Wednesday, February 17, 2010

Will Canada Survive Equalization Changes

Canada is a Federation and we have seen how small minded political players left to their own devices can wreak havoc on this beautiful country we call home. It is unfair to ask the western provinces to fund have-not provinces who refuse to fix their own balance sheets. How many years should a province be allowed to recieve equalization payments before an outside investigation in auditing the books is necessary?

As a resident of Ontario, I expect my Premier Dalton McGuinty to be responsible for his budget and stop blaming Ottawa for his priorities for his vision of Ontario. Our premier is making decisions regarding Green Jobs and our future but should look to the taxpayers in Ontario to sustain his vision. The same level playing field for those who live in in Toronto  should be required. Mayor David Miller is exporting his waste to the US and London, Ontario this is simply WRONG. Your lack of political will have shifted the burden to the Americans and residents in the London, Ontario for your garbage. Toronto residents should be held accountable for their production of garbage as their consumption of energy. Look no further in how a Union or Federation can be broken when some refuse to tackle their own problems.

Beginning this week, all Oakville households and businesses will receive a survey asking their opinion on the $200 million local share funding requested by Halton Healthcare Services (HHS) to build its proposed new Oakville hospital. The survey is also available online. A telephone survey of 600 residents begins the week of February 1, 2010, and a public meeting is scheduled at Town Hall from 7 to 9 p.m. on February 11, 2010. Staff will report to Council on the results of the public consultation on March 1, 2010.-Town of Oakville
If we take Oakville population at 180,000 by $ 200 M that would work out to be just over $ 1,100 per person for the additional 600 beds in 2018. 

The European Union may not survive with countries like Greece who have decided to not balance their books for a very long time. Jean Charest in his passion for the spotlight should look to his own province and balance his books and reduce the inflows of eight billion dollars in equalization.

If Greece is not the tipping point who is?
Legendary futures trader, Dennis Gartman, says the euro has had it, and has a long way to go before it finds a bottom. He is urging investors to short the European currency and go long Canadian and Australian dollars against it. They may resolve Greece, but not Portugal, Spain, or Italy. - Dennis Gartman

Is the province of Quebec our Greece?

To make it a little clearer with Tables How ugly is this?

The Federal Minister of Finance has established, at the request of the Prime Minister, an Expert Panel on Equalization and TFF to re-examine the operation of Equalization and Territorial Formula Financing. Its detailed Terms of Reference are set out in Annex A. This Panel is to report to the Minister before the end of 2005, so that the Government of Canada can receive its advice before deciding on the new formulas that, from 2006-07 onward, will allocate Equalization and TFF among provinces and territories respectively.-Expert Panel on Equalization and Territorial Formula Financing -  Website

Source: Expert Panel

Angry yet, how about 46% of Equalization is being diverted to one province, any guess?

Additional Reading:

Mapleleafweb Great site for detailed information and links.

Update Additional Table Added

Source Statistics Canada


skuleman said...

Can we fix equalization?

Personally I think the whole equalization scheme dramatically corrupts sound economics, promotes foolish policies in the "have-not" provinces, and holds back economic development of the "haves". In an ideal world we should simply declare equalization dies as of the next fiscal year, and each province should get its house in order.

There's obviously no incentive for the "have-nots" to see the end of equalization. For example, as long as we have a system where people in the "have" provinces send $1200/head/year to Quebec, why would Quebec ever want to see a change. That's almost $5000 per household, for nothing except living in a province with inept government.

I don't know if there is any mechanism to change equalization without re-opening the constitution (not necessarily a bad thing). I'm pretty sure there is no mechanism for Alberta or B.C. to simply pull out of equalization unilaterally. I guess one option would be for the west to declare a "tax strike" and just have all businesses and individuals withhold tax returns until equalization is renegotiated.

This could be an interesting scenario. To make it work the people of those provinces would need to "join the tax union". Then they could hold a "strike vote" and if it passes could withhold their "labour/taxes". To keep everything above board the strikers could still file their taxes and pay them in trust to the province, just so this isn't considered a tax holiday. (it would be interesting to see Jack Layton or Bob Rae "denying" the right to strike to those in the western union, that would make for a fun PowerPlay session). Like any strike, the outcome would hopefully be a compromise - something along the lines of a 5 year migration to end equalization and allow the 8 have-not provinces to get their economic houses in order.

Jen said...

And the amazing thing about Quebec is the pride the Quebec government instill in the people. Little do they know, that their own premier will never tell them the amount in the billions of deep debt they are in.
If the people of quebec knew the billions of dollars which they get from Alberta; most of them will be shocked. shocked that they are suppose to be proud of their province are in turn bashing and insulting the very province(albeta)that feeds them.

Where did all the billions upon billions go into in Quebec.

I think Ted Morton might pay a visit to Quebec to tell them that the money they get from alberta stays in alberta to help albertans for a change and for quebec to come down from the rafters to live like regular folks and not the Donald Trump style.

I think it will be a very good idea to reopen the constitutions to make amends to it.

Joe said...

Not to put too fine a point on it but Canada is a Confederation not a Federation and as such transfer payments belong in the trash heap of failed socialist policy, along with PET's 'constitution', Charter of Rights, Canada Health Act and ever other intrusion into Provincial jurisdiction.

skuleman said...

Whether its a federation, confederation, what legal mechanism exists for BC and Alta to drop out of the equalization scheme?

Gerry said...

When I first saw the table of the equalization payments I knew it had to be put on a per capita basis in order to have a standard metric. I used the financial numbers you provided and got the population data from Statistics Canada. Table 051-0001 - Estimates of population, by age group and sex for July 1, Canada, provinces and territories.

The results are quite different from the impression left that Quebec is getting a disproportionate amount of funding. Whether it should get any at all is another question but on a per capita base it is not out there.

I do know how to post the table or chart I created but below are the overall per captia averages 1993 through 2005/06

Newfoundland and Labrador $1,792
Prince Edward Island $1,720
Nova Scotia $1,296
New Brunswick $1,485
Quebec $602
Ontario $-
Manitoba $1,075
Saskatchewan $281
Alberta $-
British Columbia $38