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Alberta is the land of free enterprise, entrepreneurship and low taxes. Ontario is the home of a fat public service, an army of cultural welfare recipients and an electorate so liberal that even the bricks of the legislature building have a pinkish hue.
Albertans pay down their debt. Ontarians borrow and spend. Albertans hate socialists so much that the provincial New Democrats can't even command one in 10 votes at election time. Ontarians once made Bob Rae premier, pretty much by accident. This week, Albertans cut taxes on energy production. Ontario will likely extend its new harmonized sales tax to breathing.
These are the clichés that many people, particularly in Alberta, hold dear, especially in the era of record-busting deficits. Now that the crisis is over, Alberta plans to easily slide back into the black in a few years. Ontario, meanwhile, draws casual comparisons to Greece, perhaps because it can't bring itself to trim the budget of the Ministry of Eternal Automotive Subsidies. One province looks prudent, the other profligate - until you actually look at the numbers.
Which of the four largest provinces spends the most per person on government programs? Alberta. (In fiscal 2009, it spent nearly $10,000 per head, about $3,100 more than Ontario. Only Newfoundland spent more.) Which large province allowed its spending to grow 8.3 per cent per year from 2005-2009? Alberta again. (That's spending per capita, by the way, so it takes into account population growth. Ontario and British Columbia each managed to contain their spending growth to less than 5 per cent.) Alberta's transportation department has a budget of about $2-billion for a province of 3.7 million people. Ontario's transportation department has a budget of about $2-billion for a population of 13 million.
"We've been living in kind of a fool's paradise," says Roger Gibbins, president and CEO of the Canada West Foundation in Calgary. "The rhetoric of the government is all about small government and low taxes. The reality is all about big spending."
The activity that bankrolls all this spending is oil and gas production, of course, and therein lies the story of the week. In 2007, as oil and natural gas prices soared, Alberta Premier Ed Stelmach set out to squeeze more government dough from the province's No. 1 industry. The title of a government report on the subject - Our Fair Share - reflected what polls said Albertans believed: Big Oil was drawing people to the province but wasn't doing enough to build hospitals or schools for them.
Mr. Stelmach imposed higher royalties, said they'd bring in an extra $1.4-billion, called an election and won big. Then the world got caught in the teeth of the financial crisis and oil and gas prices crashed. Not-so-steady Eddie has been backpedalling ever since. Thursday's announcement of a new royalty regime undoes much of the 2007 policy. But the government says it's not going to cost anything close to $1.4-billion and it's not going to jeopardize the road back to a balanced budget. Why not?
The answer is in the oil sands, development of which has snapped back so fast during the recovery as to paper over Mr. Stelmach's mistakes. Not long ago, Alberta's budget depended largely on gas revenue. Now it's oil that counts. The oil sands are expected to generate $5-billion in for the province in 2013, while gas will slide to less than $2-billion, assuming prices don't take off.
One golden goose has replaced another. And as long as it stays healthy, Alberta will be able to afford to pay lip service to small government while doing the opposite. But if it doesn't? Mr. Gibbins is among those who are vexed by Alberta's inability to save very much of its energy loot. (The clearest evidence of this is the state of the Heritage Fund: at $14.4-billion, it's scarcely larger than it was 25 years ago.) The foundation has proposed the province begin saving 30 per cent of its resource revenue, to smooth the bumps for when the energy market is down.
But that would imply taking away more than $2-billion this year and $3-billion in 2013, by which time the red ink is supposed to be gone. Lingering deficits would expose the provincial Tories as the spendthrifts they are. They would have to cut the budget, or - gasp - even impose a provincial sales tax, an economically-sensible idea that has absolutely zero political traction.
Since those are unpalatable options, expect Alberta to keep spending. Mr. Stelmach may well get lucky; high oil prices may indeed mean he doesn't have to make the tough choices that other provinces face. Good for him. But luck shouldn't be mistaken for fiscal responsibility or lean government.