Buckle up folks, the ‘fiscal imbalance’ will be rectified

This ‘fiscal imbalance’ thing is not going away. Ontario’s Premier and senior Ministers are flogging it all around Canada. While nobody states it, rectifying this imbalance to Ontario’s satisfaction must – by definition – hit Atlantic Canada.

You see, most of the $23 billion fiscal imbalance (the amount of money Ontario each year that is generated by Ontario taxes but spent elsewhere) goes to prop up Atlantic Canada, signficant parts of Quebec, the North, etc.

A recent article in the Edmonton Sun had an interesting angle on this. It advised Ontario to ‘buck up’ as Alberta has done in this area. The article has this quote from the report on fiscal imbalance:

“Perhaps the most troubling aspect of the whole transfer payment issue,” the report continued, “is the province’s generosity has generated no goodwill in other provinces.”

The Edmonton Sun writer responds this way:

Those ungrateful Maritimes premiers apparently haven’t even bothered to send Dalton a thank-you card.

But I come back to a common theme in this blog. It’s pretty hard to find a grateful person on welfare. The whole Equalization system has allowed NB, NS, PEI, et. al. to continue to pay for health care, education, etc. but everyone living in the ‘have not’ provinces realizes that things are heading downward and that is a huge concern.

So if the Equalization system was geared towards raising up the economies of the have not provinces (and not subsidizing government services during the decline), then maybe people would be more ‘grateful’. Maybe if those Equalization dollars translated into hope for the future of our provinces, we would be more ‘grateful’.

But providing dollars to ease the economic fall – that’s no solution. Keeping New Brunswick on life support is no solution.

Make no mistake. Some federal government party is going to realize one day real soon that this issue of fiscal imbalance will be an election issue. Some party, Libs or Tories, will campaign on it. And some party will start the redess it. And that will, over time, be at the expense of places like New Brunswick.

We made our bed, metaphorically speaking by eagerly asking for and taking more Equalization and EI over the years, and now we have to sleep in it. Premier Lord’s biggest achievement, from an pure financial perspective, was renegotiating the Equalization formula that brought more dollars to New Brunswick. But it’s that attitude that is fuelling Ontario’s anger and Alberta’s ambivalence (as long as we don’t ask for more).

Some government in New Brunswick, some day, is going to talk again about self sufficiency. It will talk about reducing the massive dependance on tax dollars generated in Ontario. It will talk about the large scale economic development required to make this happen.

It just won’t be today.

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0 Responses to Buckle up folks, the ‘fiscal imbalance’ will be rectified

  1. Anonymous says:

    It’s hard to be economically self-sufficient when you have no means of protection. Just think about all the investment that leaves New Brunswick. Most of your gas taxes go to the federal government, most of your income tax, when you pay your insurance (car and home) most of that goes to Ontario, the same when you buy a car. When you buy food a good percentage of it goes south of the border, while much of the processed food comes from west. Wood products are the ultimate anamoly as most of it leaves NB and often comes back ‘value added’ to short change NB’ers.

    All New Brunswick savings, unless you are in a credit union is held in Ontario, likewise most people’s RRSP’s feature investments primarily in Ontarian and western industries. Most countries and/or regions have mechanisms that help it keep it’s own money local. Keep in mind also that many areas have industries that are stockholder owned, meaning that stocks become a method of resource ownership and capital, however, Irving and McCain are not public companies, so there is no ‘investment vehicle’ available.

    Now take a look at what we get back. As you say, there is welfare and EI, but that has been cut to the bone. A person on welfare gets just enough to keep them from starving and freezing to death. A single person on welfare gets $378 a month. EI has been similarly gouged, while we can debate the merits of the system we should also note that it sits on an $8 billion surplus. Keep in mind also that “welfare” does NOT mean ‘freeloader’, the vast majority of welfare recipients have been injured, usually on the job.

    Federal investment spending in the province is restricted to the pittance that ACOA gets and a very few choice industries. Atomic Energy, located in Ontario, is going to make a fortune of the Lepreau refit, and if it succeeds it will give them good press to get even more jobs elsewhere-all thanks to NB.

    Take a look at what the province spends it’s money on-health and education mainly, with some other buyoffs and of course BIG blunders like Coleson Cove (although they often like to treat NB Power as a separate entity). So most of the federal money covers the cost of your kids education and the cost of (specifically elderly) healthcare. Of course, if you’ve got no kids and no parents, or parents who live elsewhere, the federal government really does next to nothing for you, even though they suck out over half your pay.

    Keep in mind also that the $23 billion is by no means concrete, it was as made up as any other statistic (LOTS of caveats and estimates). They also didn’t include the generous federal spending in the auto sector. I’m doing a series on my website, I’ve got the first one done but got distracted. I went over their “study” in great detail, and it’s as biased as the organization that put it together.

    I think Ontario made it’s real point when Newfoundland and NS were going to have their oil wealth deducted from their equalization payments-which just goes to show how interested Ontario is in development in the maritimes. Why would anybody bother creating an industry if it’s just deducted from your paycheque? Self sufficiency is fine, but you can’t talk self sufficiency when you’re on life raft and the guy who throws you meatbones is on a yacht.