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His policy decisions restored Alberta to prosperity
April 22, 2012
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CALGARY, AB, Apr. 22, 2012/ Troy Media/ – Ralph Klein’s record as premier of Alberta from 1992 until 2006 is often attacked by critics, too many of whom believe every human problem, including intractable private ones, can be solved by government action: gather plenty of smart people in an office, add tax dollars and stir.
So Premier Alison Redford’s recent behind-closed-doors critique of the former premier – she claimed Klein’s 1990s-era cost-cutting produced ‘negative’ effects with which she is still forced to deal – is not surprising or new.
Criticized from inside and outside government
Over the years, I’ve heard the same criticism from a few senior Tories on infrastructure. Outside government, the more vitriolic folk claim Klein somehow ravaged health care and education.
Full disclosure: Klein was a Senior Fellow with the Fraser Institute after he left politics and until he fell ill; everyone at the Institute was proud to have him on board. Klein, by his own admission, is not an intellectual. But he did understand that if Alberta continued spending more than it took in – and this after already dramatic tax hikes under his predecessor Don Getty - a fiscal shipwreck would result. For those who govern, the latter quality is more helpful to citizens than the former.
Actions from Klein and his colleagues included reformed and reduced government spending, balanced books, an end to most subsidies to business, privatization (we never needed civil servants to sell us wine and beer), and later, tax reductions after decades of new taxes and ever-higher rates.
Those policy decisions restored Alberta to prosperity. But critics usually try to damn the former premier on three matters: education, health care, and infrastructure.
Let’s start with the last item. During the earlier Klein years, as a per centage of the budget, the province did spend less on infrastructure relative to later years. But capital spending did not cease. It also increased once fiscal conditions improved. For example, by 2002, capital spending had more than tripled to $2.8 billion annually, from the $800 million low-point back in 1997.
On the program side, Klein’s 1990s cuts included a reduction in social services but that was not, in the main, a bad thing.
I recall an early 1990s conversation with a fellow University of Alberta student. Earlier, he had taken an extended trip to Asia and thus spent all his savings. Upon his return and before attending university, he collected welfare rather than take a ‘McJob’ he thought below his dignity. Klein’s welfare reforms stopped much of that nonsense.
In the 1990s, health care and education budget cuts were obviously painful for those laid off – though this is a constant reality in the private sector – but those reductions must be placed in context.
Alberta hadn’t balanced its books since 1985. By 1992, the province’s annual deficit was $2.6 billion (and would hit $3.4 billion in 1993). Interest rates were high – the Bank of Canada rate ranged between 4 and 9 per cent in those two years – so more borrowing was fiscal suicide.
Soaring interest payments already diverted tax dollars from frontline services. More borrowing would have led to even deeper program spending reductions later. See Greece as a negative object lesson.
When Klein became premier in 1992, interest on Alberta’s provincial debt was $1.3 billion annually and would hit almost $1.8 billion by 1995. In 1992, debt interest was equivalent to 32 per cent of health care spending; it amounted to 36 per cent of the budget for basic and advanced education; it was akin to 75 per cent of social services spending.
By wrestling deficits and then debt down to zero, Klein’s actions also allowed – here’s irony – for a later, dramatic expansion in program spending, which hit $10,489 per person by 2009 (and only then did the province incur a deficit) up from a low of $6,659 per person in 1997.
Takes ignorance to criticize Klein
One last fact: Alberta’s five-year average unemployment rate between 1990 and 1994 was 8.5 per cent; the 1995-1999 average was 6.4 per cent. Just before Klein left office in late 2006, an autumn release from Statistics Canada noted an Alberta unemployment rate of 2.9 per cent that June. ‘Over the last decade, Alberta has consistently had Canada’s strongest labour market,’ wrote the statistical agency in a side comment.
Klein was not perfect. Foregone reforms included missed opportunities to introduce European-style options in health care and education.
But the Klein critics from Premier Redford on down should face this reality: The difficult policy decisions made by Ralph Klein and his colleagues, far from harming health care, education and infrastructure – instead allowed Klein and future politicians to spend much more lavishly in all three areas and without borrowing money. And Klein set up the province to boom. It shows a profound unawareness of the facts to suggest otherwise.
Mark Milke is the director of the Alberta Prosperity Initiative at the Fraser Institute.
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