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Politics Premier Prentice’s budget tack goes against conventional wisdom

Since the decline in the price of oil last fall, Premier Jim Prentice has been primarily talking about two big ideas: First, he argues that Alberta needs a dramatic budget to deal with this economic crisis, leaving everything from bringing back the health-care premium to removing the cap on postsecondary tuition increases on the table; and, second, as a result of this essential and dramatic budget, he very strongly hints the province may need to have an election to seek a mandate for the budget, a year before the date scheduled under the province's toothless fixed-election-date law.

If this one-two combination – introducing a bad-news budget, then calling an early election to fight about it – sounds a little odd, social science research would back up that uneasy feeling. Research shows that both parts of this plan – cutting spending and increasing taxes just before an early election call – are very uncommon paths.

The idea of a political budget cycle is based on observations of budgeting practices around the world. When social scientists look at variables such as public spending or income-tax rates, a clear pattern emerges: As governments get closer to election time, they are more likely to increase spending on public programs and decrease taxes.

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Governments likely do this for two reasons. The first is simpler: On the whole, people like to get more services while paying lower taxes. The second is more indirect: If voters are more likely to support incumbents in good economic times, governments can use tax cuts or spending programs to boost the economic activity (or, more mischievously, give the appearance of doing so).

Research suggests that this practice is very common in provincial governments. A 1989 study by Douglas Hurtle found that four in five bureaucrats reported feeling that provincial governments increased service standards in election years in an effort to win votes.

A 2001 study by Ronald Kneebone and Kenneth McKenzie found provincial governments avoid tax increases in election years. While some cuts in health and social services spending are common, usually in an effort to balance the budget, increases for education and transportation usually manifest themselves. They found that Liberal, Conservative and New Democratic governments alike are equally eager to use budgets for electoral advantage. This research indicates the Alberta government's plan to slash services and increase taxes runs against the usual practice of the political budget cycle. Of course, a political budget cycle isn't some sort of inviolable physical law: It's simply an observation over the past several decades.

What does this mean? Progressive Conservative supporters can spin this to say it demonstrates that Jim Prentice is a brave and bold leader going against the conventional wisdom to provide good governance to his people. Opponents will say that bucking the trend so much is further evidence that the election is a cynical ploy to take advantage of disorganization among the most of the opposition parties. Social scientists take a slightly different view, and will mostly return to a theme that emerges whenever questions about Alberta politics come up: It is just kind of weird.

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