CALGARY—Faced with a faltering economy and a large budget deficit, Alberta’s recently-elected New Democratic government would be better off emulating the fiscal prudence of Roy Romanow’s NDP government in Saskatchewan – rather than the tax and spend policies implemented by Bob Rae’s NDP in Ontario – concludes a new study published by the Fraser Institute.
“Canadians too often make the assumption that a new government’s approach to fiscal policy can accurately be predicted simply by looking at its political label. But historically, that hasn’t been the case,” said Ben Eisen, a policy analyst with the Fraser Institute and co-author of the report.
“There are numerous instances across the country of Progressive Conservative governments not acting in a fiscally responsible manner just as there are cases of NDP governments that managed provincial finances prudently.”
For example, Roy Romanow’s NDP government in Saskatchewan in the early 1990’s is widely recognized for delivering one of the more fiscally prudent series of budgets in recent Canadian history.
Romanow came to power in 1991 during a time when Saskatchewan’s debt had reached dangerous levels and the province was on the brink of insolvency. Romanow’s government took immediate action. During their first three years in office, program spending fell by a total of 10 per cent. The government’s spending reforms eliminated an $845-million deficit in just three years, two years ahead of their original plan.
“The spending cuts in the early years of Romanow’s term, combined with the lengthy period of restrained spending growth in the subsequent years, allowed for large-scale personal and business tax reductions and reform. The smaller, more focused government coupled with improved competitiveness established the foundation for prosperity that Saskatchewan enjoys today,” Eisen said.
Also in the early 1990s, Bob Rae’s NDP took control at Queen’s Park in Ontario. Unlike Romanow, Rae chose to tackle recessionary pressures by increasing nominal program spending by 11.9 per cent in his first full year in office.
The Rae government’s plan to pay for the new spending was through an array of tax increases. The combination of large spending increases and slow economic growth, however, resulted in unprecedented budget deficits, increasing debt-service costs and a credit rating downgrade for Canada’s most populous province.
“The history of her own New Democratic Party provides Alberta Premier Rachel Notley with both successful and unsuccessful fiscal policy models from which she can draw lessons. The new NDP government in Alberta has a choice between successful NDP policies rooted in competitiveness and practical solutions to current day problems or the unsuccessful tax and spend policies of the Bob Rae NDP,” Eisen said.