Selfish is Asking High-cost Provinces to Subsidize Low-cost Provinces

-- (historic), Commentary, Equalization, Role of Government, Uncategorized

One of the more egregious sins against language occurs when words that should be limited to descriptions of individual behaviour – “selfish” or “charitable” – are instead applied to a province. The latest example comes from writer Frances Russell who argued in the Winnipeg Free Press that Canada faces a new and dangerous politics of provincial selfishness.

The Winnipeg writer left no doubt as to the guilty party: Alberta. Any proposal to give Ottawa direct access to resource wealth sparks instant fury in Edmonton and Calgary and is denounced as a regional wealth transfer that would devastate the province, wrote Russell earlier this month, who then quoted several Ontario thinkers on the dangers of regionalization.

Even if one prefers to use such language generally to avoid giving personal offense, the advocacy on behalf of new wealth transfers is ill-advised; existing federal redistribution schemes such as equalization and transfer payments are already counter-productive for all of Canada.

For example, Russell’s home province, Manitoba is a terrific case study in how good intentions (equalization) can lead to bad results: counter-productive provincial fiscal policy followed up by poor environmental policy.

Manitoba, a have-not province, receives about $2 billion in equalization payments from the have provinces via federal taxes. It’s a payment from federal coffers so technically there is no transfer between provincial governments. But if ten people sit at a table and shift money around, if even one person leaves the table with more, that means someone else gave up cash. That’s the federal equalization program except four provinces give and six provinces take.

So what’s wrong with that? Plenty. The inter-provincial welfare scheme means the Manitoba government can and does charge less than market rates for its hydro electric power, about $1.2 billion less. Absent $2 billion in equalization payments, Manitoba’s government would be forced to stop undercharging for its own natural resource. An important side benefit is that proper pricing would also be more environmentally friendly. It’s a given that people use less of something as it becomes more pricey.

Another result of Ottawa’s charity the flip-side of supposed provincial selfishness is that Canadians who live in high-cost provinces subsidize those in low-cost regions. For example, according to Royal LePage in the first quarter of this year, the average price of a detached bungalow sold for $155,000 in Charlottetown, $235,000 in Halifax, $199,786 in Saint John, and for $170,000 in St. Johns (in the high-end area). Depending on the neighbourhood, the average bungalow price in Montreal went for between $180,000 and $270,000, between $169,000 and $295,000 in Quebec City, and showed a range of $215,000 to $240,000 in Winnipeg.

Now consider the provinces which have been mostly in the have category over the last several decades. (I’ll skip Saskatchewan as it is only a recent addition). A detached bungalows sold for between $315,000 and $700,000 in Toronto and for between $363,950 and $681,040 in Calgary. In greater Vancouver, prices ranged from $350,000 to $1,050,000. (Lots of luck finding the low-priced ones in those cities; I assume they were mouldy, former drug dens, now inhabited by cockroaches).

So here is my definition of selfish-and bizarre: a demand that Canadian families in high-cost provinces subsidize those in low-cost regions.

Worse, the inter-regional rip-offs that Russell and others defend on the grounds of a national concern only exacerbate regional tensions; they do not ameliorate them.

Several years back, I interviewed Gilles Duceppe. The Bloc Quebecois leader told me Quebecers paid more into federal coffers than they receive back. I asked Duceppe and his staff to send me proof as anyone who understood the nation’s finances knew such an assertion was nonsense. They never got back to me.

Duceppe can be economical with the truth in Quebec and ramp up anti-Alberta, anti-Ontario, and anti-Canada sentiment as a result precisely because of the existence of federal transfers.

Such opportunistic politics, along with the over-the-top regionalization so many worry about, could end tomorrow. All the federal government need do is kill cash transfers. In exchange, Ottawa could hand over the GST to the provinces (and other tax points if necessary).

There’s nothing selfish about defending the constitutional separation of powers including provincial power over resources. As for language, those who defend endless federal-provincial transfers and the pathetic, destructive consequences which result should be described in this manner: sincere but misguided.