Here is an interesting article by Robert Roach of the Canada West Foundation with respect to this topic. I have to say that he makes some very good points.
Prosperity Bonus a waste of opportunities
Oh great, here comes a Grinch from a think tank to tell us that handing out cheques to Albertans is a bad idea! Well, it is. The Prosperity Bonus announced by Premier Klein is one of the worst ideas I have heard in a long time.
Compare Alberta?s oil and gas revenues to winning the lottery. Each person who buys a lottery ticket is willing to forego a small amount of money for the chance to benefit from winning a whole lot of money. The price of a lottery ticket does not go very far, whereas a million dollars is enough to buy a house, get out of debt, or retire. Similarly, an individual Prosperity Bonus cheque will not go very far, whereas pooling our oil and gas revenues presents us with an opportunity to do something truly special.
Because the surplus changes on an almost daily basis as the government plays a shell game with its budget numbers, it is difficult to predict the amount of the proposed Prosperity Bonus cheque, but it will not be a lot. Nonetheless, with filling up the car requiring a bank loan these days, most of us could use even a little extra cash.
To get this money, however, we have to sacrifice at least three very important things.
First, we have to sacrifice the opportunities created by pooling our natural resource revenue. For each of us to get our share right away and in the form of a cheque, we have to water down what we can do with the collective pot of money. We could, for example, use it to help turn the University of Alberta into a school on par with Harvard. Or, we could target its redistribution so that it really means something to less fortunate Albertans rather than see millionaires get cheques for a few hundred dollars that they don?t need.
It is important to pause here and note that the idea of using windfall revenues to help the poor should not be seen as a substitute for a comprehensive approach to helping people in need. Helping the poor or funding programs for seniors or any other core social program cannot be contingent on the price of a barrel of oil. High oil and gas prices, if used responsibly, present us with the opportunity to build a sustainable source of revenue that could be used to improve the lives of Albertans over the long-term.
Alberta?s oil and gas bounty does not, moreover, belong to individual Albertans, but to the people of Alberta as a group. Residents of Alberta have not forked over cash for shares in the province?s oil and gas reserves; we benefit from them simply by living here. The money collected by way of income taxes or a consumption tax like the GST comes from the individual earnings of Albertans. Oil and gas revenues, on the other hand, are collected from the businesses that pull the resource out of the ground. The government collects royalties on behalf of the collective owners of the resource, not individual Albertans.
Hence, if you want to dismiss the argument that oil and gas revenues should be pooled and used for collective projects as ?socialist,? you have to be willing to go one step further and argue that the royalties should not be collected in the first place, but left in the hands of oil and gas companies and their investors.
The second thing that we have to sacrifice to get a one-time dividend cheque is the opportunity to create a permanent savings account that would, with good management, yield annual dividends in perpetuity. It takes discipline to save for the future, but retirement planners will tell you that it works. Put some of your money away today, let it grow, and you will have a steady flow of income year after year. Albertans have the chance to do the same thing by saving a portion of our annual oil and gas revenues. Imagine the tax savings or public works we could finance using the earnings of a Heritage Fund worth $100 billion or more. This is what we should be shooting for.
The third thing we have to sacrifice is the prosperity of our children. Alberta?s natural resource wealth does not just belong to people living here today; it belongs to people living here 10, 50 and 100 years from now, too. Future generations have just as much right to share in this wealth as we do. Hence, we must act as responsible stewards and make sure that we leave something for future generations. The best way to do this is to set a large portion of our annual oil and gas revenues aside in a savings account. The rest we can spend as we see fit and, like our children, we will have access to the earnings on the spending account as well. It is a win-win approach, but it requires patience and discipline in the present to pull it off.
While I myself could use a few extra bucks in my pocket this winter, good public policy demands that we resist the temptation of a dividend cheque and demand that our government take a higher road and invest our money wisely.
Emrald, I thought you were retired. If you're on the road this much now, I would likely cringe at what you were doing when still a councillor. Do you still make it to Red Deer once in a while? I'm there every day now and wouldn't mind meeting up with you sometime.
