Organizations and Markets

The Klein Revolution

1 May 2013 at 5:48 pm Peter G. Klein 2 comments

| Peter Klein |

Going through some old files, I came across a 1995 Wall Street Journal piece I had saved, with the following passages highlighted:

Mr. Klein caught the fanaticism of the converted and convened a special commission to audit the books. It summed up its findings in six words: the need for change is urgent. Polls showed the public agreed. . . .

Mr. Klein doggedly pursued a program of breathtaking change. Government will fall from 24,000 to 18,000 in two and a half years. Sixty school boards were eliminated, the health budget was cut by 17%, and the number of hospital beds cut in half. Seniors earning over $21,000 (U.S.) a year were asked to pay their own Medicare premiums. . . .

The Klein Revolution did meet with opposition. . . . “My day wasn’t complete without a protest,” Mr. Klein recalls with a smile. But each success spurred him on: “You’re nervous the first time you try something new, but once you do it, you sort of get used to it.” . . .

Last year, he spoke to a group in Toronto and was asked if books by F.A. Hayek and Ludwig von Mises had inspired his policies. Mr. Klein smiled and said, . . . “Do I look like the kind of guy who would read those books?” The crowd laughed, because while Mr. Klein may not have read Hayek’s “The Road to Serfdom,” he has proved he knows how to build a policy exit ramp away from it.

The full article is below the fold.

Learning from Canada’s Reagan
John H. Fund

Wall Street Journal, 23 Feb 1995, p. A14.

CALGARY, Alberta — Trade between the U.S. and Canada has grown 40% since the 1988 free-trade agreement, so it’s appropriate that President Clinton travel north to Ottawa today and tomorrow for talks with Prime Minister Jean Chretien.

The two men have much in common. Both were elected after their conservative opposition raised taxes, but both are now resisting public pressure to cut spending. Last week, Moody’s warned that it may downgrade Canada’s bonds if the national budget due out next Monday doesn’t dramatically shrink the nation’s huge budget deficit. There’s reason Americans should look north: Canada is where the U.S. will be if it doesn’t adopt growth-oriented policies and tackle entitlements.

But there is a great Canadian success story both men could learn from if they really wanted to reinvent government. The province of Alberta is home to North America’s most radical revolution in budget downsizing. Since Premier Ralph Klein took office in a fiscal crisis in December 1992, his reform blitzkrieg has touched — and cut — every corner of government. Last month, Mr. Klein used a folksy TV speech to tell Alberta’s 2.8 million people he will wipe out the $2.6 billion (U.S.) budget deficit he inherited a year ahead of his campaign promise. His secret? He cut spending by 20% in real terms, and is reducing government jobs by 25%, refused to raise taxes, increased some user fees and was assisted by higher oil and gas revenue. The free-market Cato Institute and Canada’s Fraser Institute report that Alberta has the most prudent tax and spending policies of any state or province.

What astonishes Canadians is that Premier Klein’s downsizing agenda is popular. A January Environics poll found that 68% of Albertans approve of Mr. Klein’s policies, and a visitor to this pleasant prairie city (home to the 1988 Winter Olympics) finds wide support for him. “Many people here think he’s just below God himself,” says John Friedt, a retired soldier who guards a Calgary government building. But he also draws praise from younger people. Eric Rehberg, a pony-tailed Calgary store manager says Mr. Klein “has certainly been good for business” and “he knows you can’t spend more money than you take in.”

Premier Klein’s success has given the feeble national Progressive Conservative Party some needed credibility. Mr. Klein is touring Canada touting the fact that his province’s unemployment rate has fallen to 7.2% from 9% and welfare caseloads have dropped almost in half. He calls his policies the “Alberta Advantage.” “The most competitive tax regime in Canada has spawned the best economic growth in the country,” he says. He notes that Alberta has Canada’s lowest personal and corporate taxes, no sales tax, efficient public services and a business-friendly climate. Indeed, a two-income couple in Alberta earning $71,000 (U.S.) pays 31% less in taxes than a similar couple in Toronto. The premier wants to cut provincial taxes to make up for expected tax hikes in next week’s federal budget.

Premier Klein will also expand his privatization program beyond liquor stores and motor vehicle offices. Almost any government asset or service is a candidate for transfer to the private sector. “No government operation wouldn’t be 20% to 40% more efficient if handled privately,” says Minister of Transportation Steve West. Already, private medical clinics have been legalized, full public school choice is being implemented and there are plans to privatize parks and a prison.

All of this has been accompanied by extensive public consultation. Albertans are deluged with quarterly updates on the budget, and in the past 18 months more than 46,000 of them have attended 1,075 public meetings on government policies. A seventh of the adult population has called an 800 number to make comments. “I’m simply doing what average Albertans tell me makes common sense,” Mr. Klein, a compact 52-year-old, says in an interview in his wood-lined Calgary office. “Our critics are easily identifiable as those most comfortable with the failed status quo.”

