Equalization. Just say no!
By Ted Morton -- For the Calgary Herald

April 22, 2004

Earlier this week JMCK polling reported that seven out of ten Albertans think that Alberta’s net $9 billion annual contribution to confederation is too much. Half said it should be cut by at least half (to $1 to $5 billion a year) and a quarter said we shouldn’t send any money at all.

Presumably these same Albertans will not be happy to learn that they will soon be on the hook for another billion a year, but not, of course, before the next election. Paul Martin has made sure of this.

The current four year equalization agreement was scheduled to expire March 31. With Jean Charest’s Liberals’ demanding billions more for Quebec, Martin was cornered. Eager to help his beleaguered and bankrupt Liberal allies in Quebec, Martin wants to deliver. The problem is all the extra dollars will have to be squeezed out of voters in Alberta and Ontario, the only two “have provinces.” While the Liberals can afford to write off Alberta—yet again—Ontario is another matter. With Quebec rapidly slipping away back to the BQ, Ontario is the do-or-die electoral battleground for the Liberals.

The Liberals’ solution: postpone the day or reckoning, just like they have on every other issue of import--gay marriage, parliamentary reform, the gun registry, reform of court appointments, security issues, and reform of aboriginal governance. On March 29, Bill C-18, extending the current federal equalization program for one more year, received royal assent. Predictably, not a single national media outlet reported this Houdini trick.

The source of Martin’s problem is the Seguin Report, one of the cornerstones of the Charest Liberals’ promises to Quebec voters to end the “fiscal imbalance” between Quebec and Ottawa. The Seguin Report calls for an immediate increase of $2-$3 billion dollars in equalization payments to Quebec. Since Quebec receives half of all equalization payments to the eight “have not” provinces, the total increase will have to be in the $4 to $6 billion dollar range.

Albertans are justified in opposing the current equalization policies. It is not a matter of selfishness or sour grapes. It is a matter of whether these transfers have worked. Have they helped our country become more unified at home? More competitive abroad? The answer to both is a resounding No.

Between 1961 and 1997, a net $167 billion dollars left Alberta for Ottawa. Not by coincidence over that same time period, Quebec governments pocketed a net $202 billion dollars. Has this won the hearts and minds of Quebeckers? Hardly. Support for separatism in the 1980 referendum was 40 percent. Fifteen years and hundred billion dollars later, it peaked at 49% in the 1995 referendum. Today it still hovers in the mid forties.

Economically, Equalization transfers have been a disaster. In 1973, when Equalization amounted to only $1 billion dollars a year, the Canadian dollar was worth $1.05 US. Since then, the limping Loonie swooned to 60 cents US before recovering to the 70 cent range. Just in the decade of the Nineties, seven other OECD nations passed Canada in terms of per capita income—Iceland, Ireland, Norway, Finland, Denmark, Holland and Switzerland.

These comparative declines are hardly surprising. Canada’s Equalization programs reward failure and punish success. When the Quebec separatists destroyed the Quebec economy by chasing half of Montreal’s Anglophone population out of the province and most of the head offices of national corporations, no worries. Ontario, BC and Alberta were there to pick up the slack.

When three successive NDP governments wrecked British Columbia’s economy during the Nineties, they were rewarded with “have not” status and equalization payments. Equalization creates dependency, discourages economic development, and encourages keeping Crown Corporations. The list of perverse incentives goes on and on.

Mr. Martin loves to present himself as the savvy international businessman who will restore Canada’s economic competitiveness. Canada’s massive equalization payments do just the opposite. Albertans are fully justified in opposing any new increases in the equalization program. It’s not fair to us and it’s not good for the country.

The Liberals should not be allowed to hide this issue from Canadian voters until after the election. Mr. Martin should put his cards on the table now and level with Canadian voters, not just in Alberta but across the country. I doubt that Ontario voters, already saddled with provincial tax hikes and an $8 billion dollar deficit, relish coughing up another $3 to $4 billion a year in transfers to Quebec and Atlantic Canada.