Which is the have-not-iest province?

I have received a few angry emails lately telling me to back off talking about Equalization. That it’s entrenched in the Constitution, et. al.

But I am fascinated by this program because as I have said before it is set up to reward failure in economic development.

Basically the program says “Don’t worry if you can’t generate enough taxes, we’ll pick up the slack”.

Designed this way, it encourages provinces to find ways to maximize their Equalization.

And when you look at the numbers, it’s no wonder Premier Lord is fighting hard for more.

I came across this little section of the Government of Canada’s web site talking about Equalization.

I was a little surprised to find out that New Brunswick has the second highest rate of Equalization per capita in Canada – only PEI has a higher rate of per capita Equalization.

But upon further inspection, the economic success of PEI in the 6-7 years has led to a a much lower increase in Equalization compared to New Brunswick.

Since 1999, PEI’s total Equalization has risen only about 14.1% compared to 22.7% in New Brunswick.

In other words, at the same rates of Equalization growth, New Brunswick will pass PEI as the province with the most per capita Equalization in Canada by the end of one more four year election cycle.

I wonder where that fits in the 5 in 5 plan?

If Premier Lord and Al Hogan are still around in 2010, I wonder how they will spin being the most dependent province on Equalization in all of Canada?

But on a more sober note, what if Shawn Graham wins the election and has to find a way to eliminate the $1.5 billion in Equalization to meet his ‘have’ province status? Under Lord, Equalization has risen by almost $400m per year and not only has Graham committed to stop the increase in Equalization, he has committed to rolling it back to zero within 20 years.

I think just stopping the growth in Equalization would be a laudable goal.

This entry was posted in Uncategorized. Bookmark the permalink.

0 Responses to Which is the have-not-iest province?

  1. Anonymous says:

    That’s interesting, and a little disturbing, that people would email saying ‘stop talking about that’. It’s scarily reminiscent of Charles Leblanc’s mention of several bureaucrats telling him to ‘stop making waves about Quebec’. Economic dependance is one thing, censorship is quite another and to my mind the scariest thing-far more than economic policy-has been Lord’s banning of people from the legislature and refusing to acknowledge basic human rights.

    As for equalization though, once again we can look at what it actually is, not what people perceive it to be. Even from a pragmatic point of view, if NB is spending the money to educate workers who will work elsewhere, then why shouldn’t they be reimbursed for that? I posted a long time ago some numbers that showed that equalization is easily simply a small amount of taxation that former New Brunswickers pay.

    Of course it would be VERY easy to get off the equalization pony, all you have to do is tax resources and corporations.

    What is VERY interesting about New Brunswick is that it is almost literally the equivalent of most third world countries. What I mean by that is that if you look at the ‘national debt’ of just about any poor country, it is usually the equivalent of the net worth of the wealthy people in that nation. In Indonesia, the national debt is worth even less than what the Suharto family pillaged from the nation, and you can go across the board and see the same.

    In New Brunswick, the province could easily be awash in capital if it simply didn’t let Irving and McCain dictate policy. Every penny of the net worth of Irving was derived from the resources of the province, not vice versa.

    The other interesting similarity is that what is occurring now is very very similar to what was going on in the thirties. There was tons of capital, just not in the governments hands. Federal spending was extremely low, and poverty rampant. Like then, the province was barely making ends meet, yet the feds were backing off, but many of the problems were of the provinces own making.

    None of those situations are especially cheerful, but there is certainly no need to ‘blame the messenger’. Anybody sends you an angry email you just post their address here and we’ll set them straight!

  2. factsarefacts says:

    Do you like spreading incorrect information,just for politics?

    After you learn about canada and egualization and reasons for it and how its determined,then you could help us understand it.

    Item: NFLD and N.S are recent energy provinces.

    B.C has the oil potential,plus its 6 billion dollar marihuana industry.

    ” It is estimated that in 2006-07, support through major transfers to New Brunswick will be approximately $2.4 billion (about $3,249 per person).”

    Lot of taxes,wouldn’t you experts think?

    You might be better off in the oil fields.

  3. David Campbell says:

    Factsarefacts,

    I don’t know your point. The fact that NS, NL and BC are energy provinces makes my point exactly. That is the precise reason why New Brunswick has to be more diligent about incubating and growing new industries – because we don’t have oil. And the fact that PEI doesn’t have oil and New Brunswick will still pass it within four years for Equalization per capita should be of concern to all New Brunswickers.

    Equalization is an important program. I agree with that. But what is the limit? When all government revenue is generated from Equalization?

    No, the goal must be to stop the increasing reliance Equalization and work towards more own-source revenue.

  4. Anonymous says:

    I must admit I’m at a loss to understand that post as well. For information on equalization there are tons of resources if people want to understand it.

    There’s no doubt about the point that getting more equalization is not a good prospect. Actually, to address the above point, NB could make massive headway simply be legalizing marijuana.

