Oil Prices crash and possible recession

With slow growth, oil prices falling, and Coronavirus we are likely heading for a recession if we are not already in one.  The crashing oil prices are likely to be bad news for Alberta economy and to a lesser extent nationally.  In the case of Alberta, I really don’t see how the government can balance the budget in its first term.  One solution is deeper cuts but that is something you want to do when economy growing not in recession.  Other is to introduce a sales tax which I believe so province is less reliant on oil prices that is something that should be done although will be a tough political sell, but if a choice between that or bigger spending cuts may be achievable.  I do believe the Alberta government should re-do its budget but not right away, instead wait a few months to see how things play out as you don’t want to get it wrong again.  Also on corporate tax cuts, maintain the current rate, but pause further cuts until the economy starts to rebound.

For federal government, this is exactly why we should balance the budget during good times so we have fiscal space to run deficits when things turn bad.  We don’t know how bad Coronavirus will get and whether it will be a pandemic or not, but there is a real possibility it will be and the impacts on the economy will be bad.  If the economy this year is as bad as I feel it will be, it makes sense to run deficits, but they would be very modest ones and budget could be balanced in next couple years.  But thanks to earlier reckless deficits, it will result in a deeper hole meaning tough decisions ahead.  Government should also postpone any big spending promises like Pharmacare or dental care.  We simply don’t have the money for either.  Instead focus on low income individuals who don’t have private coverage for both.

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