Who’s subsidizing who?

Premier Alward is right to be worried about the future of transfer payments – particularly the equalization program.   I’m interested in this broader narrative of, to slightly alter Aretha’s “Who’s zooming Who?”, of who is subsidizing whom?  Ontario’s Premier is adamant that his province is subsidizing the development of the oil industry in Alberta to which Albertans are horrified.   I don’t want to debate this in great measure but it is true that the federal government has poured a lot of money in the Alberta oil industry.   People are quick to forget about tax/royalty incentives but those – while not cash outlays – are ‘incentives’ to develop an industry and the cost the government in foregone revenue (although the argument could be made that the development would not have happened without the tax/royalty breaks).

There is a little bit of the people in glass houses thing going on here.  Alberta’s agriculture industry is also heavily subsidized by the federal government.

But, having said that, there is no question that cream skimmed off the Alberta oil industry is channeled to the weaker provinces such as New Brunswick.  It is an undeniable fact that New Brunswick is deeply reliant on federal transfers – both the direct transfers but also the not often discussed programs such as EI and even retiree payments.  New Brunswick receives far more than its ‘share’ of these federal programs as well.

In the end, as we have discussed ad nauseum, the fundamental argument for New Brunswick is around the sustainability of these transfers in the medium and longer term (and in the short term as Alward is concerned the ‘top up’ program for equalization may disappear).

If the New Brunswick economy started creating more high paying private sector jobs and more direct revenue for government – if the private economic growth outstripped public sector growth for a sustained period of time, the reliance of transfers would diminish.

I have argued these transfers are a critical part of what makes Canada – Canada – but there should still be an underlying agreement between the feds and the provinces to seriously address the fundamental economic reasons why there are have not provinces to begin with.

There is no inevitability here.

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One Response to Who’s subsidizing who?

  1. New Brunswick without transfer payments is Greece.

    Europe is learning now how it needs to transfer revenue to its weaker partners or fall apart. Canada had, I thought, already learned that lesson.

    History is long. Regions that were once rich are now dependent. Regions that are now rich may well depend on our help in the future. It’s always the currently rich that praise the merits of self-reliance, but they too are the first to call for help in a time of need.

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