Equalization tensions could ‘destroy unity’ in Canada: Ex-Ba

[styky]

Equalization tensions could ‘destroy unity’ in Canada: Ex-Bank of Canada chief David Dodge

Peter O’Neil, Postmedia News Jul 31, 2012 – 7:37 PM ET
OTTAWA — Tensions over wealth-sharing between rich and poor provinces could ultimately “destroy” national unity, former Bank of Canada governor David Dodge argues in an essay published Tuesday by a prominent national think-tank.

Dodge was the co-author of one of two essays published by the Montreal-based Institute for Research on Public Policy underlining concerns about growing wealth disparity as Ottawa and the provinces head into negotiations to renew the current equalization formula agreement, which expires in 2014.

Fiscal transfers have long acted as a sort of glue to preserve the integrity of the Canadian economic union by promoting stability, equality of opportunity and basic services for all, Dodge and his two co-authors wrote in the IRPP publication Policy Options.

But wealth-sharing, enshrined in the 1982 Constitution Act, can cause a variety of problems as the rise of China and ongoing U.S. economic weakness cause Western Canada’s resource-based economies to boom while Central Canada’s manufacturing-based economy struggles.....................http://news.nationalpost.com/2012/07/31 ... vid-dodge/

[Dogpatch]

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From The Gods of the Copybook Headings

Monday, July 30, 2012

Our Aloof Prime Minister

Mr Dexter complains:

The Nova Scotia premier said they have had "traditionally a very collaborative kind of relationship" with Ottawa, but "there is a distinct difference in approach with the current federal government, the disentangled federalism where they have been essentially retreating into those areas of constitutional jurisdiction."

Oh, that meany Stephen Harper. He just doesn't like playing "collaboratively" with the other first ministers. Bad, bad Prime Minister. He should be a good little Prime Minister and play with the other first ministers nicely. Remember that sharing is caring.

Dexter, who is chairing next week's meeting in Halifax, is concerned about the federal government's "diminishing role" on issues such as equalization and health care funding.

"That's very troubling to all of us regardless of what formula we think is the appropriate one."

Now put yourself in the position of the PM. You're a grumpy, highly intelligent introvert with small government leanings. Not very pronounced small government leanings, but sometimes you do cut a government program here or there. A typical first ministers meeting consists of the premiers ganging up on the Prime Minister and demanding more money. All the while Stephen Harper needs to sound vaguely statesman-like. He must pretend to transcend regional differences to create a common national vision. He hates that stuff.

The PM's natural instinct is to glower at these petty minded fools, each of them eager to beat him over the head with their ever larger begging bowls. Explain to them that it is not the purpose of the federal government to bail out spendthrift provincial governments. The federal government is suppose to observe its constitutional duties and let the provinces get on with doing theirs. Division of powers and whatnot. Sections 91 and 92 of the BNA, or the Constitution Act 1867 for those Trudeaupians in the audience.

Unfortunately no one much cares for that musty old thing, the Constitution. It was written long ago by an odd collection of high functioning alcoholics and humourless puritans. The thing has no relevance in our modern multiculturalized and twittered age. More than this the Constitution does something very old fashioned indeed, it tells politicians what they can't do. The Victorians might have practiced laissez-faire economics, but otherwise they were sticklers when it came to following the rules. Without rules, they observed, you have anarchy.

Welcome to the modern world, where freedom is often confused with anarchy. This is especially true with government. To liberate a government is unshackle Leviathan, which means our freedom is correspondingly narrowed. A federal government that is the financier of all things to all people, becomes an unlimited government. Since our parliamentary system of government has been steadily degraded into a quasi-presidential system, that means that a modern Prime Minister wields more power over the lives of ordinary Canadians than George III ever wielded over the American colonists.

