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The Emperor Kenney’s New Clothes

The pandemic has exposed his contradictory claims and true priority.

Geoff Dembicki 24 Apr

Geoff Dembicki reports for The Tyee. His work also appears in Vice, Foreign Policy and the New York Times.

Last September, Jason Kenney was welcomed like a favourite son at the New York headquarters of the Manhattan Institute, which describes itself as “a leading voice of free-market ideas, shaping political culture.” The think tank has helped mould the views of Republican presidents like George W. Bush and received millions of dollars from the oil refiner-funded Charles G. Koch Charitable Foundation, ExxonMobil, and the family foundation of Breitbart News funder and pro-Donald Trump billionaire Robert Mercer.

This night the premier of Alberta was lionized for his “character” and “largeness of vision and a fearsome work ethic,” by Manhattan Institute president Reihan Salam. Thanks to Kenney, Alberta was a case study of the Institute’s ideas put into practice, including “restrained government spending, a more modest tax burden.” The conservative movement, Salam said, should be paying close attention. “Across the English-speaking world, few conservatives have done as much to adapt time-honoured principles to new realities as the premier.”

Kenney could barely contain a smile. “I am really deeply honoured by this invitation,” he told the grey-haired, well-heeled group. “I grew up as a kid reading Manhattan Institute studies and books and articles.” To approving chuckles, he described Alberta as “sort of Canada’s Texas. We are the beating heart of free enterprise values in the Canadian political culture. We are the heart of Canada’s enormous energy industry.”

In that summation lay certain contradictions left unspoken by the Manhattan Institute and other think tanks in its right-wing network, and by Kenney himself as he campaigned for premier by claiming to champion, all at once, the oilsands industry, fiscal conservatism, free market values, and jobs, jobs, jobs for Albertans.

Seven months later, the garbled incoherence to such claims cannot be ignored as a pandemic strains a public sector where jobs were slashed by budget cuts, market forces this week drove the price of bitumen below zero and, nevertheless, Kenney risks billions of taxpayer dollars funding more pipeline infrastructure to move oilsands crude.

Alberta’s deficit is on track to nearly triple from $7 billion to $20 billion. It now has one of the highest unemployment rates in the country. Kenney’s efforts to jumpstart the oilsands have led to credit downgrades from U.S. ratings agencies. Doctors are suing him. His approval rating is falling lower than almost any other Canadian premier.

As Kenney electioneered to victory one year ago, he demonized the NDP government for failing to give the fossil fuel industry all it supposedly needed to thrive. Lose the price on carbon, cut corporate taxes and eliminate environmental regulations, he pronounced, and Alberta would reap jobs and revenue.

But earlier this month Kenney faced a much different reality when he said, “The crash in energy prices means that Alberta’s downturn will be deeper, and our recovery slower. I cannot overstate how grave the implications of this will be for jobs, our economy and the financial security of Albertans.”

It’s not the premier’s fault that the coronavirus turned into a lethal global pandemic while sparking an oil price war between Saudi Arabia and Russia. But COVID-19 has mercilessly laid bare Kenney's true political priorities. Betting everything on a single, volatile commodity was a decision commanded neither by market forces nor fiscal responsibility. It’s been a gamble on behalf of the most powerful, but fading, players in Alberta, forestalling a diversified economy while inflaming populist resentment against anyone who dare challenge oil orthodoxy.

And now the whole façade, like Kenney’s political fortunes, is crumbling amidst the crisis. How did we get here?

Speaking to his Manhattan Institute hosts, Kenney shared a narrative of personal transformation, describing his conversion from a Liberal-supporting “Canadian lefty” into a firebrand conservative during his college years at the Jesuit University of San Francisco. There, however, he did not morph into a freedom-loving individualist. Instead he harangued the school for not starting student senate sessions with prayers and led a fight for a government-imposed ban on women’s right to choose an abortion.

He told of discovering the conservative National Review magazine founded by the late William F. Buckley Jr., who ran in similar circles to the Manhattan Institute. “I terrified myself by finding that I agreed with most of what I read,” Kenney said. Years later, “I somehow got smuggled into a Manhattan Institute gala” where he was thrilled to meet Buckley in person. “I had a complete political re-orientation and that was through the Manhattan Institute.”

