Why ‘Have’ Provinces are the New Have-Nots

Media Appearances, Equalization, Frontier Centre


You’re welcome, Canada. Once again, Albertans are delighted to hold down the federal deficit.
Well, maybe we aren’t delighted; and there’s not much point in acknowledging thanks nobody gives.
But Alberta cash does suppress federal deficits, making it possible for the feds to pump vast sums into other provinces.
We’ve become the unseen, unthanked Funders of Confederation. And Thursday’s budget does nothing to right this glaring fiscal imbalance.
Mind you, redress was not expected. No federal finance minister is going to stop in the middle of his speech and say, "and by the way Alberta, thank you sooo much."
But that’s what Jim Flaherty should say. It would be nice if politics someday forced federal ministers to talk that way.
Even better, Ottawa could start treating the province fairly.
To get a picture of this problem, imagine that Alberta suddenly lofts into the air, causing Saskatchewan and B.C. to bump together.
Now picture the sudden western suction collapsing the federal treasury, forcing politicians to scurry all over Eastern Canada explaining why the payments have to stop.
By my math, without Alberta’s contribution, this year’s deficit would be nearly $77 billion, not the $56 billion predicted in the budget.
Over the next five years, Ottawa expects about $164 billion in total deficits. Alberta’s disappearance would bump that total up to $270 billion.
Ottawa would be forced either to borrow more or radically cut operations and transfer payments to have-not provinces.
Alberta people and companies send about $40 billion a year to Ottawa in taxes and other payments. The feds return just $19 billion. Annual net loss to Albertans: $21 billion.
That vast inequity, faced by no other province, is more than the total annual equalization program of about $14.2 billion. Albertans are actually paying for that chunk of the Constitution.
B.C. and Ontario are the only other provinces that pay in more than they get (although Ontario is now on the borderline).
But in their cases, the gaps are much smaller. Alberta is the lead banker on this Canada deal.
Equalization is a generous Canadian idea that has helped hold the country together.
But now the distortions are extreme, and the debate is changing as a serious side-effect becomes clear.
The Frontier Centre for Public Policy proved last week that have-not provinces enjoy much better services than the haves.
The poorer provinces have more per capita doctors, nurses, civil servants and long-term care beds; higher social service spending; and lower tuition fees.
In a curious way, the haves are the new have-nots as they bear more of the true cost of services, while funding those who don’t.
There’s a good argument that after all these years, transfers have created a lazy sense of entitlement and low productivity in some receiving provinces.
After the budget came out, Alberta Finance Minister Ted Morton said change will take time.
He wants talks to start this year for new arrangements scheduled in 2014.
But Morton, an avid hunter, already has a deadly bead on the explosive politics ahead.
He promises that when he visits Alberta campuses, "the first thing I’m going to say is that I want you to know you and your parents are spending a bunch of money to help Quebec, and they’re paying half the tuition that you are."
Ouch. This will get nasty. But hey, you’re welcome Canada. Just in case somebody cares.