MINTZ … Notley undermines Alberta’s competitiveness.

Alberta is not yet Greece, but it’s heading along that path

Politicians make promises during campaigns, often with the intent of carrying through with them to establish trust with the electorate. If expecting to win, they might be careful to avoid rash promises that are hard to implement later. And if they don’t expect to win, they take whatever position they wish. if it plays to their base of support.

Yet, many politicians fall into the trap of promising foolish policies during an election if it can garner sufficient support to win. The difficulty comes in facing the music after the election. Either they must slither out of their promises or forge ahead, with potentially bad consequences undermining their popularity and future winability.

A notable example is Greece. The ruling far-left Syriza party made unrealistic promises in the last election to undo austerity policies accepted by the former government. Obviously, Syriza found that international creditors — the IMF, the European Central Bank and the European Union — won’t play ball.

Greece’s Prime Minister Alexis Tsipras is proposing vague anti-corruption policies and better tax collection to close the gap between spending and revenues. The creditors want well thought-out policies, such as pension and sales tax reforms, to deal with Greece’s unsustainable deficits.

Syriza, caught between a foolish election promise and realism, will face a severe economic downturn if Greece defaults on its loans, resulting in an exit from the euro. The economy will face a sharp devaluation, high inflation and atmospheric interest rates. Those who danced in the streets after the Syriza election victory will find that their standard of living will precipitously fall. Tsipras might trigger a debt default rather than cut back pension costs to keep his promise, but it is far from clear he will be electable if the economy is in ruins.

The Greek situation is far more desperate than what the new NDP government in Alberta is facing with an economy that’s trending down, given low global oil prices that could stick for some time. With increased layoffs, less drilling and deferred investment, one would think Rachel Notley, the new premier, would punt some of the anti-investment policies promised in a campaign that she did not expect to win. Instead, the unneeded royalty review, a 50 per cent planned hike in the minimum wage, higher corporate and personal taxes and tougher carbon policies promised during the campaign have been confirmed in the maiden Speech from the Throne that the new lieutenant-governor probably choked on. Overall, these policies are putting on hold many investments in Alberta, aggravating further layoffs.

Take the seemingly innocuous corporate tax hike from 10 to 12 per cent. This will increase Alberta’s federal-provincial effect-

Alberta’s capital stock will decline by $9.2 billion in several years as a result of the corporate tax increase alone

ive corporate tax rate on non-resource new investments from 17 to 18.6 per cent, making it the fourth highest in Canada and 17th highest of 44 OECD countries. Even hard-pressed Ontario and Quebec will have a more tax-competitive environment for manufacturing, forestry and service sectors than Alberta. I estimate Alberta’s capital stock will decline by $9.2 billion in several years as a result of the corporate tax increase alone. Imagine what royalty hikes and other policies will do in terms of investment and jobs once they are determined.

If the corporate tax hike were to lead to gobbles of new revenue for an Alberta that is busily pumping up promised spending, it might make sense. However, with the disastrous decline in corporate profits and investment, and income-shifting to lower-taxed global jurisdictions, Alberta will raise little revenue. Based on different results from various economics studies on profit-shifting that is easy to financially structure, Alberta will raise somewhere between $50 and $210 million. No wonder most economists argue that corporate taxes are the worst funding source for public services. Little revenue is gained, with a signal to investors to go elsewhere.

While the Notley government claims it will resemble the Prairie populist governments of Romanow and Doer, it certainly does not seem that way. Doer balanced budgets, cut personal and corporate taxes and increased spending on health and education. With rising spending and plummeting revenues, the new Alberta government looks to be on Bob Rae’s path, whose election promises made little sense for Ontario entering a deep recession in 1990-1. Notley better hope that her ideologically driven policies won’t lead to a deeper recession with less investment and jobs, leading to a population shifting to greener pastures. While playing up consultations, such discussions with “partners” will be a fig leaf if the intent is to carry out promises that were already made in an election. With the present course, Alberta will slip with rather sorry consequences for the province. It won’t be Greece, but for some Albertans, it might feel like it.

With the federal election in October, federal parties will also make numerous promises. Voters often ignore policy, which is to their peril if some party platforms make little sense. Come October, Canadians should pay attention to political promises that could have significant consequences for their lives.