Kenney listed Manhattan Institute books he admires, including Charles Murray’s Losing Ground and George Gilder’s Wealth and Poverty, which both argue for slashing welfare programs because to do so would deliver people out of poverty.

The publications produced by the institute describe free-market ideology as though it is objective fact: remove supports for society’s most vulnerable, cut taxes and regulations for the wealthy and well-connected, and watch as the economy soars. Such “supply-side” economics have been widely debunked where tried in the U.S. The most notable recent failed experiment was conducted in Kansas.

Now the coronavirus is making clear in Alberta that a social safety net is especially important for a locale dependent on widely gyrating resource commodity prices. Instead, Kenney shrank a crucial revenue source by cutting corporate tax rates by one per cent, paying for that in part by allowing full-time public sector jobs to decline by more than 1,400. The premier promised this would “renew Alberta as a magnet of job creation and investment.”

Net incomes for fossil fuel producers like Suncor and Cenovus grew by an estimated $2 billion. Yet ordinary Albertans saw little benefit. After receiving a $55-million tax cut, the oil and gas company Encana relocated to Texas. Husky laid off hundreds of Albertans while saving $233 million in taxes — it chose to spend most of that windfall outside of the province. Overall employment in the resource sector declined last year by 10,000 jobs.

Kenney would be a prime example of someone who Connor Gibson, a researcher with Greenpeace USA’s investigations team who follows groups like the Manhattan Institute and their political impact, calls “fake libertarian.” “These are people who pretend to be principled,” he said of conservatives who claim to be against government interference, but work government levers to shift support away from workers not succeeding in the economy while helping powerful interests wanting competitive advantages in the marketplace.

“The outcome is liberty for corporations to plunder the public good, but not liberty for citizens to be free from the plunder,” he explained. “It’s a way to justify exploitation of people by a very few private company executives and has nothing to do with the greater good of the country or the world.”

Kenney had promised Albertans the tax cuts would “pay for themselves.” But even before the pandemic and the full slide in oil prices, the cuts appeared to be reducing provincial revenues by billions of dollars.

To help make up the difference in his government’s first budget, Kenney took actions that left the province less prepared for the coronavirus crisis. Health-care spending had been increasing at a rate of three per cent per year. Kenney knocked that down by two-thirds. Pledging to decrease pay for doctors, Kenney last October passed a bill curtailing the negotiating power of the Alberta Medical Association. Now, in the midst of one of the worst public health crises in Canadian history, the association is fighting back by suing his government for $255 million.

“When [Kenney] started his attack on doctors as a way to keep a lid on costs in the health-care system, COVID-19 was just a gleam in a lab technician’s eye,” wrote Graham Thomson in CBC. “Now it’s a pandemic, and doctors are our front-line troops, alongside nurses and other health-care workers. And Kenney is being painted as the enemy by those front-line heroes. It’d be like soldiers during the Second World War suing prime minister Mackenzie King.”

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At this most precarious moment for the province he leads, Jason Kenney intends to directly pour more than $1 billion of taxpayer money into the construction of TC Energy’s Keystone XL pipeline, and secure loans for the project with more than $6 billion more.

How does this square with his claims of being an advocate of free enterprise, averse to government intervention in market forces? During his Manhattan Institute address, Kenney tipped his hand.

“More recently,” the premier said, “I have been a huge fan of Oren Cass.” Cass is a former domestic-policy director for Republican presidential candidate Mitt Romney who until last year was a senior fellow at Manhattan.

Cass is the torch-bearer for a recrafted conservative claim, one that shrugs away a once basic tenet of free market economics. Now government intervention in the economy can be justified when capitalism bears down too hard on a particular group or sector. It’s okay, in other words, to redistribute wealth towards corporate favourites, if they can be portrayed as prime creators of jobs and opportunity.

“It’s a conservatism focused on social mobility and not just simply laissez-faire liberalism or even neo-liberalism, but one that understands that the state can sometimes use market mechanisms to help lift up people who have barriers to upward social mobility,” Kenney told the National Post last year.

