When I first went to the States in 1985 to university as a 17 year old freshman, I remember having long talks with political science majors in the dorm late into the night. I remember thinking some of the crazy ideas (to me at the time) they were putting out there such as ‘workfare’ and, somewhat paradoxically the merits of running up the debt to keep taxes low (this was in the Reagan years).
Just about everything they advocated came to pass eventually. My point is that the ideas debated in universities today find their way into the policy making of tomorrow.
From an op/ed today in the TJ:
In reality, equalization transfers cash from taxpayers in high-cost provinces to governments in lower-cost provinces. The program also allows for lavishly subsidized services where they ought not to exist and thus acts as an incentive to poor provincial policy.
Mark Milke is the director of research for the Frontier Centre for Public Policy
This is the smart new line of thinking among the growing anti-Equalization crowd. Before the arguments were based on trying to make the point that Equalization is actually a disincentive for provinces to push for cost containment and economic development. That didn’t get much traction so the new line out of western academia is that Equalization is fundamentally unfair to the rich provinces. I didn’t post his full comments here but you should read it.
And if that doesn’t work, they will try other arguments.
The point is that there are clear warning signs that the Equalization program as we know it likely to be radically alterned in the near future (Bernard Lord’s constitutional protest notwithstanding). I have argued that for years there already has been an unholy quid pro quo where the richer provinces get the bulk of the economic-development-related dollars from the Feds (EI, Invest in Canada promotion, TPC, etc.) and the poor provinces get Equalization but the thinking out of the West is even more blantant.
What they want is a full reset. Take the poor provinces of the equalization life support, let the migration begin in droves, reset government spending around a much lower equilibrium point in the poor provinces.
I have also predicted here that by 2040 or so there will be a ‘Royal Commission on the future of the Maritimes’ that leads to the amalgamation of the three provinces and a radically reduced government and subsidy model for the region. Many folks scoff at this prediction and I may be wrong but I watch trends as much as anyone and with population stagnant and declining and the cost of government rising by upwards of three times the rate of inflation – increasing amounts funded by federal transfers – eventually something’s gotta give.
I have also said this timetable could be accelerated if there is a prolonged recession and economic stagnation in Canada. We may be approaching that time.
That is why I agreed with the self-sufficiency agenda. It was the right strategy – 10 years too late. During the Bernard Lord period in office (and the late Liberals after the budget balancing act of the early mid 1990s), we had a golden opportunity to build a new economic development model in the province based on fostering the growth of higher wage industries and keeping our cost structure moderate – weaning off Equalization. Instead we didn’t foster new industries and we spent like drunken sailors. The NB budget rose as fast as the have provinces during that period even though our population stagnated.
I don’t have a crystal ball but it doesn’t look too good from the perspective of government. $800 million deficit in NB, lower tax base to pull from, the federal government warning about serious belt tightening to come and not as much business investment across North America for which to compete. Think about it. Just five years ago, there was such a labour shortage in the US – we could have attracted dozens of wind and solar manufacturers and no one would have noticed – now those companies are the most sought after economic development projects in North America. I could say the same for data centres.
I’ll end for now but any government in this province that thinks Equalization is going to save their bacon moving forward is mistaken.