Vance Ginn Economics
  • Home
  • About
  • CV
  • Media
  • Podcast/Speeches
  • Blog/Research
  • Research
  • Teaching
    • ECON 2301-Princ of Macro
    • ECON 2302-Princ of Micro
    • ECON 3352-Energy Eco
  • Home
  • About
  • CV
  • Media
  • Podcast/Speeches
  • Blog/Research
  • Research
  • Teaching
    • ECON 2301-Princ of Macro
    • ECON 2302-Princ of Micro
    • ECON 3352-Energy Eco

Texas Weathers Oil Price Volatility Better than Alberta

11/29/2016

 
Comparisons of standards of living among the largest states and their fiscal approaches provide insight into which approach best supports prosperity. Research comparing key economic data finds that states following the principles of limited government are a blueprint for prosperity.

The Fraser Institute in Canada recently published a report that highlights this debate. The authors compare different measures of standards of living of two large oil-producing jurisdictions in North America (see Figure 1) along with their fiscal approaches: Texas with limited government in the U.S. and Alberta with excessive government in Canada.

The oil and gas boom from 2004 to 2014 led to relatively strong economic performances in both jurisdictions, beating their national averages by substantial margins. Alberta even outperformed Texas in terms of private sector job creation and lower unemployment rates during much of the period, albeit roughly seven times more people reside in Texas.

However, the two jurisdictions diverged in how they conducted fiscal policy. Figure 2 shows that per capita government spending in Alberta was well above that in Texas. Alberta’s per capita government spending was 68.4 percent more than Texas in 2004-05 and increased to 82.8 percent in 2013-14.

The rapid rise of Alberta’s government expenditures, which outpaced the key economic measure of population growth plus inflation, contributed to large budget deficits. These deficits eroded the value of Alberta’s net financial assets to gross domestic product (GDP) from 7.8 percent in 2004-05 to 2.9 percent in 2013-14, jeopardizing their economic condition. Meanwhile, Texas was able to better manage their fiscal situation as the value of the state’s net debt to GDP increased 0.9 percent to 1.9 percent.

Economic diversification helped Texas withstand the steep drop in oil prices since mid-2014. For example, Texas’ real economy expanded by 3.8 percent in 2015 while Alberta’s economy tanked by 4 percent—increasing the cost of fiscal ineptitude in prior years. With a balanced budget not expected until 2024, Alberta’s net financial asset position is expected to flip to a net debt position of 6.7 percent of GDP by 2017-18, substantially above that in Texas.

While Texas was not immune to the drop in oil prices, Figure 3 illustrates that the Lone Star State weathered a potential crisis relatively well from a much better fiscal position and a more diversified economy, ultimately emerging with a brighter fiscal outlook.

The authors of the report concluded that the difference in fiscal policies from both jurisdictions has put Texas in a relatively stronger financial position compared to Alberta. Although Texas has done relatively well versus Alberta for years, there’s much more that needs to be done to limit the state’s size and scope of government.

Bottom line: It’s essential for governments to restrain spending to limit excessive tax burdens on individuals so they have the best opportunity to prosper.

http://www.texaspolicy.com/blog/detail/texas-weathers-the-oil-price-volatility-better-than-alberta

Comments are closed.

    Vance Ginn, Ph.D.
    Chief Economist
    ​TPPF
    ​#LetPeopleProsper

    Vance Ginn, Ph.D., is founder and president of Ginn Economic Consulting, LLC. He is chief economist at Pelican Institute for Public Policy and senior fellow at Young Americans for Liberty and other institutions. He previously served as the associate director for economic policy of the White House’s Office of Management and Budget, 2019-20.

    Follow him on Twitter: @vanceginn

    View my profile on LinkedIn

    Archives

    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    January 2015
    November 2013
    September 2013
    May 2013
    February 2013
    August 2012
    July 2012
    January 2012
    May 2011
    April 2011

    Categories

    All
    Biden
    Book Reviews
    Budgets
    Capitalism
    Carbon Tax
    Congress
    COVID
    Debt
    Economic Freedom
    Economic Prosperity
    Economy
    Education
    Energy Markets
    Fed
    Free Trade
    Ginn Economic Brief
    Healthcare
    Immigration
    Inflation
    Interview
    Jobs Report
    Let People Prosper
    Licensing
    Louisiana
    Margin Tax
    Medicaid
    Minimum Wage
    Occupational Licensing
    Opportunity Project
    Pensions
    Podcast
    Poverty
    Property Taxes
    RAB
    Regulation
    Rules
    School Choice
    Socialism
    Spending Limits
    Taxes
    Tax Foundation
    Testimony
    Texas
    Transparency
    Video
    White House

    RSS Feed

Proudly powered by Weebly