Equalization and Fiscal Capacity

Freedom to Think 101

- Not impaired by grandiose federal party policies designed to re-elect Liberals and Conservatives

- Not impaired by "con"federation and the thinking of New Liberalism and Joey

- Not impaired by low self esteem

- Not impaired by employment with any of the federal or provincial political parties

The truth is and we all know it - that politicians consider their main job is to get re-elected.

On that basis - all significant federal parties (those that stand a chance for a majority) - will create policy favouring Quebec and Ontario.

The truth is Stephen Harper promised in writing and verbally to remove non-renewable resource revenues from the equalization formula.

The truth is - as an economist Harper has supported this concept for many years.

The truth is - Harper knew exactly what he was promising when he promised same.

The truth is - Harper knows it's the best chance Saskatchewan and Newfoundland and Labrador have to become a non-recipient province for the long-term.

The truth is - Harper buckled and gave up all of his beliefs to get a majority.

For all Canadians out there - this unfortunately is short term thinking and will - in the end - be harmful to the country.

The concept is simple - non-renewable resources are just that and therefore will not be available for future generations. These resource revenues must be used to build infrastructure - reduce debt - establish a heritage fund of some sort - and generally make other opportunities available so that the economy can be diversified and the fiscal position be sustainable.

That is what happened in Alberta - the province not crippled by reduced federal funds when developing the tar sands.

Renewable resources - according to Harper's own thinking and I agree will be available (if managed properly) to benefit future generations directly. Therefore the removal of these resource revenues from the formula is not necessary.

Fiscal Capacity can be defined many different ways probably as many as there are Chartered Accountants - but is defined in a specific way under the current equalization formula. Any reasonably minded person can see - on review - of the Federal Provincial Fiscal Arrangements Act that the definition is quite artificial and does nothing to develop sustainable economies.

Newfoundland and Labrador - per capita - may exceed per capita the fiscal capacity of Ontario over the next few years. What does that really mean? It means that oil revenues will artificially raise our per-capita fiscal capacity for a few short years. It will not count our debt per-capita - unemployment levels - provincial taxation rates - minimum wage - outmigration - birth and death rates etc...

Therefore the artificial flawed equation - that includes non-renewable resource revenues - will cause our continued economic dependence on Canada and the continued need for equalization. Whereas if the revenues were removed and used to reduce debt - build infrastructure - attract secondary processing facilities - lower provincial income and sales taxes - it is possible that a sustainable independent economy can be developed netting Canada a long term non-recipient contributor to the equalization program.

We must remember that New Brunswick - Nova Scotia - PEI - Manitoba - and yes even Quebec are anticipating long-term need for equalization so the more net contributors the better for the country.

This should be debated in Canada for the good of the federation - else the federation will fail.

There is no excuse for a Newfoundlander and Labradorian arguing against this position and to do so is either because of pure ignorance - pure politics - or pure stupidity - or personal financial remuneration.

In the case of Loyola - Norm - and Fabian - a combination in some form of all of the above.

In the case of others - let them answer it.

Imagine if you can Quebec being on equalization while Newfoundland and Labrador is not. Ontario should be looking to that neighbour to complain about fiscal imbalance - but to do so would break up the political power base that is Quebec and Ontario.