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Calgary & Alberta Economy

JonnyCanuck said:
...investment & programs that will generate revenue for the economy that will replace the impending decline in our country's largest export product ... oil & gas. We can certainly consume more green energy in Canada and by doing so, it will maintain some jobs ... but can we export it to generate revenue? I have not heard how that can be done. Anyone?
As I have stated a couple of times in this thread .... we still have to pay for things in this country. Having jobs requires revenue from somewhere to pay for those jobs. We have racked up this massive federal and provincial debt till now, and it will only increase by X billions of dollars with the Build Back Better plan. How are we going to pay for all this without a growing oil & gas industry? I am all ears.
😟
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Who knows at this point. This is pretty unprecedented territory
 
One thing I will add about the “build back better” mantra is that the federal government remains limited by what they can legislate when it comes to regulating particular industries within a province. So short of a landmark SCC decision, the best the Liberals can do is throw money at provinces to “green” their economy and/or continue to put pressure on the industry using powers within Federal jurisdiction. Now the problems facing the O&G sector extend well beyond federalism issues but it is something to consider for those concerned that the Liberals will attempt to tear-down the industry.
 
^ Yeah. I have to wonder what those that had a hyper negative reaction think is going to happen. This government hasn't been any worse for the industry than during the Harper era. If the Harper government had been in power, Energy East still would have been cancelled, Northern Gateway still would have been put out of its misery by a court decision, and Trans Mountain would have died unless the government decided to buy it. We would still have the 80% emissions cut by 2050 goal, and the 30% cut by 2030 target.
 
It is no surprise because the Conservatives simply don't take responsibility for the role they have played in this mess. For example, a big problem with the Harper government is they never took indigenous issues seriously, which had the end result of damaging the reputation of the industry and the NEB. It was never a foregone conclusion that the Federal Court of Appeal would quash approval of Northern Gateway, but the federal consultation process was so lackluster that the FCA had no other choice but to send it back. Had the Harper government carefully followed SCC guidance, or at a minimum, had not been dismissive of the duty to consult doctrine, the industry could have saved face even if the project eventually fell through for other reasons. Instead, their handling of these issues has decreased public confidence and trust in pipeline approvals and contributed to an increasingly hostile perception of the industry. I am no fan of the LIberals for a number of reasons, but they really had little choice but to respond the way they have
 
Kenney will be giving a fiscal update Thursday and report that Alberta has it's largest deficit in history. It is hard to believe that a province as well off as it is/was, is now in a 'have not' state.
The scenarios I see that deficit being reduced and eliminated is if:

1. There is a significant increase in the prices of oil and gas. No economist is forecasting this to happen in the short to medium term.
2. We sell more of our oil & gas globally and increase our share of fossil fuel consumption. But that would mean all the provinces and federal government are united in this objective to help pay down the massive debts each have incurred. Seems like a no brainer to me, particularly selling more clean-burning natural gas, but we lack common business sense at the federal level, and in some provinces (i.e B.C.; Quebec).
3. Alberta gets back to full employment and companies start making higher profits ... all leading to higher tax revenues for the province. Unfortunately, this scenario depends largely on #1 & #2.
4. Find some industry or another economic sector to replace the GDP we are losing with fossil fuel industry. Let's face it, there is nothing that can be developed short to medium term that could possibly replace oil and gas. We would need massive investment dollars. Where is that going to come from?
5. Initiate a provincial sales tax. Although it will help some, projections suggest tax revenues will put a dent in the deficit not eventually eliminate it.
 
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angusreid.org

Economic Outlook: COVID-19 stalls trend of growing financial optimism in Canada -

Low-income households least optimistic about coming year September 8, 2020 – Canadians continue to re-enter the employment market (250 thousand more jobs were added across the country in August), but the negative impacts of the COVID-19 outbreak on personal finances and the economy have soured...
angusreid.org angusreid.org

Easy to understand why there is increased pessimism among Canadians. That level varies from province to province. The survey talks about 'standard of living' and average household income but no mention of debt levels. It is the rising consumer debt that we need to be concerned about. It was already high heading into the pandemic. I surmise debt levels by household have only increased in the last 6 months as people have lost their jobs or are still on furlough. CERB only helped pay for the essentials. Mortgage/rent deferrals are coming to an end.
Add on the massive federal and provincial debt, and the stress that city governments are going through. All of this has to result in increased taxes at some point. Debt + higher taxes will doom any kind of economic recovery.
 
