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.