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Keep Equalization Honest
12/02/2005

I think few Canadians really buy the argument that health care or education, or whatever, are supposed to be provincial programs and the federal government should keep out. I actually want the federal government to be involved, because I like having nationwide standards and the money to help back it up. I think it is a good thing when relatively poor provinces get some help from the others in the form of federal transfers.

The Equalization Program has being doing this for years, ostensibly based on a formula that sets a standard for per capita "fiscal capacity" and then gives enough money to the sub-standard provinces to bring them up to the mark. Fiscal capacity is based on the ability to raise taxes, and the standard is set by the average of five provinces: Quebec, Ontario, Manitoba, Saskatchewan and British Columbia.

As almost everybody knows, the two provinces that are above the standard are Alberta and Ontario. Every other province gets money back from the overall pool of federal revenues.

In my view, having a formula is what makes this seem fair and tolerable by most Canadians. When there is a formula, the redistribution appears to be above politics. The size of your cheque doesn't depend on your relationship with the Prime MInister or how badly he needs a few more votes in your province during the next election. It's driven by an agreed-upon and transparent formula.

Over the years, accusations of politically-driven regional favouritism have been a serious problem in our country. We need to minimize this, and keeping the appearance of politics out of Equalization would help a lot. Unfortunately, the recent deal Paul Martin has made with Newfoundland is moving us quickly in the other direction. Everyone is now calling for their own side deal.

It is entirely natural for all the Premiers to be trying to get the best deal possible for their province. It might be nice to imagine them all cooperating for the good of the country, but it's not likely. The solution is a strongly federalist Prime Minister, who can say no, get lost, no special deals. Unfortunately, Paul Martin has proven to be a push-over who naively feels the best way to keep the regions happy is to give each one whatever it is asking for at the moment. Also unfortunately, it wouldn't seem likely that Stephen Harper or Jack Layton would stand up for the national interest over regional complaining either.


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