A great time to kill equalization

Budget de MJF - mars 2009

As U. S President Barack Obama has demonstrated, a global economic meltdown provides excellent cover for a radical policy overhaul: When trillions are melting off the stock market, panicked pundits and voters alike can be counted on to stop bickering about government programs that cost mere billions.
While we might not agree with all-- or even most of-- Mr. Obama's policies, we admire the U. S. President's instinct for seizing the moment to bring about radical changes that might not otherwise see daylight. Stephen Harper's government should do likewise here in Canada, seizing this opportunity to eliminate our outdated equalization program.
There was a time when equal ization made sense. When the policy was formally introduced 50 years ago, disparities among the provinces were pronounced. The Atlantic provinces, in particular, had problems delivering the kind of services affordable in better-off provinces such as Ontario or British Columbia. Quebec remained an economic backwater under the paternalistic rule of Premier Maurice Duplessis and his Union Nationale.
Ontario, the acknowledged engine of the economy, could afford to subsidize the aspirations of the country's have-nots by contributing heavily to the equalization scheme. Paying for the program, Ontarians believed, was part of their patriotic duty.
That world no longer exists. Ontario has sunk to have-not status, holed by the collapse of the auto industry and the deterioration of the manufacturing base that sustained it for so long. Premier Dalton McGuinty's frequent demands for a better deal from Ottawa have been temporarily quieted by billions of dollars in federal spending to offset the recession and encourage adoption of a harmonized sales tax, but the road back to its previous level of prosperity will be long and difficult.
Alberta, the other major "have" province, introduced a budget this week that included a $4.7-billion deficit, its biggest ever. Having frittered away another oil boom, it will dip into emergency savings to make ends meet. Meanwhile, "have-not" provinces are prospering despite the onset of hard times. Manitoba's budget is in balance despite increased spending and modest cuts in taxes. Saskatchewan is so flush that Premier Brad Wall is touring the country in search of workers to fill thousands of vacant jobs. New Brunswick has embraced ambitious tax cuts that could make it one of the most competitive provinces in the country, while Newfoundland -- once the poster province for "have-not" status -- makes no bones about its pride in escaping that designation thanks to abundant energy revenues.
That leaves Quebec, which will get $8-billion in equalization this year, almost 60% of the total. Though Quebec politicians would protest loudly at any threat to this jackpot, anyone visiting Quebec would be hard-pressed to find justification for the lavish outlay. Whether in terms of schools, universities, health care, social services, industry, culture or business, Quebec is as advanced and sophisticated a society as exists in Canada, having prospered mightily in recent years. Yet it continues to receive massive annual payments from other provinces, even as its noisy nationalists proclaim themselves a "nation," fully capable of handling their own affairs.
The situation no longer makes sense, and the longer it is allowed to drag on the more damaging and politically divisive it will become. Politically docile as they have been trained to be, Ontario residents are unlikely to quietly accept a continued annual outflow of billions of dollars to other provinces while their own services suffer and unemployment approaches double digits. Alberta, despite its image as the land of plenty, will struggle to meet its own needs until another oil boom comes along. Neither province should be expected to keep running deficits to finance programs in other provinces that long ago caught up to their own.
The Constitution recognizes the right of provinces to programs that "ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation." That worthy goal has been achieved. Canadians can travel to any province and find a roughly similar high level of services. That happy fact opens the door to a much-needed restructuring -- and eventual elimination -- of a $14-billion program that has now become completely obsolete. What better time to do it than now?

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