Read on Twitter
A brief rebut of this fine piece by @trevortombe. I have great respect for Trevor so shared this privately with him first.
The analysis that Alberta is a net recipient this year is interesting and fun, however...
1/ https://twitter.com/trevortombe/status/1288108546022731776
The analysis that Alberta is a net recipient this year is interesting and fun, however...
1/ https://twitter.com/trevortombe/status/1288108546022731776
..the reality is that the source of this (as Trevor acknowledges) is a massive federal deficit.
You can make everyone a net recipient if you spend enough. As we are doing and as we should be doing.
2/
You can make everyone a net recipient if you spend enough. As we are doing and as we should be doing.
2/
Yet I would counter that from both an economic and political point of view, we should impose some sort of Ricardian Equivalence.
That is to say, we should evaluate them based on some sort of reasonable assumption about the future path of federal revenues to pay for the deficits.
That is to say, we should evaluate them based on some sort of reasonable assumption about the future path of federal revenues to pay for the deficits.
Ricardian Equivalence says that deficits result in the rational expectation that you have to pay for those deficits through future higher taxes or lower spending.
So folks will react by constricting their own activity in response to a burst of deficit financed gov't activity.
So folks will react by constricting their own activity in response to a burst of deficit financed gov't activity.
In this context, I can’t imagine a reasonable scenario under which paying for these deficits won't require larger relative payments from Alberta than from elsewhere - as has been the case for many years and should continue.
So a Ricardian Equivalence says that this "current day" net benefit to Alberta will be negated by a "future day" net cost to Alberta to pay for the deficits incurred today.
