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Alberta and Saskatchewan are tied by something other than fate. They were hit by the same financial storm in 2008. Both provinces have a similar economy that relies on energy exports. They’re also facing similar problems at the moment. The budget deficit, rising unemployment, and a struggling energy sector are some of the problems faced by both provinces.
The problems are the same. What’s different, however, is the solution both premiers offer. Alberta’s Premier Rachel Notley is dealing with the deficit by borrowing more and more money and levying newer taxes just to keep the government machinery running. Wall, on the other hand, wants to cut government expenditures to deal with the deficit dilemma now, rather than later.
But which of those Premiers is on the right track?
Comparing The Two Approaches
The contrast between the financial approaches of the two Premiers could not be more striking. Essentially, Alberta’s government’s approach is to keep borrowing to keep the economy afloat. Rachel Notley’s borrowing reached $7 billion recently. And this huge amount is not for any development projects or in public interest. She’s borrowing just to cover operations and keep paying government employees.
On the other hand, Wall has to deal with the province’s $1 billion deficit. Firstly, compared to Notley’s $7 billion, it shows just how effectively Wall has kept his province on the track of recovery. Secondly, Wall isn’t keen on borrowing. He wants to pay for the deficit by cutting down on government expenditures, mainly employee wages, which constitute almost 60 percent of spending.
Provincial Economics 101
There is no doubt in our minds about which approach will have the most long-term benefits. Notley needs to learn two things about basic economics from Wall.
Firstly, if your province is dealing with the budget deficit, it is the people who are actually bearing the burden. Being a Premier, your job is to protect the people who voted you into office. You don’t need to exacerbate the problem by borrowing more.
Secondly, simply kicking the can down the road will make problems worse. You cannot leave it to your successors in government to deal with all the financial mess you’ve created. Dealing with the deficit should be a priority for any government.