Be careful with this Equalization thing

I am watching the Premier’s debate over Equalization quite closely (as evidenced by the number of blogs on the subject). I just have one sort of overarching point to make today.

Using a quick back of the napkin analysis and government figures, for every dollar in tax cuts the NB Conservative government has made they have added 4 more dollars in Equalization payments.

In other words, they have (slightly) cut taxes and received (significantly) more Equalization.

So when I heard Brent Taylor on Friday defending Harper’s proposal to rework the Equalization formula to remove natural resources revenues from the calculation, I was quite shocked. His own government is relying more and more on Equalization every year and Taylor is defending a modification that could over time cost New Brunswick hundreds of millions in Equalization.

I think they have to tread very careful on this. Alberta, BC, SK, NS and NL all want natural resources revenue dropped from the calculation. Ontario wants to give less. Quebec wants more. Manitoba and New Brunswick are sort of out of the loop and just crossing their fingers.

If it is the intention of Bernard Lord and J. Volpe to continue increasing New Brunswick’s reliance on Equalization, they should push for a model that will address that need and not risk serious trouble with this ‘natural resources’ thing.

You all know my preferred model. Freeze Equalization at the current level for ten years (put in escalators on Health and other federal transfers) and set up a 10 year 2 billion dollar economic development fund that can be drawn down at a rate of $200 million per year. The New Brunswick government should match those funds and then go to work.

Hire the best minds in economic development.
Invest strategically in training workers to feed into targeted growth industries.
Go out and attract companies to come into the province and invest in those targeted industries.
Invest in growth-oriented infrastructure.
Sell, sell, sell.

But there is zero, zip, zilch, nada, nein, non, chance of that.