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.
Ken:
ReplyDeleteThank you for your decency and fairness in responding to my earlier posts and giving me the opportunity to provide my viewpoint to your bloggers. I know you are a very principled individual, there are so few left in politics these days.
Fourth, the $9.5 billion in tax cuts is based on the projection of a 1.2% per year growth in population over the next five years. This results in a cumulative feedback of $900 million over five years. We looked at a worst case scenario, so additional population means additional personal and corporate tax revenues, balanced off by an increased demand for services. Nominal GDP is projected to increase at approximately 3.5% per year over the next five years, again very prudent.
The net effect under your projections for higher nominal GDP growth and personal income growth should be higher net balance, but again as I said a very prudent approach was taken for forecasting purposes. For additonal clarification, you may want to take note of note 1, page 32 of the 2005/06 consolidated statements of the province of Alberta which for first time examines the sensitivity of personal income growth to personal income taxes. For each 1% increase in personal income growth, personal income tax revenue will increase by $98 million
I apologize for my early morning posting. I have been in precarious physical and mental health over the past two years, and am required to rise at 2:00 am to take my medication.
I do not sleep well because I have difficulty shutting off my brain, I think politics, policies and ideas much of the day, so it is sometimes difficult to relax physically and mentally.
But the invigorating debate over ideas and policies is what sustains me and allows me to continue my daily struggle over my illness which I am determined to beat once and for all.
Excuse me if some of my responses to your questions are less than precise today. It has been a difficult day for me for many reasons and I am physically and mentally exhausted.
First, I would appreciate the opportunity to talk with you directly by telephone tomorrow to explain who I am, what I do, describe my nearly twenty years in this business, who I have worked for in the past, my body of my work, and some contacts with the media, former and current elected officials, academics, government officials, you may want to contact to verify my identity and my work.
Once you have make your rounds and are satisfied with my credentials, I will have no problem revealing myself. I would appreciate if you extend that countesy to me by providing me with your telephone number and a time to call.
I can assure you that I have not accepted any money from any candidate in this campaign, the work I have done is of my own free will. I do not wish the glory or the limelight, I have had both in the past, nor do I do what I do for financial reward. I do it as a service to Albertans.
Second, the Gilbert Lautsen Jung (GLJ) site can be accessed at www.glpc.com. The latest forecast prepared by GLJ is from October 3, 2006 and provides a range of prices for crude oil, heavy oil and natural gas. I would encourage you to contact the senior economist at GLJ, Carol Crowfoot. She is one the most respected and insightful commodity price forecasters in the business and I know that any oil sand producers rely on her forecasts in the context of preparing their business case scenarios.
Third, on the issue of the price spread between market crude oil and market crude bitumen, I would refer you to an excellent presentation made by CAPP to the Alberta Multi-Stakeholder Committee on Oil Sands Consultation, October 2006.
It should be available on the CAPP web site, if not it can be obtained from Greg Stringham at CAPP, an excellent resource person. The report notes that whereas the average WTI price was close to $US $70 per barrel, the average price of heavy oil and bitumen blend was only about $45 per barrel. Once diluent costs and transportation costs are paid, the average 2006 bitumen price at the plant gate is US $20 per barrel. As you have indicated, oil sands producers use conventional crude price in business planning their projects, they need to take into account the significant discount which occurs from the costs of upgrading to crude bitumen and SCO.
This was all taken into accoun in the Oberg costing documnt which provides a separate projection for crude bitumen and SCO royalties over the next five years.
The public infrastructure deficit was estimated at $7.248 billion as of June 2005 and is estimated to reach $7.764 billion in 2007, and would reach Over $11.5 billion within ten years if not addressed. This is all incorporated in the Oberg plan through giving municipalities and school boards sole access to the education property tax and returning 2% of royalties to communities without sufficient property tax base, we estimate that the infrastructure deficit can be eliminated in 5-6 years, avoiding $1.9 billion in inflationary pressures that Jim Dinning's ten year plan will induce. The model did take into account deferral of infrastructure projects due to rising labour costs, an overheated economy, and lack of skilled labour. This is particularly with pre-tax corporate profits and bsuiness investment which actually decline from recent high levels during the forecast period due to project deferrals.
CPI or inflation averages approximately 2.5% per year over the forecast period, maybe somewhat low in a superhearted economy, although we are seeing the signs of an economic slowdown from declining resale values of homes, etc. I believe I saw an atricle in the Edmonton Jounral yesterday about this very subject.
I appreciate your desire to obtain further clarification and greater understanding. I wish more voters too the time to ask these questions. Please feel free to ask any other questions you may have.
As you say, economic forecasting is more of an art than a science. We have certainly seen that proven by Alberta Finance over the past number of years, with no derogation intended towards the excellent people who work in that Ministry, many whom I know personally and respect highly.
As I said, it was chosen to deliberately take a very conservative approach to energy and economic assumptons in order to ensure that the platform would stand up to the volatility of the Albertas economy. Should forecasts be higher than projected that means more money for the Heritage Fund and other endowmment funds, and a greater opportunity to address such important issues as health care, education, poverty, provincial/municipal relations, and infrastructure to name just a few.
Thanks for giving me this opportunity, Ken. As I said, if you reqire any further clarification please do not hestiate to contact me, and I look forward to our chat tommorrow. Give me a time and number and I will phone you directly.
Thx Anonymous for the thorough and prompt feedback. I am at 420-0505 after noon tomorrow.
ReplyDeleteKen:
ReplyDeleteI throughly enjoyed our discussion this evening. You and I come from an era in politics in which policies and ideas were central to evaluating the character and integrity of candidates for public office. I am hopeful that our discussion will engender participaton from all bloggers, because we are talking about the future of this great province.
I look forward to an invigorating debate over ideas and policies, because that is my passion, and I know that is your passion as well.
I'll start tomorrow with my thoughts on what we can do to sustain our public health care system, because for me that it is one the central issues that needs more discussion in this campaign, along with education,environment, infrastructure, etc.
Once gain, thanks for your understanding and compassion.