Equalization a Moral Failure

In a recent article, Professor Tom Courchene of Queen’s University coined a new word to describe the problems Ontario faces due to the network of financial and electoral instruments used by the federal government to channel resources away from the province and diminish its electoral standing within the federation.

The word he used is “fiscalamity,” a term that captures some of the disastrous impact these federal policies are having on the provincial home of 13 million Canadians.

The problem described by Courchene is, however, more than a fiscal calamity. It is an economic calamity. It is a governance calamity. It is a public administration disaster. It is a moral calamity that goes to the heart of what the federation should be about.

The economic dimensions of the problem are straightforward.

Every year, the federal government transfers a share of Ontario’s output to others that is usually double and sometimes triple the province’s growth, also expressed as a share of provincial output.

This policy, if it is continued and because it has been practised over several decades, is almost certainly enough to ensure that Ontario never competes effectively in the economic world of the 21st century.

It will also drag the whole country down because Canada cannot be economically vibrant if the home of 40 per cent of its population is not vibrant.

The governance calamity is equally troubling.

The decades-long transfer of wealth from Ontario is one of the largest in the world but the federal government has never conducted a public study to determine its impact on the jurisdiction whose taxpayers disproportionately pay for it.

The province’s federal legislators are publicly silent about it and have not sought detailed information about this massive effort.

Ontario’s provincial legislators, with only a few exceptions, have done little to inform the public of the full dimensions of this punitive system.

An important exception is Premier Dalton McGuinty, whose efforts should be applauded by all who believe in a future for Ontario. John Tory, the leader of the Opposition, has also acknowledged the problem and understands the importance of resolving it to ensure a better future for the province and Canada as a whole.

However, the approach of a large majority of the province’s legislators – federal and provincial – has been one of studied ignorance. For disaster to occur in a democracy, all that is necessary is for good people to see nothing and do nothing. That has happened in this case.

The public administration aspects of the problem are also staggering.

The rationale for the equalization program is to achieve rough comparability of government services across Canada but for the 50 years equalization has been in place, there has been no system to measure program comparability.

This is a specific violation of the government’s internal requirements that all programs should be measured against their intended results. The failure to do so is not only an assault on a core principle of public administration, it is an assault on accountability, reason and common sense.

Probably the most serious dimension of the problem is the moral failure it represents.

In our personal lives, we generally recognize three basic moral principles in our economic relationships with others.

The first is to do everything we can to ensure that we do not become an unnecessary burden on our neighbours. The recipient provinces have not done this. Instead, they have spent the money coming mainly from Alberta and Ontario taxpayers on extravagant bureaucracies and gold-plated services that are far more accessible than similar services here.

The second is a core principle adopted from the practice of medicine. It is to do no harm. Again, the recipient jurisdictions, by their never-ending search for more, can be demonstrated to be doing great harm to Ontario, their neighbour and partner in the federation and a friend who stood by most of them in past periods of difficulty.

The third principle is to share where sharing is required but to do so in a way that does not breed dependence.

The failure to measure the system against its principal goal means that federal regional subsidies fail this final moral test. Without measurement against the principal goal, there are no discernable limits on federal largesse to recipient jurisdictions and dependency grows.

In summary, Courchene is right to draw the fiscal dimensions of regional subsidies to our attention. He has also suggested steps that could be taken to address the problem, a major contribution to the public interest.

Much more has to be done, however.

Above all, Canadians need to stop reading our own press releases about how fair and compassionate we are.

These are not fair and compassionate policies.

The great tragedy of it all is that this system has resulted in fragile national unity that is based on a system of regional subsides that is damaging the economy of the entire country and doing great harm to Canadians living in Ontario. It could, under some easily imagined circumstances, lead to a major national crisis.

It represents a denial of all principles of good public policy.

Reprinted from the Toronto Star, July 27, 2008.