his party were re-elected in 1997 with an even bigger majority than they had obtained in 1993. Re-election showed that voters would support prompt, decisive action in favour of fiscal responsibility.
Today’s politicians vie with each other to take credit for Canada’s relatively favourable performance during the Great Recession that started in 2008. Both Liberals and Conservatives deserve some recognition, but if you want to know when and where Canada’s success really started, think about the homely little guy from Alberta with the funny face and the crooked smile.
Tom Flanagan is professor of political science at the University of Calgary.