Outrage: Rosedale subsidizes Etobicoke

I see David MacKinnon has brought his anti-Equalization message to the pages of the Telegraph-Journal.  He is one of a growing number of voices in Ontario that blames equalization for Ontario’s economic woes and throws in the usual after thought about it being bad for the Maritimes as well.

Anyone who has been reading this blog will know that I am all for a fulsome debate about equalization, transfers and economic growth but I think much of the logic used by the equalization bashers is puzzling.

I hate to break it to you but goverments are primarily in the business of transfering income from one segment of society to the other.  From rich to poor, from young to old, from old to young, from those without kids to fund those with kids, from those who don’t use public transport to those who do.  From healthy people to sick people.

So why stop at provincial borders?  Why isn’t MacKinnon outraged at the subsidization between Toronto and rural Ontario?  Or why not be outraged that Rosedale subsidizes Etobicoke?   Heck, forget about national borders, why isn’t he outraged that we give billions worth of international aid each year?  Isn’t that crippling Ontario too?

We live in a country that is making an effort to ensure that Canadians have access to good quality public services no matter where they live – Etobicoke, Rosedale, Moncton or Minto.  That’s an admirable objective.

The real problem is the chronic underperformance of the economy in the Maritimes.  We were told in the 1990s that the solution was for tens of thousands of people to pack up and leave for Ontario, Alberta, Saskatchewan and BC and the Maritimes’ economy would recalibrate down to a lower level, but a sustainble level of economic activity.

We did exactly what they asked for – shipped tens of thousands west and the economy down here in many ways is weaker than ever.

I think this debate is one that will have profound implications for New Brunswick.    I remember Bernard Lord demanding his “constitutional right to equalization” the last time we were in this type of negotiation.   Nowadays I am not sure that will fly.  Most east of Cornwall have been told Ontario and western Canada are paying for gold-plated public services down here and it must stop.

I would like to see a new partnership – where the feds and province work on a long term plan to reduce reliance on equalization based on a mix of economic growth and public sector cost growth management.   This new view out of Ottawa that tough love will solve the structural problems is a risky one.   It could lead to greater social unrest and even greater economic disparity between the regions.  That creates both social and political instability.

A revitalized economy in the Maritimes would be good for everyone and I don’t think we have really given that model much of a try.


6 thoughts on “Outrage: Rosedale subsidizes Etobicoke

  1. If our expert feels that subsidies do more harm than good he should speak to New Brunswick’s imperial family. They do NOTHING without subsidy. That is why the previous governments mantra of self-sufficiency was such a joke. If one of the richest families in North America needs subsidies, what does it say for the rest of us? Wonder why there is so much cynicism? We have been sold too many bills of goods!

  2. Canadian trade policy since confederation has favoured Ontario at the expense of the regions (in particular the Maritimes). If we looked at overall federal spending (federal workers,purchasing and transfers) it will show that Ontario has not done so badly relative to the the east.

  3. ” We have been sold too many bills of goods!”

    I like to *think* of them as those “surprise bags” we bought as kids *trusting* that we were going to at least break even. Too bad these “surprise bags” come at a hefty price and always seem empty for the folks paying for them.

  4. I don’t think ANYBODY in Ontario takes that stuff seriously anymore-Ontario has been collecting equalization for the past two years, so Ontario complaining about equalization is like New Brunswick complaining their hard earned tax dollars are going to support those deadbeats in Prince Edward Island.

    However, the martyr card really isn’t necessary. You can’t possibly believe that in the 90’s there was some kind of concerted federal effort that told NBers to move out west so that ‘the economy would be recalibrated lower’. I have to say it, that’s just crazier than most of Charles Leblanc’s comments about the fascist police! I was around for most of the nineties, and never heard of any such thing. That they DON”T CARE is certainly evident, but saying something like that would be political suicide.

    You make it sound like this was some concerted economic plan that NB willingly went along with only to be stabbed in the back when the province did what it was dutifully told. That’s not just ‘a bit much’, but again, crazy.

  5. The most important thing to remember is that equalization is not funded by the provinces. It is a federal program, paid for out of the Government of Canada’s general revenues. The Government of Canada collects revenues from many sources including, but not limited to: personal income tax, corporate income tax, non-resident income tax, other taxes and duties (e.g. GST), and contributions to social insurance plans, investment income, to name but some.

    As well, it is important to understand that the Government of Canada collects these taxes and other sources of revenue in the provinces, not from the provinces. This is a very subtle, but crucial difference. To the Government of Canada, it doesn’t matter where someone lives in Canada – we all pay the same rate of GST, the rate of personal federal income tax we pay depends on our taxable income, not on what province we live in, etc. Someone earning $46,000 a year will pay the same rate of federal income tax whether they live in PEI or Alberta. Someone who buys a new TV costing $899 will pay the same amount of GST whether they live in Winnipeg or St. John’s. The point here is that it isn’t the provinces sending this money to Ottawa, but individuals and businesses.

  6. David is right as usual, transfers and redistribution are one of the things government does best. One argument I like to use is “Imagine Canada were not a federal country, e.g. like France, would we tolerate lower level of essential public services like education in less prosperous regions?”

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