Todd Hirsch, recently retired chief economist of ATB Financial, tours his Calgary neighbourhood on Oct. 7, 2022. Untethered, Hirsch talks to The Globe about how he sees Alberta’s economic future.Glenn Lowson
When I ask Alberta economist Todd Hirsch about Danielle Smith and her proposed Alberta sovereignty act, the question seems to cause him physical discomfort.
His shoulders slouch deeply, as if a massive weight is on them. His eyes roll dramatically. He takes a long, slow breath.
It is, perhaps, a reflexive response for the man who spent the past 15 years as chief economist of ATB Financial, the provincial-government-owned banking and financial-services company from which he retired – at age 56 – last month. While the job has made him one of the highest-profile economic experts in Alberta, it also meant that he habitually bit his tongue on matters of the province’s politics, always mindful of who his ultimate bosses were.
He was a leading voice on the Alberta economy who, perversely, never commented on provincial budgets. He avoided discussions about the government’s fiscal policy options – about, say, a carbon tax or a provincial sales tax. His concern was that it could be interpreted as political commentary – especially in this volatile era of social media.
“It was always understood, this was a no-fly zone,” Mr. Hirsch said over coffee on a sunny patio in Calgary’s Beltline district last week.
“It was really difficult, and it became more intense.”
Now that he’s free from that entanglement, he has a few things to say.
For one, he believes the incoming Alberta premier’s planned law, which would assert the province’s sovereignty to overrule federal laws and policies, is “dangerous.”
“I think this would be so politically confusing and disruptive. Just ask Quebec, after 1976 [when that province first elected a separatist Parti Québécois government], how that went for them. It was 40 years of an outflow of people and capital and corporate presence and influence … and it’s never returned. The same thing would happen in Alberta.”
Mr. Hirsch is far from alone in his apprehension about the rise of Ms. Smith, who prepares to move into the premier’s office after winning the leadership of the province’s ruling United Conservative Party last week. Her campaign – branded with the slogan “Alberta First” – promised a highly adversarial approach to dealing with Ottawa, which she paints as Alberta’s enemy and biggest obstacle to the province’s economic well-being.
Yet she assumes the job at a time when Alberta’s economy is enjoying some of its best success in years. Strong global oil and gas prices have rekindled capital spending in the energy sector and spurred a wave of job creation, driving unemployment down to seven-year lows. The provincial government recently projected a record budget surplus of more than $13-billion in fiscal 2022-2023.
Mr. Hirsch believes that Alberta is headed for more budget surpluses in the future, as its royalties from oil and gas production stand to increase in the next few years even if commodity prices don’t remain as strong as they are today. That’s because some of the biggest oil-sands projects of the past decade are approaching the point where they will have earned back their large up-front development costs, at which point their royalty rates increase dramatically on all future production.
“That gives Alberta a happy problem, but it’s still a problem. How do you decide what to do with these surpluses?” he said.
“Do you just roll it into program spending, and lock yourself into structural problems in the future? Do you pay off debt? Do you squirrel it away in the Heritage Fund [Alberta’s sovereign wealth fund]?
“We need to continue some dialogue, as Albertans, about how we want to manage our fiscal situation,” he said. “Because just sort of playing it by ear every year we have a budget – it’s like you win the lottery every year, but you’ve got no plan for what to do with those lottery winnings. And then some years, you don’t win the lottery, then you’re in trouble.”
Ultimately, he believes a provincial sales tax is the best way to stabilize government revenues through the inevitable swings in oil and gas fortunes that, in the past, have wreaked havoc on budgeting.
“If you really want a stable revenue source, there’s no more stable or predictable revenue than a value-added tax, or a PST,” he said.
That’s definitely an opinion he was careful about expressing publicly while at ATB. A provincial sales tax is among the most touchy and politically charged fiscal policy options in Alberta, where the public has long viewed the lack of such a tax as a proud part of the province’s unique identity.
“I don’t actually know if Albertans would be so up in arms if a provincial sales tax was rolled out as [part of] a broader redesign of our fiscal environment,” he said. “It can’t just be, ‘Well, now we have a provincial sales tax.’ I’d also want to see what else we are doing with our oil and gas royalties, with our other tax rates.”
Mr. Hirsch plans on continuing to address these economic topics. He has launched a late-career business as a freelance public speaker – a skill he honed, and enjoyed, in his years at ATB. With Alberta facing some challenging political and economic questions in the next few years, it seems an apt time for him to turn his analytical lens to some of those issues that he has left outside of his focus for a decade and a half.
“There are now things, in my career, I feel like I have to talk about.”