What is Equalization?

I was talking with a colleague the other day and we got into a lively debate about Equalization – the federal program that provides additional funding to provinces that do not generate enough taxes locally to ensure their public services meet some basic standard (that’s a paraphrase).

He was suggesting that Equalization is a legitimate program and that wealth sharing should be a component in any civilized society. And I agreed.

Where we disagreed is on the perception of Equalization across the board. If you read this blog on a fairly consistent basis, you will know that I report on how ‘Equalization’ is perceived across Canada.

Bernard Lord, his provincial counterparts and the majority of the public in Atl. Canada believe that Equalization is not only a legitimate transfer of wealth but also a Constitutional right. We have as much ‘right’ to our share of Alberta’s wealth as they do. This is, after all, a country.

But that is increasingly becoming out of synch with the rest of Canada (except old faithful, the Toronto Star). Every think tank you can imagine as well as most of the national economics columnists (Ibbitson, et. al) define Equalization in a totally different way saying that ‘Atlantic Canada is hooked on Equalization’. That it is sucking the economic life out of AC. That we are dependent on this welfare. And even more disturbing in the last two years led by McGuity and the Ontario Centre for Competitiveness and Prosperity the new thinking is that Equalization is a drain on Ontario’s prosperity. And don’t forget our old pal Mike Harris who equated Nova Scotia getting to keep its offshore gas royalties with the ‘welfare bum’ who wins the lottery and wants to keep his welfare cheque.

So to me there is a teensy weensy difference between a “Constitutionally guaranteed wealth distribution model that ensures consistency of public services across the country” and a productivity draining, welfare-type, dependancy model that threatens the future of not only Atlantic Canada but also the stronger economies.

Now, my opinion is that wealth sharing is part of what a country is. To me NB is to Alberta as Hinton is to Alberta. That, in many ways, is what governments do – transfer wealth – up and down socioeconomic levels (rich to poor), across interest groups (Aboriginals, Maritimers) and within jursidictions (southern Ontario to northern Ontario).

I, quite frankly, would like to have a national policy on the sharing of natural resources revenues (like Iraq). I realize I have just blown any hope of ever becoming a politician but I don’t care. If we perceived our natural resources as benefitting all of Canada and not just one or two provinces, we would be acting more like a country.

But barring that (which will never happen), I think we need to rethink Equalization in terms of growing the economy – not just sustaining basic public services. Because there will come a day and I think in the next 10-15 years where there will be overwhelming pressure to cut the Equalization system to the bone. New Brunswick’s population continues to decline while the province’s budgets increase on pace with the growing provinces. Eventualy, someone is going to say enough.

That’s why we need to get the economy growing. We need to reduce our dependancy on Equalization. We need some economic sovereignty so that Alberta and Ontario won’t be dictating our future.

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0 Responses to What is Equalization?

  1. Anonymous says:

    So your answer to ‘have provinces’ griping about federalism is to abandon what equalization actually is and accept their arguments?? Forgive me, but I think THATS where you lose the political acceptability!

    It’s clear that you’ve already begrudgingly accepted that, even moreso by the semantics of “atlantic canada BELIEVES they have a right..”. Go read the charter, it IS a constitutional right, and thank god because its about the only one that has any benefit for the maritimes. NB now gets about 1.6 billion in equalization, which has been going down, so the reality is that we ARE learning to make do. This is why standards of living are dropping and poverty is rising.

    NB could probably well get along without it in the short term, namely by not having any more orimulsion fiascos, being smarter with energy and not selling it out to Irvings, investing some of its own pension funds, and of course stop making huge payouts to giant businesses. That would solve the problem right there, perhaps add a new tax on profits leaving the province, and your all set.

    However, I’ll be the first one to start a new provincial party aimed at joining Quebec in its separatist aspirations. Without equalization NB gets just about ZERO benefits from being in Canada, and I’d be starting a democratic party aimed toward getting the province out. It of course may come to that anyway, but its more likely that Ontario and Alberta will simply want to KICK us out.

  2. Anonymous says:

    You seem mistaken on one point-Ontario is griping not because of past grievances, they are griping as they always do when they percieve that other provinces are getting some benefits over theirs. They know what can happen if energy is found in a maritime province. Ontario is a truly skanky place to live, and people would be flocking in the other direction if they lose their clout. They now are resorting to paying off automakers and they know that their historic stranglehold on the country is weakening. This of course is the ‘pundits’ and politicians,not the people-many of whom weren’t even born in southern ontario and if the jobs weren’t there wouldn’t spend a day of their life there.

  3. David Campbell says:

    Come on. Let’s be clear. Equalization is a Charter right but how it is applied is soley open to interpretation. We have already had one change in the formula during Lord’s administration and now he wants another. So, don’t think there is some magical percentage found in the Constitution (i.e. NB gets 2.8% of Alberta’s oil and gas revenues). If Ontario and Alberta start cracking the whip or if there is another major recession, you will see how much of a ‘right’ we have to that dough. I would rather build a stronger economic foundation and be less reliant on Equalization – just in case.

