Poor Wile E. Coyote. That mangy predator was relentless in his schemes to catch the Road Runner, only to be foiled every time. The law of gravity played a lead role in crushing his plots. The coyote was always falling off a cliff, crushed under collapsing rocks, or squashed into an accordion by a plunging anvil.
Playing the part of the coyote this winter is Alberta premier-designate Ed Stelmach, who picks up the reins from Ralph Klein to govern the continent's hottest job market.
Playing the part of the anvil is Alberta's economy. The saying "what goes up must come down" applies here. If he's not careful, Mr. Stelmach could end up with the anvil of Alberta's economy crashing down on top of him. Who wants to be the premier blamed for letting the economy sputter and choke?
Has Alberta's economy peaked? Is it heading for another 1980s-style bust?
Consider energy revenues. The price of natural gas has sagged for much of 2006 (although it has recently rebounded a bit). A barrel of crude oil hovers in the high $50 (U.S.) range -- solid by historic standards but down sharply from its peak of $78.
Jobs and wages are also causing brows to furrow. Severe labour shortages are ratcheting up wages and forcing some companies to scale back or shut down altogether. This has been especially hard on small companies, non-profits, and personal and business service providers. Unless your product is crude oil -- or you have sufficient market clout to jack up your prices -- your bottom line is caught in a cruel vice of escalating wages and flat revenues.
As well, much of Alberta's growth has been due to a steady inflow of interprovincial migrants. It is often joked that Alberta's most valuable asset is Saskatchewan's education system (although such hilarity is lost on Saskatchewan taxpayers). But as Edmonton and Calgary watch housing prices soar, transportation problems worsen, and rental vacancies approach zero, the attraction of Wild Rose Country is waning.
The new Alberta Children's Hospital is already too small. Calgary's C-train -- the city's light rail transit system -- is packed tighter than Tokyo's.
The implication is that fortune seekers in Saskatchewan, Manitoba and the East Coast will do the math, decide they simply can't get ahead in Alberta, and stay put.
So, if energy prices stay relatively soft (still a big "if"), if high housing prices stymie interprovincial migration, and if labour shortages fuel inflation and curb capital investment, Alberta's economy is sure to cool.
But in Wile E. Coyote's cartoon world, gravity was often momentarily suspended -- the anvil floating in mid-air for just a second or two, hovering, hovering, then finally smashing down on the poor coyote's head.
That strange hovering feeling is what Albertans are currently experiencing. The economy is certainly not falling, but it doesn't feel like it has much room to rise, either. It's hovering at a lofty height.
Mr. Stelmach faces an enormous task: to defy gravity and keep that economic anvil in the air before it comes crashing down on top of him. The coyote never did manage to do it, but Mr. Stelmach should fare better.
Some suggestions? Keep spending under control. Set aside 50 per cent of annual resource revenues in a long-term investment fund that bears interest in perpetuity. These revenues may be less than last year's, but they will still total in the billions of dollars.
Focus on education. There is no better way to ensure a prosperous, productive and innovative economy than by investing in education -- K-12, postsecondary, adult literacy, and apprenticeships.
Limit capital spending this year to those projects deemed absolutely critical. Construction workers and materials are stretched thin. As University of Alberta economist Paul Boothe puts it, the province cannot buy more capital, only more expensive capital. Wait until there is some slack in the construction sector before ramping up capital spending.
Alberta's economy may have peaked. Will it come crashing down like the cartoon anvil? Possibly, but not likely. With prudent policy measures -- and some luck with energy prices -- it's more likely to stay suspended in mid-air. But if Mr. Stelmach does not lead Alberta with wise fiscal planning, he could end up with a giant anvil on his head and a nasty political headache.
Todd Hirsch is chief economist at the Calgary-based Canada West Foundation. The views expressed are his own.