As Alberta heads closer to a general election that is shaping up to be a battle of the province’s two right-of-centre parties – the 40-year-dynasty Progressive Conservatives and the upstart Wild Rose – the Alberta Blue Committee is taking a hiatus from commenting on the political landscape.

“Our goal as a committee is to influence public policy and urge political unity on the right, it is not to take sides during an election,” said Alberta Blue spokesperson Morten Paulsen, noting that the hiatus will allow committee members to take part in the election process without being in a conflict of interest with the goals of the Committee.

The Alberta Blue Committee will come back together following Alberta’s spring election to re-evaluate its mandate and if there continues to be a need for the organization. 

“Depending on the outcome of the election, there may be a decreased need for our committee, or we may need to resume our call for a united right with renewed vigour,” Paulsen said. 

“Our final comment prior to the election is that we hope the two sides focus on policies and not personal attacks during the election. Personal attacks will only further fragment the movement and distract from a positive debate on meaningful public policy.  We urge both parties to keep it clean.”

OK, that’s a provocative headline. But before you throw stones, allow me to ask two questions about Premier Redford’s new drinking and driving rules.

1. Will the law mean more or less criminal convictions for those blowing just over  .08?

Public choice theory says that if faced with a choice between doing something in the public interest or doing something in their self interest, public officials do not always act in the public interest. So for example, given a choice to implement something where one way requires policies that are difficult to implement and the other is simple and efficient, public officials will often choose the former because it allows them to build a bigger bureaucracy. I am not being critical here, just noting that sometimes the incentives faced by public officials (bureaucrats and politicians) cause them to promote their own interest over the public interest.

So now let’s look at the new law from the perspective of public officials acting in their own self-interest.

Janet the policewoman pulls over George. Janet suspects George has been drinking and asks him to blow. George blows .081, which is  .001 over the impaired legal limit.

As we all know, the police have some discretion at this point. Under the new law, as I understand it, Janet has a choice. She can:

1.     charge George with impaired driving; or
2.     impose “administrative penalties” as if George had blown between .05 and .08.

I think we would all agree that the police should be given some discretion, but the key point I want to make here is that the incentives from the point of view of the police/government/politician are not the same for these two options.

If Janet charges George, it is likely that George will fight the conviction. Fighting the conviction will entail a criminal trial. The key point is that this will cost the system money in terms of lawyers and time.

If instead Janet imposes the new administrative penalties, George is probably unlikely to challenge them (he will be relieved to have avoided the impaired driving charge). Therefore imposing administrative penalties will make the system money or at least not cost as much as a likely criminal trial.

And so from a systemic point of view, there is now a systemic incentive to impose administrative penalties rather than criminal convictions for individuals who blow over .08. This is particularly true when, as is true today, governments are retrenching.

Public choice theory tells us that when there is a systemic incentive that runs against the public interest (and I take the public interest here to be that we should charge people who blow over .08 with a criminal charge), we should not be surprised when the system follows the systemic incentive.

Which means that what we may well have done is, on a systemic basis, reduce the number of people who are driving drunk and get charged with impaired driving. Janet can increase her department’s (or the government’s) revenues by levying administrative penalties instead of charging George with impaired driving.

The result will be more revenue for government… which is why I have been calling this the “impaired driving tax”.

In short, the incentives of the law from Janet’s point of view will bias her towards administrative penalties and away from criminal convictions for those blowing just over .08.

2. The second question returns to George and asks: does it matter if George is relatively poor or relatively well off?

It turns out that it just might. If George is very poor, then the prospect of paying a stiff administrative penalty may be just as much of a deterrent as facing a criminal conviction.

But if George is quite well off, paying even a stiff fine would be much less onerous than a criminal conviction. In addition, it is probably much easier for rich George to do without his car and license for three days than poor George.

In short, the impact of the law from Geroge’s point of view will be different based on his relative economic standing.

And so I return to my headline and ask the question: Will more rich people drink and drive?

Public choice theory would tell us that they will. Let’s hope (against much evidence) that the theory is wrong.

The Government of Alberta has posted an online survey to get input from Albertans as they work towards developing next year’s budget. You can find the survey online at http://www.budgetdialogue.alberta.ca/. Below you will find my answers to the survey where I push for reduced spending and balanced budgets! This issue is critically important to our province. If you agree with the principles of the Alberta Blue Committee, please take a few minutes to answer this survey yourself and add your voice to the call for responsible government.

Question 1: Setting the right priorities

Albertans have worked hard to get out of debt, but during the recent global economic downturn the province ran a deficit. The shortfall in the budget was covered by the province’s rainy day fund (the Sustainability Fund), which helped us maintain programs and services without going into debt. We used the fund because Albertans said it was the right thing to do at the time. But we want to know how that fits with your priorities today.

Rank the following in order of priority (1-4):

Balance the budget (no deficit)

Spending on priority areas

Maintaining low taxes

Saving for the future

My Response and Comments

1. Balance the Budget
2. Saving for the future
3. Maintaining low taxes
4. Spending on priority areas

The trouble with this question is that the priority for the next budget should be “Cutting spending.”Alberta is spending 40 percent more than Ontario and 30 percent more than British Columbia to deliver the same basket of services. If Alberta cut $12 billion out of its $30 billion budget, we would be spending the same as Ontario to deliver health, education, social services and everything else.