The 2012-13 federal budget has about $40.8 billion allocated for health and social programs, most of which is transferred to the provinces. Another $15.5 billion is transferred to provincial governments mostly in the form of equalization payments. That's $56.3 billion a year being collected by one level of government and then spent by another level of government. That raises big questions about who is accountable for all the money. The feds who raised the funds? Or the provinces who spend it? This gets even more complicated when you consider that these schemes move vasts sums between the provinces. Habitual net contributors like Alberta win up subsidizing habital takers like Quebec.



One of the cornerstones of our constitution is responsible government. An aspect of responsible government is that those who tax are also those who spend. Equalization and the Health and Social Transfer make a mockery of that concept. The spenders, like the Quebec provincial government, are not held to account by the net tax contributors in Alberta. It can be argued that the federal government, which represents the whole country, still remains accountable to both net recipients and net contributors. The problem is that Canadian governments are rarely national in their scope. The Harper Tories have a restaurant booth's worth of MPs in Quebec. Chretien Liberals were as rare as hen's teeth west of the Manitoba-Ontario border.

This mismatch between those who spend and those who tax, gives lots of room for near-consequence free vote buying. Without federal government slush money the government of Nova Scotia could only bribe the electorate with the money of other Nova Scotians. That's a small fiscal pool and eventually you run out of taxpayers to subsidize the tax eaters. With federal monies the government in Halifax can spend the money of Toronto bankers, Alberta rough-necks and BC salmon fishers, none of whom can cast a vote in a Nova Scotian election. A natural check on the growth of government is that the electorate has to be pay for it. When someone else is paying for your government goodies, that natural check is gone.

The Prime Minister should stay as "aloof" as possible from these spending games.

Posted by Richard Anderson on Monday, July 30, 2012 at 12:10 AM | Permalink

[RadicallyLiberal]

Nova Scotia with it's coal and shale deposits are poised to be gas giants.

Research is ongoing on the Bay of Fundy and tidal hydro electric generation.

A shocking fact... Each day 100 billion tonnes of seawater flows in and out of the Bay of Fundy during one tide cycle more than the combined flow of the world's freshwater rivers!

Come up with generation turbines that can withstand the tidal forces and you have Nova Scotia and New Brunswick becoming the largest generators of electricity on earth.

Billions of dollars of the cheapest energy you can have, enough for the entire east coast of the U.S. and Canada.

Sadly we have weak smears like Dexter in orifice.

[styky]

Quebec proves that not all is equal in Canada's equalization payment program


John-Robson
By John Robson ,Parliamentary Bureau

First posted: Monday, August 20, 2012 01:00 AM CDT
OTTAWA - Canadians have given Quebec a quarter of a trillion dollars in equalization payments since 1957, half of all the money the program has handed out. Over that span of more than 50 years, Quebec has always been the biggest beneficiary, and has never been a net contributor to equalization.

With Pauline Marois and her Parti Quebecois leading in the polls as the province approaches its Sept. 4 election, all that money doesn't seem to have won us friends or influenced people.

Equalization started small, at just $139 million in its first year. But it has grown relentlessly, to more than $15 billion this year, of which Quebec got $7.4 billion. And since Pierre Trudeau jammed it into the constitution in 1982, it would be hard to get rid of.

Supposedly the point of the program is to make sure people in poorer provinces get decent public services. But somehow, no matter how often it's redesigned, Quebec gets about half the money.

At the very beginning, Quebec pocketed only about a third of the cash. But of the $510 billion equalization shelled out since 1957 (in inflation-adjusted 2011 dollars) Quebec has received $253 billion......................http://www.winnipegsun.com/2012/08/17/q ... nt-program

[RedDog]

Somebody in Ottawa or Quebec out of the blue comments it may be destroying unity and suddenly as if hit by lightening it's destroying unity? Have these fools been in a fog for decades? Are they stupid? Are they blind?

Life is really FN grand on the receiving end hey ? You can just pluck from the tree daily.

