Sunday, October 29, 2006

Good Morning Anonymous

I am presuming the last three postings by Anonymous in "Where is the Smear" posting of yesterday are from the same person but I may be mistaken. I suggest readers go to that posting and the comments for content and context before you continue on this entry. I also apologize for the length of this post. I think it was Socrates who said "If I had more time I could write a shorter letter."

Thanks Anonymous for the economic facts and details as well as the insights in the earlier postings (Where is the Smear) as well as the “supposition” comments regarding integrity. Let me assure you that yours and Dr. Stokes’ integrity is not at issue. My reasons behind this are at the bottom of this post.

At your invitation, I have some more questions.

First – please tell us who you are. You say you are “someone in the loop” and will reveal your identity soon. Will you also explain why you felt the need to keep your identity hidden now in a free and democratic society? In any event we look forward to knowing who you are and to making your acquaintance.

Second – please give the reference for locating the Gilbert Lauten Jung site you mentioned.

Third - can you clarify the first posting reference to crude, bitumen and SCO (Synthetic Crude Oil) price estimates “include the $30 price spread?" Are you talking the differential price between these forms of energy and are you saying that the oil sands industry price assumptions were used for bitumen and SCO in the model? I don’t understand the reference. I know energy commodity prices are somewhat seasonal as is the volume of use and presume that was all considered in the economic modeling for the next five years.

Fourth – does the reference you make to $9.5 B in tax cuts assume the average 1.2% increase in population growth over the 5 year review period? And were the Oberg net tax cut rates used in arriving at the $900 M cumulative simulative effect on tax revenues? What were the assumptions used in Alberta’s GDP over the next five years to reach the $900M cumulative figure?

Fifth – 1.2% per year seems a bit low as an assumption for Alberta’s average population growth over the next five years don’t you think?

The GOA stats at Alberta Finance show more recent economic and population growth significantly higher and a recent baby boom emerging with a 12.6 per 1000 population which will also have an impact. In 2003, 2004 and 2005 net migration population growth was 1.39, 1.43 and 1.62 per cent respectively. The actual numbers were 21,135, 22,475 and 56,084 in 2005 and 2006 appears to be larger still. This is not insignificant growth, I am sure you agree.

These new people coming to Alberta do not bring their homes, schools and hospital beds with them so we have to invest in public infrastructure to accommodate the growth – something Alberta has been ignoring for a decade or more. I note Dr. Oberg is on record saying he can overcome the multi-Billon public infrastructure deficit in 5 years and I presume those figures and the impact of growth issues are calculated in the model. Can you let us know what public infrastructure deficit numbers were used and the rationale for them?

Sixth - We are seeing enormous price increases in the current public infrastructure projects on the go of 40% and higher in the past year alone. What is the estimated cost premium tht was used for these projects over the five year period? We know the cost escalation is being caused by the over- heated economy, materials shortages, private sector project competition and the lack of skilled workers to complete projects in a timely fashion. Did the model project any economic slowdown due to project deferrals?

Plus what are the Canadian dollar and inflation assumptions around the remaining infrastructure deficit projects and what cost amounts was used for the additional projects like schools etc. we need right now, for the immediate future and over the five year review period to respond to the population growth throughout Alberta?

Seventh - Real GDP growth in 2001 at 2.0% and 2002 at 2.4% uses what fiscal year as the base for the calculations? Again the GOA stats at Alberta Finance for more current growth rates, which may be more reflective of the next five years than 2001 and 2002, show considerably higher numbers. In current terms the GDP growth in Alberta for 2003, 2004 and 2005 was respectively 13.5%, 9.3% and 15.3%. “Real” GDP using 1997 as the base for those years was 3.1, 4.3 and 4.5 per cent. In actual numbers GDP was $171,175M in 2003, $187,152M in 2004 and $215,858M in 2005. Pretty impressive numbers for a population of 3.2 million don’t you think?

I noted in the 4:40 am Anonymous Comment (insomnia or what”) the writer said “He (Dr. Stokes) was presented with a detailed costing of each of the policy elements contained in Blueprint for Prosperity and was given absolute free rein to apply the program within the context of his base case scenario of the Alberta economy.”

Who is it that prepared the “detailed costing” of the Oberg Blueprint for Prosperity that was supplied to Dr. Stokes? Did the detailed costing that was used come from the Oberg campaign and if so, did anyone confirm the “detailed costing” assumptions and calculations to give them independent veracity? I presume the detailed costing details and the identity of any independent third party verification will also be released in the near future. That seems to me to a critical element in all of this. Don’t you agree?

Finally – Please do not interpret these questions or comments as anything more than seeking clarification and understanding. Economic analysis and forecasting – like public opinion polling - is as much an art as it is a science as it has to make assumptions and has to be adaptive as circumstances change. That does not detract from it usefulness but it has to have a context and is subject to interpretation. The assumptions behind the economic model as well as what all is included and excluded and how the various elements are weighed all have a huge impact on the conclusions.

The current context is a hotly contested political campaign so people will tend to be skeptical. That should not in any way to be interpreted as disrespectful or of questioning the integrity of the Anonymous Commenter or the professional judgment or skills or integrity of Dr. Stokes, the economist who undertook the work. In fact I, as a citizen, appreciate and applaud Dr. Stokes for doing this professional task under these circumstances. Many others would simply shy away and avoid the challenge altogether.

Open, accountable and transparent democracy depends on citizens asking questions as much as government giving answers. The campaign process is abetted and democracy is better because professional people like Dr. Stokes provide their expertise to assist citizens decide on who we will entrust with our consent to govern us.

So thank you Dr. Stokes. Now let’s keep the dialogue going in an open, respectful and responsible manner.