    However, equalization means equal services, simple as that. In theory, this means that the feds should have to prop up other provinces to Alberta’s level-making services equal. That’s why you see tons of pressures in ALberta to makes sure profits don’t stay in the hands of government, or at the very least, those funds don’t actually service the population. That’s why you have most of Alberta’s schools as charter schools and why they are moving towards private healthcare (you didn’t just think it was because they are ‘like americans’ did you?)

    This way, their welfare payments, social services, health and education and environment stay about equal to the rest of Canada so other provinces can’t cry foul and say ‘we need equal services’. It’s no coincidence that Canada’s richest province is also its most miserly.

    If that happened, then of course the feds would have to pull an NEP type program to get more funds from Alberta so that other provinces remain on the same playing field.

    Keep in mind that NB doesn’t have oil, but it does have an oil refinery, which is even better. Unfortunately, it remains it private hands. This is a multi billion dollar installation and anybody who thinks it wasn’t bankrolled by the province doesn’t know the Irvings very well.

    However, there is no fear that that is going to be counted in equalization counts-and thats one big problem. Other provinces are quite right to say “why the hell should we be paying you money just because you are too lazy or cowardly to adequately tax the resources you have?” They’d be right, but then again that’s circular because its up to the feds to enforce NAFTA and ensure that “royalty payments” stay at a low level.

    So we have the case where New Brunswick can’t change ‘market prices’ for a gas line going through the province even if it wanted to (which is debateable) because a bunch of bureaucrats sitting in Calgary say so. New Brunswick, like Afghanistan, sits at a critical juncture for gas AND oil, and in times past this made people of the area extremely wealthy. However, because of the feds, they CAN”T get wealthy, can’t even TRY to get wealthy.

    So somebody in Ontario could realistically say my point above, which is “why don’t you tax your resources better so we don’t have to give you money”, however, while that is true, the province is owned by Irving, its also true that even if we COULD do that, we really can’t because of federal regulations. Isn’t politics wonderful! So in other words, as far as the people are concerned, you’re damned if you don’t, and damned if you don’t.

  5. ohmanandahmen says:

    “”I must admit I’m at a loss to understand that post as well. For information on equalization there are tons of resources if people want to understand it.
    There’s no doubt about the point that getting more equalization is not a good prospect.””

    Do I need to tell you why you don’t understand? Cause your too lazy to look up the Info. as

    “The standard measured the average fiscal capacity of the five “middle income” provinces – Quebec, Ontario, Manitoba, Saskatchewan and British Columbia.”

    You tell the premiers of these provinces its not a good Idea then,cause they all agree to equalization as did the Fathers of confederation.If you are smarter then them,keep talking.
    The rest of your story shows you know nothing of the federal responsibilty for legalizing drugs, and don’t mention B.C. case because the BC government is not going to interfer in a 6 billion windfall. Where,tell me does Alberta hide its profits(offshore?)
    Where does a gas pipeline go through this province?
    Check to see who gets gas from the N.S pipeline.
    Where does the pipeline from alberta end??
    An oil refinery is better than oil?OH BROTHER

  6. Anonymous says:

    Technically it wasn’t formally ‘equalization’ to the fathers of confederation, however, somebody needs to take a deep breath and relax. Everybody here is quite aware of what the program is, the point is simply this: if Bob made $100 and Frank only $20 and they were brothers, they may agree to ‘average it out’ and Bob would give Frank $30 so that they’d each have enough to get by.

    All that is being said here is that while that is a nice system, wouldn’t it be better if Frank didn’t have to rely on Bob at all and also made $100? I certainly think so.

    However, as has often been pointed out, that analogy can get stretched too far. That’s because in reality it is FEDERAL program, which means that a rich person in New Brunswick will pay far more into equalization than will a poorer person in ontario. The main point of difference being that there are simply more people in ontario, and more wealthy people. As has also been pointed out, they are wealthier in good measure because that same federal government goes out of its way to protect industries in ontario, so equalization is quite justified (and nobody said it was a ‘bad idea’)

    An oil refinery is far better than having oil because an oil refinery can’t ‘run out’ of oil, it just buys from someplace else. Plus, there is none of the massive environmental costs associated with extraction, although there are plenty from refining. If you don’t think so, just go ask Irving how much exploration they do.

    The marijuana line was a joke, I was pretty sure nobody would think that I thought the province was going to do that. However, just to address that issue, the province is by no means bound to the requirements of Canadian law if they don’t want to be, that’s what the notwithstanding clause is for.

    Even without that, its not like canadian law is sacrosanct. The federal government has told Bernard Lord that paying for abortions is necessary under the health act, but Lord just told them to go to hell. Likewise, the feds were among the last to grant rights for same sex marriages, other provinces were way ahead of them on that, which meant the rights were different in Ontario and in ‘canada’.

    As for the other comments I couldn’t even understand what the heck was being talked about.

  7. youphd? says:

    “rich person in New Brunswick will pay far more into equalization than will a poorer person in ontario.”

    Guess what?Can you figure this out?

    A rich person anywhere,will pay more taxes,then a poor person anywhere,DUH

    And don’t say you understand what I’m talking about,or I’ll really be worried.