[styky]

Some provinces more equal than others

No parity when it comes to taxes
By Tom Brodbeck ,Winnipeg Sun

First posted: Monday, August 20, 2012 05:51 PM CDT | Updated: Monday, August 20, 2012 11:19 PM CDT
We know the federal government hands out equalization payments to poorer provinces like Quebec and Manitoba so that all jurisdictions in Canada can provide similar levels of service at similar levels of taxation.

But do these poorer provinces really ensure their taxes are “comparable” to other jurisdictions?

We can quibble over the quality of public services from one province to the next when it comes to the delivery of health care, education, justice and municipal services. No doubt we could all find specific examples of how one province delivers one type of service better than another.

But overall, it’s fair to say that all provinces in Canada provide roughly the same level of services, since we all have government monopoly medicare, free public schools, subsidized universities and municipal governments that provide us with policing, parks and recreational centres.

But what about taxation? Do all provinces have comparable levels of taxation as part of this equalization scheme?

Not on your life.......................http://www.winnipegsun.com/2012/08/20/s ... han-others

[Edward Kennedy]

kweebec elite separatists and bureaucrats need to be yanked off the teat and told to get real jobs. Bilingualism needs to be trashed and anyone who supports it as well.

[Kate Shaw]

Unity? In Kanukistan? Since when?

The only time I have ever seen Unity in Canada is when it wins an International hockey tournament of some kind. The rest of the time it takes on the appearance of the German and British campsites at Le Mans in a World Cup year (that have to be separated by chain link fences with space in between to defeat a fairly robust toss of a rock, brick, bottle or firecracker.)

[Julian]

Canada's manufacturing isn't struggling, it's been murdered and buried by politicians and bureaucrats through endless, senseless rules, regulations, taxes and worst of all global free trade pacts that allow North America companies to enjoy all the rights and benefits of the tax system that benefits the mega wealthy while outsourcing and manufacturing in slave labour nations and then charging Canadians as if our well paid union member neighbours (when such a thing existed) had made the product right here at home.

[styky]

Equalization only promotes lazy spending habits

By John Robson ,Parliamentary Bureau

First posted: Wednesday, August 22, 2012 01:00 AM CDT
OTTAWA - Equalization doesn't just reward failure. It encourages it. Seven Canadian provinces were chronic recipients of the program from the very beginning and all have been economic and financial underperformers that bleed ambitious young people to more dynamic parts of the country. Newfoundland and Saskatchewan are no longer recipients of equalization and are struggling to reverse economic and demographic decline, but Quebec, Manitoba and the other three Atlantic provinces are still stuck in it.

Stuck is the right word. Equalization rewards failure because governments, and voters, who consistently make bad policy decisions get money. But it also causes failure, because it insulates governments, and voters, from the painful consequences of taking the soft option.

Fiscal discipline is like any other kind. At first it just hurts. If you're out of shape and decide to start working out you need to get off the couch, buy gear and perhaps a gym membership, spend time getting ready, then lurch and sweat and gasp for air and look bad doing it before staggering home sore and hungry, resisting the urge to sweep everything off the fridge shelf straight into your mouth.

Only after weeks of this misery do you begin to start to see results, and it takes months before you really look and feel better. Now suppose a government program existed that turned down the numbers on your scale and even gave you a free corset and helped you put it on if, but only if, you didn't actually lose weight.

Tempting, isn't it? Except you know you wouldn't actually look better and, in the long run, you'd feel worse. Equalization has exactly that effect on government budgets.

P.E.I., for instance, is expecting a deficit of $75 million this year. Without that province's net gain of $284 million from equalization, though, the number would more than quadruple, and jump from 1.3% of GDP to more than 6%. At which point everyone, starting with voters, would demand the politicians stop coasting and do something.

The figures are worse elsewhere: Without equalization, Nova Scotia's $211-million deficit would increase five-fold, to $1.1 billion, New Brunswick's would increase more than seven times, from $183 million to $1.4 billion and Quebec's $1.5 billion would surge to $6 billion. Manitoba's $460 million would just more than triple, to $1.7 billion.

