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Is Alberta’s budget really that austere?

Premier Alison Redford speaks at the first annual Alberta Economic Summit on Feb. 9, 2013 in Calgary.

Chris Bolin/The Globe and Mail

I blame the allure of alliteration.

The world was fixated on the European debt crisis, and Washington was locked in constant struggle over its $1-trillion (U.S.) deficits. Observers had no choice but to herald an "Age of Austerity." It rolled perfectly off the tongue. It was also kind of true.

Just as the Ice Age slowly enveloped the planet, the Age of Austerity has spread from Europe and the United States to Alberta. Premier Alison Redford last week moved to constrain her province's budget deficit, reneging on some election promises and effectively freezing the government's budget. Her plan immediately was described as, yes, "austere."

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Let's think about that description for a moment.

Austerity looks like this: There were some 800,000 fewer government workers in the United States in February than in the same month in 2009. Or like this: The rate of government consumption in Spain contracted by 0.5 per cent in 2011, 4.1 per cent in 2012, and will shrink by another 4 per cent this year, according to the Organization for Economic Cooperation and Development.

But does it look like this? The Alberta government's expenses are forecast to decline by about 1 per cent this year, and rise by 2 per cent in the following two fiscal years, according to an assessment by Royal Bank. Government wages will be frozen for three years, and 10 per cent of managers will be fired. (Alberta's unemployment rate was 4.5 per cent in February, compared with the national average of 7 per cent.) The province plans to borrow $12.6-billion by 2016 to finance infrastructure. The Redford government projects a deficit in the current fiscal year and small surplus the following year.

Jack Mintz, one of Canada's most influential fiscal conservative thinkers, sees nothing austere about Alberta's budget. He was critical of the decision to borrow, arguing that is short-sighted for a jurisdiction dependent on royalties from a non-renewable resource should be focused on saving that money for the day the wells run dry.

Indeed, Ms. Redford appears to be resisting what Harvard economist and former U.S. treasury secretary Lawrence Summers has characterized as "budget repression."

Writing in the Financial Times earlier this year, Prof. Summers argued that government officials who fixate on the balance sheet risk repressing deficit problems rather than solving them, just as a chief executive who is rewarded for short-term results will take risks that could ruin the company later.

Prof. Summers, who served as President Barack Obama's chief economic adviser, has been adamant that the U.S. should be taking advantage of record-low interest rates to rebuild roads, bridges and other infrastructure. Mr. Obama has been begging Congress to do just that for a couple of years, but the Republican leadership in the House of Representatives won't budge.

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Republicans want to eliminate a budget deficit that is projected by the Congressional Budget Office at almost $5-trillion (U.S.) over the next decade. That could be called austerity. Nothing that Alberta is doing comes close. In fact, Mr. Obama, who is no one's idea of a budget hawk, might call it prudent.

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