In short, spending is out of control in Alberta and needs to be cut. That should be the number one priority.

Questions 2 and 3:

Meeting your needs

One of the biggest challenges for any government is managing all the competing priorities. Just like your household budget, we need to determine where the money goes.

How would you allocate the budget?

Health

Education

Social Services

Agriculture, Resource Management and Economic Development

Other (Other includes transportation, justice and policing, regional planning and development, environment, recreation and culture, housing, government operations and administration, and debt servicing costs.)

Please rank the items in the ‘other’ category from one to six:

Transportation

Justice and Policing

Regional Planning and Development

Environment

Recreation and Culture

Housing

My Response and Comments

40%     Health

30%     Education

10%     Social Services

5%       Agriculture, Resource Management and Economic Development

15%     Other

1. Justice and Policing
2. Environment
3. Transportation
4. Recreation and Culture
5. Regional Planning and Development
6. Housing

The button I wanted to push for this question was “less than we are spending now”. In general I find this type of question unhelpful, though what the government is trying to do is gauge relative priorities. On that front, I must say that I prefer how Alberta does education to how it does health care, and by a wide margin. Our education system is the best in the world because it gives parents choice between state schools, charter schools, independent schools (some of which are part of the state school system and some remain separate) and home schools. And these are all public schools in the sense that they are all funded by the public purse. What a great province.

Questions 4 and 5:

Building your province

Public infrastructure is essential to supporting a strong economy and maintaining the quality of life for Albertans – giving us the schools, health facilities and roads we need for a growing economy.

Through the current three-year capital plan, Alberta will invest roughly $18 billion to pave or re-pave approximately 1,400 km of highway, build five new health facilities and 22 new schools, and maintain many other facilities.

Overall, how do you feel about investing in infrastructure? In the coming years would you like to see that investment:

Increase

Decrease

Remain the same

Would you be willing to borrow to invest in infrastructure – just like taking out a loan to buy a car?

Yes

No

My Response and Comments

Overall, I would like to see investment in infrastructure decrease.

I would not be willing to borrow to invest in infrastructure.

The first question is obvious. Where I live (Chestermere) the government is building highways where no one lives, they are building sculptures that I drive over (called overpasses) and they are building massive hospitals where very few folks seem to live (south Calgary). I’m all for infrastructure and believe this is a government responsibility, but following the massive injection by the federal government and the 10 year spending spree we have been on provincially, I can’t shake the feeling that we should, as in all other areas of spending, just take a breath and slow it down, if not reverse it!

The second question is curious. At about the time I worked at Alberta finance (at the turn of the century), the accounting for infrastructure changed from a cash model (where the government had to book all expenditures on infrastructure in the year they were spent) to an accrual model (that allowed for booking of capital expenses over a much longer period of time based on some notion of depreciation). The result is that our accounting system means we are effectively borrowing already – we can spend billions on infrastructure and only book a fraction of the total cost.

To say that we want to borrow on top of this, well, I just don’t think that makes sense. Households cannot account for a large expenditure by “booking” the costs over many years… and then also take out a loan. So neither should governments!

Question 6: Saving for the future

When Alberta has returned to a balanced budget and has a surplus, what are your priorities for that surplus revenue?

Heritage Fund (province’s long-term savings account)

Sustainability Fund (province’s short-term, or ‘rainy day’ savings account)

Spending (programs and services)

One-time capital projects

My Response and Comments

I would put 100 percent in the Heritage Fund.

Here’s why. During the 1990s, a vast majority of our surpluses went into the Sustainability Fund. And guess what happened when we headed into deficit? Right, the government plundered the sustainability fund. By the end of next year Alberta will have wiped clean most of the sustainability fund.

Let’s stop that. Let’s stop pretending deficits aren’t so bad because we have a “sustainability fund”. Let’s make politicians run deficits and build up debt… or face the wrath of Albertans by draining the very popular Heritage Fund.

The purists will say I am just engaging in a communications exercise. Fine. But that’s how the government got away with wiping out a decade’s worth of savings in just three years.

And it should go without say that the last thing we need is more spending. Cripes!

Bonus Question:

If there are options or priorities we haven’t mentioned, we want to know that too.

My Response and Comments

 If Alberta spent the same per person as Ontario to deliver all the programs Albertans value, we would be spending $12 billion less. If we spent the same as British Columbia per person, we’d be spending $8 billion less. And I see no evidence that we get better services than Ontario or British Columbia. It’s simply profligate spending, because we think we can.

And why is Alberta spending so much? Because it is squandering our children’s inheritance. Alberta is spending all of the resource revenues it takes in. But these are not really revenues, they are merely the conversion of an asset in the ground (oil and gas) into a financial asset (royalties). Alberta is squandering our assets to pay for today’s consumption.

Alberta desperately needs to cut at least (at least!) $5 billion from our spending. This should be a cakewalk. Look at what BC does on education and what Ontario does on health care, and you’ll be there.

Please, please cut spending and stop squandering our children’s inheritance.