But in the case of Alberta’s oilsands industry — the favourite benefactor for this new twist on conservatism — it’s not at all clear how further state intervention can rescue an industry so thoroughly slammed by the current price crash, and facing dismal long-term prospects according to many experts.

Alberta’s bitumen crude costs more to mine and refine than other oil grades, and produces more emissions. In a world awash with oil, prices are expected to remain low for the foreseeable future, making bitumen uncompetitive. Renewable energy sources are dropping in price as well, posing a healthy alternative amidst a climate emergency. Yet Kenney has used every tool at his disposal to keep the industry on life support, while at the same time denying that alternatives to Canada’s high-cost oil will ever be practical (see sidebar).

In the process, he has stoked conspiracy theories that play well with his base of pro-resource extraction populists. When the U.S. ratings agency Moody’s last year downgraded Alberta’s credit rating due to the province’s heavy and risky reliance on oilsands revenues, Kenney without any evidence shot back that the decision was “based on data distorted, torqued data provided by green left pressure groups.” He accused HSBC, BlackRock, the Hartford and other financial institutions that have cut ties to the oilsands of “buying into the political agenda emanating from Europe.”

Recently, Kenney slashed the budget of his $30-million “war room” devoted to issuing such propaganda down to "subsistence operations." But in late February, he floated the idea of setting up a government publicly-traded corporation or agency to invest in oil and gas projects. “This province will not be shut down. We will not leave in the ground assets that represent ten trillion dollars of value on global markets. We will not be the only of the major energy producers in the world to choose poverty over prosperity,” he said, defying the free enterprise gospel against such government interventions.

But the idea of Kenney as manager of his taxpayers’ investments is cautionary to say the least, because his loyalty to oil interests seems to have blinded him in the making of financial projections. The budget his government released in late February, just weeks before the virus was declared a global pandemic, depended on an oil price of $58 per barrel, despite economists warning that was much more optimistic than other industry forecasts. Now, with bitumen oil prices hovering between zero and five dollars per barrel, Alberta’s financial health plunges along with them.

The premier’s answer to this fiscal catastrophe, however, has been to double down on denial. The money markets, given their actual conservative natures, do not approve. To Kenney’s plan to spend $7.5 billion in public funds on the TC Energy’s Keystone XL pipeline, Moody’s responded by downgrading the company’s credit rating.

“We do not assume that the project will be completed in our current forecasts for the company and will only incorporate cash flow when the project is complete. The decision to move forward is a material credit negative,” it said in a statement. Moody’s noted the project hinged on U.S. support, and that could evaporate if Democrats win the U.S. election in November. (In mid-April, a federal judge in Montana revoked a key environmental permit for the pipeline.)

Even the Globe and Mail editorial board, a frequent supporter of oil and gas expansion, tried to talk some sense into the premier. “As for Mr. Kenney, there is no indication he weighed how else Alberta could invest $7.5 billion,” it wrote. “If the project was a slam dunk, it would not need government money.”

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At this point, the question must be raised. What does Jason Kenney really believe? What kind of conservative is he, if he is a conservative at all? More and more, it seems J.J. McCullough was correct a year ago when he wrote in the Washington Post that “Kenney possesses remarkable skill at convincing the many factions of the Canadian right that he’s ‘one of them.’ Social conservatives fixate on his Catholicism and history in the pro-life movement; fiscal conservatives point to his background as head of the Canadian Taxpayers Federation. He can be wonky to wonks, ideological to the ideologues and pragmatic to pragmatists. Even obscure factions of the base, including libertarians, monarchists and gay Tories, have been on the receiving end of Kenney’s outreach.”

Despite all the ideological tap dancing, or maybe because he is so good at it, Kenney remains a beacon to not only the Manhattan Institute but a growing American right-wing political infrastructure.

A few weeks after Kenney’s speech in New York last fall, a conservative umbrella group called the Atlas Network that counts the Manhattan Institute as a member announced it was creating a Center for U.S. and Canada. “One of the things that I think is really interesting is we have this great experiment with our neighbour to the north where they’re doing really innovative things in government,” said John Tillman, the Illinois-based director of the centre, whose partners include the Fraser Institute and the Canadian Taxpayers Federation. “We have a lot to learn from the Canadians.”