Mr. Klein came to his “common sense” policies by an unusual route. His father was a road builder and occasional wrestler. Ralph left school at age 16 but enrolled in a private business college after a stint in the air force. He worked for the Red Cross and United Way until he became a popular city hall reporter for Calgary TV. In 1980, he became outraged by a downtown development project and ran for mayor, ousting the incumbent. His down-to-earth, unassuming personality — thousands of Calgary residents have had a beer with him at his St. Louis Hotel haunt — was immensely popular, and he topped 90% of the vote in two re-election bids. He was a free-spending mayor during the booming 1980s; Calgary soon had the nation’s largest per-capita municipal debt. Mr. Klein defends his record, saying the city’s Olympic-related infrastructure has paid off.

In 1992, Mr. Klein was a minister in the profligate government of Premier Don Getty, which in seven years had exploded the province’s debt from $2 billion (U.S.) to $15 billion. When Mr. Getty resigned he was replaced by Mr. Klein, who reinvented the ruling party from the ground up. He faced a daunting challenge. Edmonton Journal columnist Mark Lisac said that if the Progressive Conservatives won the June 1993 election, it would be “the biggest political miracle of the half century.”

Mr. Klein caught the fanaticism of the converted and convened a special commission to audit the books. It summed up its findings in six words: the need for change is urgent. Polls showed the public agreed. After some hesitation, Mr. Klein started cutting at the top. He abolished parliamentary pensions and personally gave back $41,000 (U.S.) in benefits. One month before the election, he issued an austerity budget that aimed for a 20% spending cut. “You can’t leap a canyon in two jumps,” he told voters. He won 44%, winning a clear majority in Parliament.

Mr. Klein’s revolution was home-grown, but he drew some inspiration from Roger Douglas, a former New Zealand finance minister who freed his nation’s economy in the 1980s. Mr. Douglas visited Alberta and urged the Klein government to move with such speed that special interests would have too much to fight against. He told them to “constantly sell your program and remind voters of the payoff.”

Mr. Klein doggedly pursued a program of breathtaking change. Government will fall from 24,000 to 18,000 in two and a half years. Sixty school boards were eliminated, the health budget was cut by 17%, and the number of hospital beds cut in half. Seniors earning over $21,000 (U.S.) a year were asked to pay their own Medicare premiums.

Welfare saw the most dramatic change. Social Services minister Mike Cardinal, an Indian, led a frontal assault on dependency. Benefits were cut and disability lists checked to see who was actually employable. By October 1994 only 50,000 people — or 2% of the population — were on welfare. By comparison, Ontario had 1.3 million people, or 15% of its population, on welfare. One reason: Ontario’s welfare benefits are now 60% higher. “Families and communities can do a better job helping those in trouble than centralized bureaucracies,” says Premier Klein.

The Klein Revolution did meet with opposition. More than 15,000 people marched in Edmonton to demand that a local hospital not be downsized. “My day wasn’t complete without a protest,” Mr. Klein recalls with a smile. But each success spurred him on: “You’re nervous the first time you try something new, but once you do it, you sort of get used to it.”

Nonetheless, Mr. Klein and his ministers are somewhat modest about their accomplishments — one reason they aren’t known in the U.S. When presented with the Fraser Institute’s glowing new “report card” on his government, Treasurer Jim Dinning sighs and says some of the grades are too high. “I’d give us an incomplete in several areas,” he says. Mr. Klein himself says the report’s one low grade — a C-plus on industrial policy — “is fair criticism.”

Mr. Klein insists his former journalism colleagues have covered his policies fairly, although a new content analysis of Canadian television found that 90% of its coverage of Alberta’s spending cuts was negative. When asked if he appreciates media comparisons with House Speaker Newt Gingrich, Mr. Klein says he doesn’t know Mr. Gingrich. “I like the fact he’s trying to stick by the promises he’s made. Voters want performance from politicians. If I don’t deliver I deserve to be fired.”

Actually, Mr. Klein reminds a visitor more of Ronald Reagan than Newt Gingrich. Like Mr. Reagan, he came to his conservatism in his 40s through practical observation of government. By articulating “common sense” solutions to problems, he’s become a hero to many average voters. Although no matinee idol, he is also Mr. Reagan’s equal in charm and self-deprecation.

Last year, he spoke to a group in Toronto and was asked if books by F.A. Hayek and Ludwig von Mises had inspired his policies. Mr. Klein smiled and said, “Now, you know good old Ralph. Do I look like the kind of guy who would read those books?” The crowd laughed, because while Mr. Klein may not have read Hayek’s “The Road to Serfdom,” he has proved he knows how to build a policy exit ramp away from it. The new GOP Congress would do well to sit down with “good old Ralph” and his ministers for a peek at their road map.

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Mr. Fund is a Journal editorial page writer.

Entry filed under: - Klein -, Ephemera.