I’m standing my ground on this one, thanks.

I may be the only person outside Nova Scotia and Newfoundland cheering the recent deal between the Feds and those provinces that means the provinces will benefit from offshore oil & gas revenues. Now, I see that NB Liberal Leader Shawn Graham has added his name to the list of people condemning the deal. No matter, I am standing my ground on this one, thanks.

This situation is an excellent illustration of the regressive and harmful nature of the current Equalization formula that distributes money from the ‘have’ provinces to the ‘have not’ ones (which incidentally is all the provinces in Canada except Alberta, Saskatchewan and Ontario). Like a classic welfare system, there is almost no incentive to encourage provinces to become self-sufficient. Virtually every dollar brought in from new economic growth (i.e. from something like offshore gas revenues) gets ‘clawed back’ by the Equalization formula.

This is exactly why our Premier spent so much effort wringing out more Equalization money from Ottawa and no effort at all trying to get a new regional development agreement.

Don’t get me wrong, here. The central theme of this blog and all my writings and musings on this issue is that provinces must get off Equalization. They must take back their economic sovereignty to ensure they control their destiny. I fundamentally believe that Equalization has been a weight that has been a prime contributor to New Brunswick’s economic decline over the decades.

However, the richer provinces and the Federal government should create a system that provides incentives for the poorer ones to get off Equalization (and EI dependence for that matter).

Here’s a little recurring dream I have:

Alberta says to New Brunswick (maybe through the intermediary called the Federal Government), “What would it take to get you out of my wallet?” New Brunswick answers, “25 years of strong economic growth, a doubling of our population and a 25% rise in inflation-adjusted income. After that, we should have enough population base and tax generating capacity to be self sufficient.”

Alberta then says, “Sounds good. What will it take to help you achieve that objective.”

New Brunswick responds (somewhat shocked at the offer), “We spend the least in Canada on economic development, among the least in education, almost nothing on research and development and we desperately need a four lane highway around the top of the province to open up the region for development. However, our current revenue has forced us to cut back on all these spending areas to feed health care expenditures.”

Alberta (who is debt free and has the lowest taxes in Canada) then says, “OK. We’ll freeze current Equalization funding at the current level for 25 years. If you can improve your economic fortunes, great. If, however, you slide even further into the tank. We’re done. Agreed?”

New Brunswick thinks for a minute (still in a state of shock) and then says, “We accept your offer.”

This entry was posted in Uncategorized. Bookmark the permalink.