At some point... but not today at least federally. Good debt management strategy could lock in debt at very low interest for a very long timeframe. Which since the cost of servicing debt is at an all time low, means there is lots of capacity. Even if you don't believe in MMT.

Provincially it is much worse - we are in need of a structural adjustment and we can either adjust now or adjust later. Going to be bad no matter when.
 
The interest payments on federal debt may be low at this time however the principal still has to be paid. How is that going to be done over the next number of years? Revenues will be down from fewer people working and paying taxes, corporations not making the profits they once were therefore paying lower taxes., and small business being decimated and not paying any taxes. With some form of CERB or unemployment benefit continuing for the medium term plus other social programs likely to come (i,e daycare subsidy); federal spending will continue to be higher than average.

What I will be looking for when parliament returns and the Liberals reveal their 'recovery plan':
1. Measures to increase our export revenues including oil & gas
2. Steps to reduce non-essential government spending over the next 2-3 years. It is time to look at the size of the federal government, pensions etc.
3. Position on tax increases. i.e income, GST, corporate.

In normal times, I would also say infrastructure spending would be key. However the amount of spending that would be required to generate sufficient jobs, added to the 'COVID result' spending would be staggering. It is unlikely that income tax increases will be announced at this time but watch out next year. We may also see an increase in the GST back to 7%. This country simply cannot afford to do everything unless we address points 1&2 and at some point, sad to say, raise taxes.
I have no faith in this government to come up with a fiscal strategy that will not bankrupt us. Unlimited spending seems to be their mantra.
 
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JonnyCanuck said:
however the principal still has to be paid
Click to expand...
No it doesn't. You just wait long enough and time dilutes the value. Perpetual organizations can use very different strategies. Organization that both issue debt and money can use incredibly different strategies.

I think your solutions are viewing things through a very oh no the IMF is going to come knocking 1980s, 1990s fiscal and monetary bound. We just aren't there. We don't need to move as fast.

We aren't anywhere near to a current accounts crisis, where chasing export earnings and reducing imports would be a over riding goal above everything else.

Federal spending on staff isn't out of control. Just a smidgen over 2% a year, which mostly comes from growing the size of the military and RCMP. As does the growth in future benefits, as other public servants have more standard cost shared pensions over longer service requirements. The cost has been dropping as a share of GDP, showing productivity gains too.
1599666648074.png


I think in the short-medium term, the replacement for EI will be much more comprehensive, which will mean gig economy people, entrepreneurs, will be forced to pay into it. The government will subsidize the benefit expansion for this year, and partially next. First, EI premiums will be required by everyone. Then, the rates will have to be adjusted to reflect the economy at that time. Companies with gig workers in Canada but little physical presence may end up with having to contribute as well via a revenue tax of some sort.

Medium-long term, depending on other programming, I think we will also see some changes to capital gains taxation, as it seems the economy is minimizing profit and raising asset prices, which is destabilizing the 'bargain' - double taxation - which justifies lower taxes of capital gains and dividends. I'd wait a few more years for things to calm down before choosing how much more revenue the government needs and where it should come from. A GST hike would make sense in the long run.

Short term, Infrastructure spending growth won't be happening on a wide scale. That sector of the economy is near capacity, and has no need for stimulus. What I can see: universal childcare; implemented at breakneck speed. It is the single largest barrier to full economic recovery. Perhaps a comprehensive retraining program for workers deemed displaced and who are below a certain age (older workers it will make more sense just to bridge them until their pensionable age).
 