It is somehow taken for granted that the Atlantic region is a have-not part of Canada. But it's not some act of God that created a sluggish economy there: It's high taxes, wasteful spending and overregulation. And as long as someone else picks up the tab, it's easy to stumble on down that route and call it compassion.

Money isn't everything, of course. There's also opportunity. And as Canadians vote with their feet for places better at rewarding hard work, those provinces that have relied on big government plus subsidies have seen a steady decline in their population share.

Quebec famously went from housing 28% of Canada's population as recently as 1971 to barely 23% today. Like Quebec, Atlantic Canada's population declined relative to the rest of the country, with Newfoundland's share plunging 40%. In 1971, one in 40 Canadians was a Newfoundlander; today it's one in 66.

Some might dismiss the young, ambitious and mobile as sellouts. But even in the coin that seems to matter most to politicians - political clout - the result of the decline is increasingly painful. When equalization was introduced Quebec, Manitoba and the Atlantic provinces between them held nearly half the seats in Parliament (122 of 265, or 46%).

After the next redistribution that share will be down to around 37%, barely a third. And already Stephen Harper's Tories won a majority with only 5 seats in Quebec and 30 in all the equalization-receiving provinces besides Ontario.

Whether you measure it in wealth, political leverage or individual opportunity, provinces that receive equalization have lost ground since the program was introduced. Anyone can have a lousy decade, but a lousy half century down east is not coincidence. It's the result of bad choices that are not only rewarded by equalization but encouraged by it.

We are all poorer as a result.
http://www.winnipegsun.com/2012/08/21/e ... g-habits-2

[styky]

An education in equalization

By Lorne Gunter ,QMI Agency

First posted: Tuesday, August 21, 2012 09:03 PM CDT | Updated: Tuesday, August 21, 2012 09:12 PM CDT
If an Alberta student wants to attend the University of Alberta or the University of Calgary, he or she will pay about $6,000 a year for tuition. If he or she enrolls at McGill University in Montreal, the cost will also be around $6,000, not including books, room and board and living expenses.

It’s the same if a young Montrealer comes west. Tuition for out-of-province Canadians at Alberta’s largest universities runs about $6,000 annually.

Ontario university students face much the same — about $6,000 a year if they stay home or choose to study in Quebec.

But a young Quebec scholar who stays in Quebec will pay only a little more than $2,000 for a year of college or university. Given that nearly 90% of Canadian university students stay in their home provinces for post-secondary study, this subsidy of nearly $4,000 a year paid to tens of thousands of in-province Quebec scholars amounts to a provincial budget expense of tens of millions a year.

So what? Why is the extent to which the Quebec government chooses to subsidize its own students any business of the rest of Canada?

The short answer is: It wouldn’t be any of our business if Quebec were paying the subsidy itself. If the taxes of Quebecers were underwriting this largesse, it would matter only to them and them alone.

The trouble is, Quebec is the beneficiary of at least $8 billion annually in federal top-up funds — about 12% of the provincial budget. This money makes it possible for Quebec’s provincial government to offer generous social benefits such as cheap tuition without taxing its own citizens for the full cost.

It can afford to be so generous because it can count on Ottawa to shift some of the cost burdens to taxpayers in other provinces.

Albertans and Ontarians are net contributors to Confederation — Ontarians to the tune of about $25 billion a year, Albertans at about $14 billion (despite having just one-quarter of Ontario’s population) — yet those provinces’ students have to pay higher tuition even if they stay in their home provinces so their parents’ taxes can be sent to Quebec to cover the cost of tuition subsidies for Quebecers.

And it’s not just Quebec. The other have-not provinces (currently P.E.I., Nova Scotia, New Brunswick, Ontario and Manitoba) are able to pay higher civil service wages or keep provincial taxes lower or offer more public services because they can count on Ottawa to put its hands into the pockets of have-province taxpayers and root around for the cash needed.

