[LINK] "Equalization payments equal unfairness"

[rfmcdonald]

In The Globe and Mail, journalist Neil Reynolds touches upon the growing discontent in Ontario ("Equalization payments equal unfairness") that the federal government's equalization program which transfers funds for public services to poorer provinces is continuing to do so at a time when Ontario's economy is facing serious problems, between slow growth and heavy job losses.

David MacKinnon is an acknowledged authority on Ontario's apparent willingness to do without public services even as it provides other provinces with the money that they use to provide the best-funded services in the country. He has studied the phenomenon for years. A native of PEI himself and a graduate from Dalhousie University in Halifax, he held senior positions with the Nova Scotia government, the Ontario government and Bank of Montreal.

For the better part of a decade, he ran the Ontario Hospital Association (retiring in 2003).

He now campaigns for radical reform of the country's equalization program. Two weeks ago, for example, he spoke to the Empire Club in Toronto - at which time he suggested that Ontario needs "the modern equivalent of a Boston tea party" in Toronto Harbour to arouse the complacent province from its long lethargy.

"Why is it," he asked, "that so much of the crime is in Ontario - but the judges are disproportionately in Newfoundland?

"Why is it that Manitoba can subsidize its electricity prices by $1.2-billion [a year] even as it collects $1.8-billion in equalization?

"Why is it that the old in Ontario and the very young in Ontario will experience greater challenges in accessing hospitals and teachers than in most other provinces?"

[. . .]

Canadians love the mythology of equalization, Mr. MacKinnon says - "the myth that we are all equal, that we all have equal access [to services]." None of the mythology, he says, is true. In his Empire Club address, for example, he concluded that public services are more accessible in the provinces that get equalization payments than they are in the provinces (Ontario and Alberta) that "pay the freight."

The consequences, Mr. MacKinnon says, have been evident for years. Inexorably, Ontario grows less competitive: "Like any manufacturing jurisdiction, Ontario now has to compete with China and India. [At the same time] its per capita income has been falling [relative to the Canadian average] for 15 years. It is about to fall below the Canadian average. It would be far better for the rest of Canada if Ontario did not have to pay for government programs in six or seven of the other provinces."

"Sadly, if Ontario falls into recession today and its output declines, its citizens will still have to come up with nearly half of the annual increases guaranteed for equalization payments in coming years," he says. "Equalization is now largely decoupled from Ontario's economic performance." Equalization, in other words, requires that Ontario keeps paying - whether it is rich or poor.