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Another investment by the Opportunity Calgary Investment Fund. This time to support student programming at the SAIT Digital Transformation Talent Hub. I much prefer using this fund to help build up the ecosystem for the tech sector rather than having a government entity trying to pick winners in the market. Will be much more beneficial for Calgary in the long term.

A bonus to this is that the school is setting up the talent hub in the Odd Fellows Temple building downtown.

1599668567117.png


www.newswire.ca

Opportunity Calgary Investment Fund supports SAIT Digital Transformation (DX) Talent Hub providing Calgarians job skills for the digital economy

/CNW/ - The Opportunity Calgary Investment Fund (OCIF) will provide SAIT up to $8.2 million over five years for programming to address the significant shortage...
www.newswire.ca www.newswire.ca
 
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One curious thing re: economy is how critics of governments always compare the government to a household budget - "government debt is out of control, we got to pay it back and make ends meet, just like regular Canadians!" Of course, perpetual organizations like governments that control their own fiscal and monetary policy tools are not at all like households, but the "household budget = government budget" is a easy lie to generate some votes.

Funny part is they never make this comparison on the other side, because the household v. government budget comparison is a political, not economic argument. It only is used when someone is opposed to the government in power. If a household had as diversified income streams or interest costs as percent of income (~5%) the same as the federal government everyone would celebrate them as some of being so financially responsible and amazingly above average compared to other households.
 
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darwink said:
No it doesn't. You just wait long enough and time dilutes the value. Perpetual organizations can use very different strategies. Organization that both issue debt and money can use incredibly different strategies.

I think your solutions are viewing things through a very oh no the IMF is going to come knocking 1980s, 1990s fiscal and monetary bound. We just aren't there. We don't need to move as fast.

We aren't anywhere near to a current accounts crisis, where chasing export earnings and reducing imports would be a over riding goal above everything else.

Federal spending on staff isn't out of control. Just a smidgen over 2% a year, which mostly comes from growing the size of the military and RCMP. As does the growth in future benefits, as other public servants have more standard cost shared pensions over longer service requirements. The cost has been dropping as a share of GDP, showing productivity gains too.
View attachment 268631

I think in the short-medium term, the replacement for EI will be much more comprehensive, which will mean gig economy people, entrepreneurs, will be forced to pay into it. The government will subsidize the benefit expansion for this year, and partially next. First, EI premiums will be required by everyone. Then, the rates will have to be adjusted to reflect the economy at that time. Companies with gig workers in Canada but little physical presence may end up with having to contribute as well via a revenue tax of some sort.

Medium-long term, depending on other programming, I think we will also see some changes to capital gains taxation, as it seems the economy is minimizing profit and raising asset prices, which is destabilizing the 'bargain' - double taxation - which justifies lower taxes of capital gains and dividends. I'd wait a few more years for things to calm down before choosing how much more revenue the government needs and where it should come from. A GST hike would make sense in the long run.

Short term, Infrastructure spending growth won't be happening on a wide scale. That sector of the economy is near capacity, and has no need for stimulus. What I can see: universal childcare; implemented at breakneck speed. It is the single largest barrier to full economic recovery. Perhaps a comprehensive retraining program for workers deemed displaced and who are below a certain age (older workers it will make more sense just to bridge them until their pensionable age).
Click to expand...

I agree with most everything you've said here, minus the commentary on infrastructure spending growth. This has been a familiar well for government's passed, and I don't think they will eschew it based on theoretical holding capacity of the construction industry in the short term. It's also a potential opportunity for Trudeau to do some legacy building (something he loves, i.e. transcanada highway North, or something similar) OR if you really have a negative opinion of him, another opportunity to funnel some contracts towards some of his favourite companies.
 
heightjunkie said:
This has been a familiar well for government's passed, and I don't think they will eschew it based on theoretical holding capacity of the construction industry in the short term.
Click to expand...
The problem is that in 2009 the municipalities were really bad at actually getting projects started fast, and in 2016 it was the same deal. They have a history of failing.

A long term boost to infrastructure spending would be fine: lock in for 10 years starting in two years; with significant requirement for training people who have never worked in the industry before (mobilization). But that isn't stimulus.
 
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