And he cited another Canadian premier as a hero: former BC Liberal premier Gordon Campbell. Tillman extolled the massive reduction in regulations and corporate taxes that occurred under Campbell as he governed from 2001 to 2011. “That’s one really terrific example,” he said. Over the past several years, the Atlas Network has disseminated a selective retelling of Campbell’s legacy to conservative groups and politicians all over the U.S., arguing that “the incredible shift in regulatory policy” that occurred under his leadership turbocharged the province’s GDP.

Actually, despite riding a many-year global commodity boom neatly aligned with what B.C. exports, the Campbell era produced modest GDP levels compared to the Socred and NDP government eras that preceded. And the social and environmental costs to the province were great.

“The deregulation was done to satisfy the owners of oil, logging and mining companies who wanted greater decision-making control over what happens on the land,” said Joe Foy, a long-time campaigner with the Wilderness Committee. Logging companies encroached on old growth forests. Oil and gas companies abandoned leaking wells across the northeast. Provincial park budgets were gutted. “B.C. is going to be paying for Gordon Campbell for a long time — in dollars for repair and in tears for lost fish and wildlife populations,” he said.

Years later, Campbell’s own cabinet minister from that era, George Abbott, acknowledged that the tax cuts and deregulation were hastily undertaken and poorly thought out, arguing “few fully understood the fiscal repercussions that would follow.” When the tax cuts failed to pay for themselves as Campbell had promised, the resulting $4.4-billion deficit forced deep cuts to ministries that served the most vulnerable, Abbott wrote with regret.

Regardless, thanks to the gospel spread by Atlas, when Kentucky’s former governor Matt Bevin, a Trump-supporting Republican, brought in a program to cut one-third of the state’s regulations, he cited as inspiration “an extremely successful effort in British Columbia.”

Right-wing forces see similar opportunity in the crisis that is turning Alberta to shambles. “Many of Alberta’s economic challenges are out of Kenney’s hands. Kenney can’t keep the world price of oil from falling, he can’t cure the coronavirus and it’s not his fault that we can’t get resource projects built,” Franco Terrazzano, the Alberta director for the Canadian Taxpayers Federation, argued recently in the Calgary Herald. “But Kenney can aggressively cut bureaucratic red tape. He can also speed up his business tax reduction.” The premier, Terrazzono argued, should accompany that with aggressive cuts to health care and education. Already, virtually all environmental regulations have been lifted in the province, ostensibly because of the COVID-19 crisis.

The Fraser Institute meanwhile sees a perfect chance to freeze Canada’s carbon tax. And the Atlas Network’s Center for U.S. and Canada argued in mid-March that the country needs to rethink “cumbersome energy regulations” and “big government policies.”

Such measures would privilege the desires of the fossil fuel industry over protections and support for the wider public right in the middle of a public health emergency. Like emperors strutting in their invisible new garb, Kenney and his think tank friends, however they recalibrate their arguments, are exposed. Rather than principled conservatives, they are first and foremost friends of oil and gas oligarchs.

Their Manhattan Institute is funded in good part by oil money from Exxon and Koch Industries. The Alberta election campaign of Kenney was cheered on and funded by oil industry supporters. The Alberta government has poured billions of dollars in subsidies into the province’s fossil fuel industry in recent years, not counting the billions in federal money wangled to buy the Trans Mountain pipeline. And now Kenney is chasing that with $7.5 billion more pried from his citizens gripped by pandemic.

The notion that all this is necessary because the oilsands machine delivers so many jobs is belied by the facts. Between 2014 and 2019, that same industry lost one in five members of its workforce even as oil output rose 75 per cent.

Kenney looks out on all of this and what does he see and hear? Still, apparently, the smiling faces and warm applause of wealthy and powerful Americans gathered on a fall evening in New York before everything at home truly went to hell.  [Tyee]

Read more: Energy, Politics, Coronavirus

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