Equalization in Harperland

I think I might have mentioned one time that I have a Google Alert set up for the word ‘equalization’ and I get an email on a daily basis showing references to articles, reports, etc. with this key word.    Literally on a weekly basis there are multiple criticisms of the unfairness of Equalization – virtually all in newspapers in Ontario and Alberta – and how places like NB are sucking Alberta dry (this column in the Telegraph Journal this morning is a notable exception).  We are told that regional subsidies are worth about 5% of Ontario and Alberta’s combined economic output (interesting given that Ontario is now an Equalization receiving province).

We have debated this issue ad nauseum here but I will reassert my position that this will eventually have an impact.  Large, systemic changes to how government works don’t happen overnight. They happen over a long period of time after proponents have beaten on the drum over and over again.  This drum has been beating since at least Mike Harris in Ontario and certainly since the late 1990s in Alberta.  NB and PEI, we are told, have lavish public services at the expense of poor Alberta which has far fewer nurses than NB for example.

As always happens with arguments, they get more sophisticated over time.  Instead of only complaining about New Brunswick gold plated public services paid for by Albertans, the secondary message (aimed at Ottawa) is that equalization itself is dragging down the Maritimes, politicizing economies and creating the culture of defeat. This argument is meant to encourage maritimers to realize the true source of our problems.

It is likely that Quebec is the only reason why the equalization system hasn’t been ratcheted down in recent years.  Quebec, although receiving far less equalization than New Brunswick on a per capita basis, gets far more on an absolute basis and would be seriously cranky if the program was cut back.

Now that Harper has his majority without much representation in Quebec, it will be interesting to see the dynamic around regional transfers.

In theory – just theory mind you – regional economic development should be a Tory idea.  Not the whole subsidy train but government investments and policies that strengthen the conditions for economic development.

Don’t forget the federal investment in Hibernia was a Tory idea.  I wonder if the feds are lined up to support shale gas development in New Brunswick?

3 thoughts on “Equalization in Harperland

  1. “Don’t forget the federal investment in Hibernia was a Tory idea. ”

    Perhaps a Tory idea, but not a Reform idea. And the Harper Party ain’t the Tories. Harper is more likely to pursue a tax cut agenda (which is his conception of ‘policies that strengthen the conditions for economic development’) with enough a few patronage-style job creation projects thrown in to keep some happy. I wonder if Ashfield’s move from Revenue to Fisheries was part of that plan – keep the Maritime MPs off of any revenue files during the transfer renegotiations.

    As you say, the momentum is building to make some substantial changes to transfer payments. Harper will have to cut those if he really wants to balance the budget. NB needs to be prepared for that; Alward and the Con MPs should be spending some political capital on this issue – not to prevent the cuts, but to get something like a sensible investment strategy from Ottawa in return.

    Instead, we see efforts being put into getting some relief on the Lepreau debt, and now Valcourt (one of Mulroney’s old patronage pals) running ACOA. If the leaders of the province and region do not move soon and present a good investment strategy to Ottawa, we will see our slide downhill accelerate.

  2. The ‘notable exception’ may have been published in the Telegraph Journal, but the column has its origin in Calgary’s Frontier Centre for Public Policy, one of the ‘think tanks’ distributing propaganda pieces as news through PostMedia and dutifully recycled into bird-cage liner by the Brunswick News papers (who should be embarrassed to be running such tripe).

    The argument in the newspaper (unlike the argument you offer here) is a specious cherry-picking of wholly misleading statistics. And while we can just imagine how Albertans yearn for a better life (if not a lower provincial tax rate) it bears mentioning that all of the factors listed by the author are the result of public policy, not financial exigency.

    I have found that it’s very easy to trumpet the virtues of self-sufficiency when you are sitting on a pool of oil, have a gold mine in your back yard, or managing Daddy’s company. For people who actually have to make their own way to have some prospect of success, there has to be the sense that everyone’s in the same boat and that we all pull together. That is, after all, how Ontario and Alberta managed to get to where they are today.

  3. Despite the spin that this topic can quickly generate; we can all appreciate that the sides are not nearly as distinct as it may initially seem.

    One of the fundamental issues is simply how we divide our borders. If we were to segment Alberta into smaller chucks, some areas would subsidize other areas; dividing into even smaller chunks, and some people subsidize other people. The borders which divide our provinces were not based on any delineation of equal economic potential; nor would any amount of post-hoc economic planning result in such a situation.

    Another fundamental issue(s), which is of the opposite side of the argument, is problems of moral hazard and free riding.

    About the only thing we should expect from the current political trend is an embarrassingly over simplified argument to support a position of clawing back these transfers.

    If I remember correctly, in around 1999, transfer payments dropped from over 50% of New Brunswick Government revenue, to around 45%. Also, the “general feeling” would seem that our social/gov services are underfunded… Sounds like fodder for a escalating debate.

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