Equalization is broken and awful. Why is it still here?
EVERYBODY KNOWS EQUALIZATION IS BROKEN. WHY IS IT STILL HERE?
Equalization certainly is a gift that keeps on taking. It sends too much money to the wrong provinces in the wrong way at enormous cost to national unity. Of course it’s a gift to irate columnists. But the price is far too high.
For my money, and yours, the main issue at this point is not how cumbersome, bizarre and divisive equalization is. As Monday’s National Post noted, Ontario is about to stagger back into the ranks of “have” provinces despite its own poor fiscal performance because Alberta and Saskatchewan are doing even worse. It will nevertheless continue to collect equalization mostly paid for by western Canadians, nearly $ 1 billion next year, because a Harper Tory kluge meant to put a cap on the program somehow put a Trudeaupian floor under it instead. But I’m not here to tell you equalization is the mess everybody who tries to follow it knows about.
I say “tries” because it’s such a hoorah’s nest that nobody really understands it, including those supposedly in charge. As I noted back in 2012, when a Council of the Federation Advisory Panel on equalization convened in 2006, these experts discovered a whole other tier even they didn’t know about, and observed tartly, “The panel is not certain that this secondlevel equalization to the topprovince standard has ever been explained to the provinces.”
Nor, certainly, to the pub- lic. Indeed it’s not obvious that it could be explained because equalization is so complicated that quite possibly nobody really knows what it does in detail. And a program this hideously complicated can’t be carrying out sophisticated policy goals since its impenetrable operations don’t reflect anyone’s deliberate design. But we do know that, broadly, it rewards provinces for poor economic performance, which nobody ever intended, and has funnelled roughly half the money it collected to Quebec since it began in 1957, which may have been intended but wasn’t wise.
It certainly didn’t foster warm feelings within Quebec, a surprising number of whose inhabitants tell pollsters Quebeckers pay more into the federal treasury overall than they get out. ( Quebec’s politicians mostly know it ain’t so, but are too cunning to blurt it out, let alone say thank you.) Meanwhile Albertans and others who bear the cost are furious, especially as the Quebec government will continue to collect equalization despite being, incongruously, a fiscal star performer these days whereas Alberta, awash in red ink, will not.
As I also wrote in 2012, one could argue for an emergency program to bail out governments that go into receivership, allowing them still to perform basic functions including, in the modern world, a massive welfare state apparatus we evidently cannot get through a week of our lives without.
But clearly such a program ( a) should not rou- tinely subsidize precisely the sort of bad spending and taxing habits that make a fiscal crisis likely, ( b) should not kick in unless real trouble arises, and ( c) should on kicking in require drastic improvements in budgeting or impose other consequences that make it an unpleasant temporary expedient.
One major conceptual problem with equalization is the absurd notion of many modern Canadian provinces as “have not” including, currently, Ontario. According to t he World Atlas, per capita Ontario GDP in 2015 was $ 55,322, which is not want. If individuals, families or communities there are experiencing genuine need, going hungr y, wearing shabby clothes, unable to afford decent transportation or housing, it may be an indictment of the economy or the government, reflect personal misfortune or even improvidence ( yes, it does happen). But i t has nothing to do with Ontario being “poor.” By historical standards its inhabitants are unimaginably rich; even someone of modest means today enjoys luxuries that would boggle the mind of Louis XIV of France. Like fridges.
To say so is not to nitpick or justify callous indifference. It is to indict an “emergency” program that every year sends billions of dollars sloshing around the country into the pockets not of those genuinely in distress but of governments that spend recklessly, often to small or perverse effect, and cynically.
OK. So I did end up reminding you equalization is a mess. It’s hard not to get wound up. But the real point is that everybody knows it’s a mess, from Jane Q . Public to Joe D. Politician. Yet our would- be statespersons, including the Harper “conservatives,” can’t or won’t fix it. Even confronted with the massive, obvious, dangerous failings of this bloated program on the front pages of the paper, they are helpless to make even minor i mprovements. Cynical, dazed and conceited, they i nstead add fiddles that against all odds somehow make this crisis of governance even worse.
As I say, equalization is a gift that keeps giving … to columnists looking for material for a good rant. But really, you shouldn’t have.