  4. scott says:

    I have seen and heard what many Albertans think of our region. For example, back in 2000, I attended the Canadian Alliance Leadership convention in Calgary. Being a bit of a newcomer to the party(I had just left the Progressive Conservatives and Angela Vautour’s office to join Preston Manning’s campaign team), I quickly noticed a bit of a divide between western Canada and Atlantic Canada, particularly among conservatives.

    I remember showing up late at the Hyatt hotel in downtown Calgary as the five CA leadership candidates were about to address the voting delegates. To my dismay, I had lost my seat and it didn’t seem as though there were any vacancies among the 1,500 people in the convention centre. So it looked as though I would have to stand at the back with no view at all.

    But then I noticed a women motioning to me. She ask me if I would like to sit with her husband and her as their son was a delegate but was back in their hometown of Red Deer. I chatted with the lady for awhile before her husnand came back. She was unaware that I had my roots in the maritimes and began to speak candidly about western alienation and how the west was carrying the weight of all the ‘lazy maritimers on welfare and UI’. I remember how her words stung as they made me feel as though I had been hit with a sledgehammer in the gut. But so what, they were by a partisan nobody from the Canadian Alliance who didn’t understand Atlantic Canada. So As Preston Manning wrapped up his speech with a clever video of him and his wife riding horses, the women next to me began to cry as she said she loved Preston and that he would make a great Prime Minister. Then I heard behind us a man’s voice say, “you got that right darlin'”. It was the lady husband, he had finally returned to his seat.

    So in a polite fashion, the lady turned to me and said, “Scott, I would like to introduce you to my husband Bob, you know Bob Mills Reform MP from Red Deer Alberta.”

    Wow, that is when I began to think that maybe this “culture of defeat attitude” was more serious than I thought.

  5. Anonymous says:

    Nobody here is griping against your raison d’etre, I was merely pointing out that you don’t need to accept the completely misdiagnosed arguments of centralists or westerners to tout economic development.

    Western alienation has it’s roots as far back as the formation of Canada, much like eastern alienation. The boot kicks both ways though, try to find a maritime politician who isn’t complaining about Ottawa or greedy westerners.

    Once again these are fabrications of the political system. Albertans will grouse just as loudly about British Columbians or Manitobans. But stand up at a convention and say ‘OK, instead of a triple-E senate we’re going to go after those lazy maritime bastards’ and you’ll get laughed out of the building.

    Of course there is no point in looking to Alberta for compassion, they and the feds have been indicted by the UN for human rights abuses against the Lubicon, they have a minimum wage that is second lowest in the country even though they are awash in wealth, their rural areas are bleeding as badly as ours, and child poverty levels are pretty comparible to have not provinces.

    We KNOW that equalization is open to interpretation, this is why Alberta posts massive surpluses and NB’s equalization goes down and down.

    Canadians will no doubt be increasingly at one another’s throats in the future as they don’t even address the fact that the rich are becoming richer and most of canada’s wealth is heading southwards and overseas.

    If you go to Vive you’ll see the other article, that over 120 billion of Canada’s wealth sits in tax havens. To keep it in perspective, the Gomery scandal’s price tag was 1/8 what New Brunswick gets in a year from equalization.

  6. David Campbell says:

    Geez, Scott. I had almost the same experience when I applied for a job in Red Deer. The City Manager said things like ‘we do things different out here’ and ‘there’s a different work ethic here’ – coyly investigating if I would want to collect EI if I came out there to work in Red Deer.

    No, I said, but I do enjoy good beer and popcorn.

  7. Anonymous says:

    I’ve actually had the opposite reaction, in Edmonton most of the retail employers said they were looking for maritimers because they said ‘boy, you boys can work’. This was also my experience in Ontario. In Toronto several of the entrepreneurs I worked for said that they’d be happy if all the maritimers came out to stay because they could never find enough. Construction employers are miffed because of the usual maritimer practise of coming out to work in the summer and then going home in the winter.

    I suspect that remarks like the above are simply the ramblings of what would pretty much be called ‘racists’ in more honest times. It means “we aren’t going to put up with none o your crap”, which is said by bigots all over. And of course there’s good reason the conservative base is in the west and they aren’t exactly known as the most egalitarian of folk.

  8. Anonymous says:

    figures youre a maritimer. wealth re-distribution is wrong in every sense of the word. Rather than fighting with people and forcing them to give handouts why not go back to school to get a better job. Alberta’s resources are Alberta’s only and they need them to pay for their own people. However, in Canada the constitution guarantees you the right to move anywhere you want so get to where its good and stop begging for handouts. there are certain areas in the world that simply cannot support a high population, blame geography for that. Why should you get money that you did not earn? would go into your pocket and give me some money right now even though you dont know me…i doubt it…so in conclusion, stop asking for handouts atlantic canada and get some self respect