Prime Minister Justin Trudeau's visit to Alberta, featuring meetings with Premier Rachel Notley and oil executives, will not by itself heal the province's battered economy. The PM's promises – a little bit of accelerated infrastructure spending, some eventual changes to Employment Insurance, a $250-million handout to a provincial government that doesn't need it – were a lot less exuberant than his rhetoric. Given political and fiscal realities, on which more in a moment, Mr. Trudeau's chequebook moderation was definitely for the best.
But the way the PM handled himself in Alberta, and the way he approached a premier from a rival political party – in solidarity, not as an opponent – matters. Sympathy may be free, but it has value. Not so long ago, the previous Conservative regime got too much joy out of attacking Ontario's Liberal government for the province's tough times; it often felt as if the Tories were wishing Ontario ill, even though nearly half the Conservative caucus was from Ontario.
Alberta, in contrast, is the province that resisted the 2015 election's red wave, sending only four Liberal MPs to Ottawa. Nevertheless, Mr. Trudeau did not go West to gloat. Instead, he talked about helping. Would he have been as generous if the provincial government were Progressive Conservative? Maybe not. But in an NDP-run province, the PM's tone was reasoned and sympathetic. This is not nothing.
But beyond listening and empathizing, what if anything should the government of Canada do to help Alberta, its people and its bruised economy? Here are some principles the Liberals should keep in mind.
Don't sacrifice the long term to the short term: The Liberals got elected promising to nearly double infrastructure spending, to $125-billion over a decade. The idea was not about throwing money out there in a hurry, but instead about spending carefully on things that stand a chance of improving the long-term productivity of the Canadian economy. If the plan is to work, spending wisely is a lot more important than spending quickly.
In the face of a weak economy, Mr. Trudeau's team keeps dropping hints about accelerating that infrastructure spending. The danger is twofold: that the money, which should be well-spent, will be boondoggled away; and that money intended to be spent quickly as stimulus will in fact take many quarters or even years to get out the door. Stephen Tapp of the Institute for Research on Public Policy recently looked at the 2009 infrastructure stimulus program and found that most of its budget did not get spent until years two and three of the program. Infrastructure takes time, and it should.
Alberta doesn't need a handout. It's Canada's most fiscally fit province: No government has more capacity to borrow and spend than the legislature in Edmonton. Yes, Alberta is eventually going to have to start making some hard decisions. It has long acted as if the oil boom would go on forever, outspending other provinces while taxing its citizens less. That's not sustainable, and in the long run it has to change.
But in the short run, Alberta has time, breathing room and borrowing room to run deficits – because it has zero net debt. No other provincial government can say that. Trying to achieve a balanced budget quickly, by slashing spending in the midst of a recession, would only make the economic pain worse.
Ontario's net debt will be just shy of $300-billion at the end of this fiscal year, according to RBC, which puts the debt-to-GDP ratio at roughly 40 per cent. Alberta's debt-to-GDP ratio and the end of this fiscal year is expected to be negative 1 per cent – savings are slightly larger than debt.
That means Alberta has greater fiscal capacity than any other province, by a long shot. Which raises a reasonable question for Ottawa, and for voters across Canada: To what extent should the federal government run larger deficits and accumulate more debt to help Canada's least indebted province?
Change EI to benefit all Canadians – including Albertans: Employment Insurance has long provided greater benefits to the jobless in the most economically depressed areas, while being less generous and harder to access in places like Ontario and Alberta. Creating one common, national EI standard would be a very good idea. Along with fixes to the system the Liberals promised in their election platform, a common standard would put more benefits directly into the pockets of the unemployed, including the ever-growing number of them in Alberta.
But a big overhaul of EI is legislatively complicated and will take many months. If Ottawa really believes the national economy is in bad enough shape to warrant extraordinary measures, it could temporarily extend the number of weeks the jobless are eligible for EI, as was done during the 2009 crisis, or temporarily increase payments to Canadians who are out of work.
However, while the Canadian economy is in a state of slow growth, absent other shocks such as a U.S. downturn, the bulk of the country is not going into a recession. The feds have to keep that in mind. This may be a time for mild stimulus, but it's not time to open the deficit floodgates wide, as in 2009. Economic conditions right now aren't remotely close to bad enough to warrant it.
So should Ottawa provide special assistance to Alberta? The answer is mostly no. It should focus on doing some small things to boost the national economy in the short term, and big things to grow it in the long term. And it should help Canadians where they need help. It turns out that more Albertans than ever are on that list. But Ottawa should help them as Canadians, not as Albertans.