According to a study on the effect of equalization on provincial budgeting released in February by the Mowat Centre for Policy Innovation at the University of Toronto, most of the provinces receiving equalization don’t need it — or at least not as much of it. For instance, the formula Ottawa uses to calculate equalization does not take into account the lower cost of goods and services in most have-not provinces.

It doesn’t cost the same to provide a public service in Antigonish or Chicoutimi as it does in Toronto or Calgary. Still, Ottawa pays have-not provinces as though it did, meaning equalization payments carry no incentive for recipient provinces to use the cash efficiently.

Moreover, since equalization began in 1957, every province (including the have-nots) has grown wealthier — so much wealthier that now just one province (P.E.I.) would still qualify for payments under the original criteria.

Nonetheless, even though equalization is needed less than ever, it is now nearly as rich a scheme as it has ever been because have-not provinces have become dependent on the cash and no federal government has the political courage to cut them off.
http://www.winnipegsun.com/2012/08/21/a ... ualization

[Jean]

I never hear of equalization outsides of messages boards like FD.

I suppose most peoplesimply can't be bothered to care. Life's pretty good here in the West and people are too busy making money to really care about politics.

Bread and circus just as in ancient Rome, eh?

[styky]

Equalization too complex to be legit

By John Robson, Parliamentary Bureau

Last Updated: August 23, 2012 2:00am
OTTAWA - Satirist P.J. O'Rourke says, "Beyond a certain point complexity is fraud ... when someone creates a system in which you can't tell whether or not you're being fooled, you're being fooled." So take Canada's multi-billion-dollar equalization program ... please. It's so complicated even experts have trouble with it, and regular citizens are excluded completely.

It started innocently enough. Back in 1957, to protect basic public services, Ottawa started giving provinces grants if their per-capita revenue from income, corporate income and inheritance taxes was below what the two richest (then Ontario and B.C.) got from those taxes.

This "fiscal capacity" standard is simple enough that a normal person can see how it works, although it is suspicious that nine of 10 provinces promptly qualified for money meant to fend off financial disaster. Indeed, within a decade, the feds lowered the benchmark from the two richest to a national average, reducing the number of recipients to seven...................http://www.lfpress.com/news/canada/2012 ... 29011.html

[Smaug]

I never hear of equalization outsides of messages boards like FD.

I suppose most peoplesimply can't be bothered to care. Life's pretty good here in the West and people are too busy making money to really care about politics.

Bread and circus just as in ancient Rome, eh?

Beer and Hockey are the local distractions .... Romans can keep their nasty circuses and flat bread

[styky]

Equalization not unworthy, just broken


By John Robson ,Parliamentary Bureau

First posted: Friday, August 24, 2012 01:00 AM CDT | Updated: Friday, August 24, 2012 01:57 AM CDT
OTTAWA - Equalization makes us poorer, encourages bad policy and fosters bitterness. Unfortunately we can't just take it out behind the barn and kill it with an axe. It's wedged into the Constitution and besides, its original purpose of protecting Canadians against the possibility of a provincial government collapsing financially is not unworthy. But we could certainly make it less costly, harmful and unfair.

There's nothing sacred about the existing system. The Expert Panel on Equalization and Territorial Formula Financing claimed in 2006 that, "In many ways, equalization reflects a distinctly Canadian commitment to fairness. It has been described as the glue that holds our federation together." But this is nonsense.

You could travel this country from one end to the other listening to conversations in coffee shops, offices, factories, fields and kitchens and not hear one person say: "Equalization is the glue that holds our federation together." Not one.

The issue here is practical, not sentimental: to redesign equalization payments so they protect people from provincial financial collapse without expensively subsidizing failure. And it's not that hard.

To begin with, its constitutional status poses little real problem. Section 36(2) of the Constitution Act, 1982 says: "Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation." But "committed in principle" is weak language and "reasonably comparable" is hard to define and harder still to go to court over...................http://www.winnipegsun.com/2012/08/23/e ... ust-broken