Some quotes on equalization

Some the quotes on equalization we won't find in the local newspapers. Why would they bother reminding us that the equalization problems didn't start with Harper government's budget?

But in fact, history shows that, in the post-war era, Atlantic Canada was busy closing the disparity gap with the rest of the country right up until the advent of regional economic spending and UI liberalization in the early Trudeau years. We were turning things around quite nicely, and largely due to our own efforts, until cursed by Ottawa deciding that we were a "problem" that had to be "fixed." Once the spending taps were opened, our own efforts were swamped by the perverse incentives of Ottawa's good intentions.

Here are two examples of how those perverse incentives work today. Depending on the species you fish, with as little as a day's fishing, people in coastal communities can get "stamped up" for their full EI entitlement. If you do, the federal government will give you thousands in benefits - but don't try to go back to school, because students aren't eligible for EI. Welcome to Ottawa's vision of education and the economy of the future.

Under equalization, a province only gets to keep roughly 10 cents out of every new dollar in revenue it raises in taxation. Ottawa claws the rest back. On the other hand, every new dollar in transfers from Ottawa is a whole dollar available to be spent. Ditto for a dollar borrowed. Is it any surprise that the Atlantic provinces are horribly indebted and never met a transfer program they didn't like?

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Sad but true. Socialists always design their programs to perpetuate poverty. Otherwise, if poverty is gone, who will need them in power? Equalization is no exception. There's no better way to secure votes than making a region dependent on government subsidies and then scaring the voters that these subsidies would be cancelled if their opponents were to be elected.

The Premiers however know that equalization is not a jackpot that's going to solve provinces' financial problems. Frank McKenna, former Liberal Premier of New Brunswick, is clear about that:

I don't think they have hurt them more than they have helped them and I don't think there was any bad intention but I do think they have a perverse impact and that perverse impact is to make regions more dependent. They give very little incentive to create greater on-source revenue because those revenue sources are taxed back. So, I think it is fair to say that the programs are well-intentioned, have had minor to modest success but, generally speaking, aren't transformational.

(Source )

So what is the answer? Self-sufficiency plan. I may disagree with Shawn Graham on Senate reform but I welcome his program to bring New Brunswick economy to the national average. The sooner New Brunswick could make ends meet without equalization transfers is the better.