Prosperity Bonus a waste of opportunities
Oh great, here comes a Grinch from a think tank to tell us that handing out cheques to Albertans is a bad idea! Well, it is. The Prosperity Bonus announced by Premier Klein is one of the worst ideas I have heard in a long time.
Compare Alberta?s oil and gas revenues to winning the lottery. Each person who buys a lottery ticket is willing to forego a small amount of money for the chance to benefit from winning a whole lot of money. The price of a lottery ticket does not go very far, whereas a million dollars is enough to buy a house, get out of debt, or retire. Similarly, an individual Prosperity Bonus cheque will not go very far, whereas pooling our oil and gas revenues presents us with an opportunity to do something truly special.
Because the surplus changes on an almost daily basis as the government plays a shell game with its budget numbers, it is difficult to predict the amount of the proposed Prosperity Bonus cheque, but it will not be a lot. Nonetheless, with filling up the car requiring a bank loan these days, most of us could use even a little extra cash.
To get this money, however, we have to sacrifice at least three very important things.
First, we have to sacrifice the opportunities created by pooling our natural resource revenue. For each of us to get our share right away and in the form of a cheque, we have to water down what we can do with the collective pot of money. We could, for example, use it to help turn the University of Alberta into a school on par with Harvard. Or, we could target its redistribution so that it really means something to less fortunate Albertans rather than see millionaires get cheques for a few hundred dollars that they don?t need.
It is important to pause here and note that the idea of using windfall revenues to help the poor should not be seen as a substitute for a comprehensive approach to helping people in need. Helping the poor or funding programs for seniors or any other core social program cannot be contingent on the price of a barrel of oil. High oil and gas prices, if used responsibly, present us with the opportunity to build a sustainable source of revenue that could be used to improve the lives of Albertans over the long-term.
Alberta?s oil and gas bounty does not, moreover, belong to individual Albertans, but to the people of Alberta as a group. Residents of Alberta have not forked over cash for shares in the province?s oil and gas reserves; we benefit from them simply by living here. The money collected by way of income taxes or a consumption tax like the GST comes from the individual earnings of Albertans. Oil and gas revenues, on the other hand, are collected from the businesses that pull the resource out of the ground. The government collects royalties on behalf of the collective owners of the resource, not individual Albertans.
Hence, if you want to dismiss the argument that oil and gas revenues should be pooled and used for collective projects as ?socialist,? you have to be willing to go one step further and argue that the royalties should not be collected in the first place, but left in the hands of oil and gas companies and their investors.
The second thing that we have to sacrifice to get a one-time dividend cheque is the opportunity to create a permanent savings account that would, with good management, yield annual dividends in perpetuity. It takes discipline to save for the future, but retirement planners will tell you that it works. Put some of your money away today, let it grow, and you will have a steady flow of income year after year. Albertans have the chance to do the same thing by saving a portion of our annual oil and gas revenues. Imagine the tax savings or public works we could finance using the earnings of a Heritage Fund worth $100 billion or more. This is what we should be shooting for.
The third thing we have to sacrifice is the prosperity of our children. Alberta?s natural resource wealth does not just belong to people living here today; it belongs to people living here 10, 50 and 100 years from now, too. Future generations have just as much right to share in this wealth as we do. Hence, we must act as responsible stewards and make sure that we leave something for future generations. The best way to do this is to set a large portion of our annual oil and gas revenues aside in a savings account. The rest we can spend as we see fit and, like our children, we will have access to the earnings on the spending account as well. It is a win-win approach, but it requires patience and discipline in the present to pull it off.
While I myself could use a few extra bucks in my pocket this winter, good public policy demands that we resist the temptation of a dividend cheque and demand that our government take a higher road and invest our money wisely.
Emrald, I thought you were retired. If you're on the road this much now, I would likely cringe at what you were doing when still a councillor. Do you still make it to Red Deer once in a while? I'm there every day now and wouldn't mind meeting up with you sometime.
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