Where Do We Go From Here?

I'll never claim to be an economist or even someone who has an absolute 100% knowledge on everything economics in this province. My understanding is pretty basic.  I did take a year of university accounting where I learned about micro- and macro-economics among other things.  Unfortunately, I'm good with numbers but horrible with theories.  So I ended up in radio. Makes a lot of sense...

I digress. The current state of Alberta's economy has more than a few people perplexed. How did we get in this mess? Where did we go wrong? Where do we go from here? Just a few questions that are being tossed around. And frankly, does anyone really know the answers to all of these questions? Let's face it, you could ask each political party what their definition of "asset", "liability" or "debt" is and you'd probably get different answers. I'm not accusing anyone of cooking their books, but over the last few years, it sure feels like you're not getting straight answers (or at least answers that make a lick of sense). So I'm here to try to simplify the issues as much as I can.

Let's assume that this $7-billion "problem" is the real number (although I'm still curious as to whether that's the real number or not as I haven't seen the books and I don't know if this includes the credit card debt that we've accumulated over the last few years).  Anyways...it's a $7-billion problem.  We could argue until the cows come home on why we're in this mess, etc.  But I'm not interested in the past anymore.  Tell me how to fix it.  And as far as I can see, there's four ways we could fix it (with household comparisons):

#1. More debt (aka "Where's my Mastercard?")
We all know this won't go over well with many, especially fiscal conservatives who believe this should be a last resort.  Which is kind of weird given we're in a province where EVERYONE seems to have second and third mortgages to pay for all the toys (house, vehicles, boats, summer cottages, motorcycles, etc).  The one bad thing about credit card debt is that you have those outrageous interest payments.  And we all know it's really easy to get lazy and just throw in the minimum payment each month.  However, we're doing this anyways (I believe that number is anywhere from $3-billion to $5-billion, depending on who you ask).  An extra $7-billion on the credit card might not be the best option, but maybe we can put a little bit of on the card and hope it doesn't get rejected.

#2. Cut spending (aka "No more cake or allowance")
There's been some interesting developments on this one that I don't think are getting as much play as they could.  Interim Wildrose leader Heather Forsyth has said that there aren't $7-billion worth of cuts to be made.  Premier Jim Prentice says he could fire everyone employed by the province and it wouldn't equal the $7-billion problem.  So where does this leave us?  We could "cut the fat" (like many want at AHS, and it sounds like something Prentice is priming for eventually), which would, in my estimation, be nothing more than window dressing and good for the optics.  But the #1 expense for any organization (including government) is salaries and benefits.  And do you really think for a second that the worker groups and unions are going to be happy about this?  And really, neither should you because we can't be cutting employees (you know, doctors, nurses, teachers, support), especially when the overwhelming majority of people think we need MORE doctors, nurses, teachers and support.  I've even seen Wildrose candidates campaigning on getting more supports, which costs money (weird from someone who is supposed to be a fiscal conservative).  Needless to say, as much as some of you believe that cutting spending is going to answer all of our problems, you're living in a dream world.  I know opposition parties like to say that the PC's "don't have a revenue problem, they have a spending problem."  But when you have a laundry list of wants and needs from the electorate, as well as employees, you can't help but feel like the problem might be a bit self-fulfilling.

#3. More taxes (aka "NOOOOOOOOOOOOOOOOOOOOOOO!")
I reckon this one will fly like a lead balloon.  But there are more than a few ways you could look at this one.  We've heard everything from replacing the flat tax with a progressive tax regime (aka go after the big companies), health care premiums (which I'm still torn on), a PST (gasp!), and even a small gas tax.  The interesting thought with the PST or gas tax that was brought up by one person was if you made either one 3%, you could say 1% goes to education, 1% goes to health and 1% goes to infrastructure.  As a farm kid, I don't like the gas tax idea only because you're being penalized for living out in the sticks and needing groceries all of a sudden gets even more expensive.  Admittedly, I haven't done the full math on the flat tax but from what I can see, we have wiggle room to make it work without losing the "Alberta Advantage".  And making the rich guys pay a little more?  Sounds great.  Except for when you're looking for donations to your party come pre-election time.  Yikes.  And remember that comment that the PC's "don't have a revenue problem, they have a spending problem."  Well, they must have at least a little bit of a revenue problem.  Because some groups keep claiming that spending "shouldn't be on the roller-coaster ride provided by the price of oil."  Government doesn't have a ton of options when it comes to revenue.  So...there's that.

#4. Heritage Savings Trust Fund (aka "Remember that secret bank account we created when you were a kid?")
This one has me a little perplexed and intrigued all at the same time.  Admittedly, I don't know the process in how or even if we could liquidate assets.  But I did a little reading and it appears the value of that thing sits at $17.2-billion.  Here's my question: is this not referred to by many as the "rainy day fund"?  That would lead to a follow-up question: what is your definition of a "rainy day"?  That would lead to a third question: is this not a "rainy day"?  And if it wasn't set up for a rainy day and was set up more as being "for our grandkids' grandkids", at what point does it constitute our grandkids' grandkids' era?  Is there a "best before" date on the fund?  Is there a "can't open until 2030" sticker on the fund?  Now, I understand that the value of this fund hasn't dipped below $11-billion since the '90's, so taking the full $7-billion would be uncharted territory.  But what would be stopping us from utilizing some of the Heritage Savings Trust Fund to soften the blow so that we're not forcing something else down the taxpayers' throat?  Buys the government a little bit of time to maybe look into some other options (ie the above three options) and come up with a scheme on how to build the fund back up over time.  And who knows, maybe diving into that fund now might actually help us avoid creating a PST that lasts into the days of our grandkids' grandkids, who will be shaking their fists at us, wondering why we tied their hands "back in the day."  That'd be a legacy, now wouldn't it?

I'd imagine the Prentice government is going to introduce some hybrid of all four options (assuming they don't find an extra $7-billion sitting under the couch cushions).  Here's my bold prediction though: they'll introduce their solution and then call an election.  It will be their dare to the other parties: "let's see you do better."  And Albertans will be left in a tricky predicament.  Ultimately, you want to choose the party that presents the best plan to get us out of these turbulent times.  But what happens if that party is the one that steered us into these turbulent times in the first place?  Do you pick the second-best plan?  Or do you give them one last chance?