United in Dependence

Commentary, Equalization, Frontier Centre, Uncategorized

Imagine that you have a pile of money and several kids. Some of those kids work hard and are quite self-sufficient. Some of them, on the other hand, just never quite seem able to look after themselves. Because you’re rich and you believe all your kids deserve a similar standard of living, you pay the ne’er-do-wells a good allowance accompanied by lots of well-meaning admonitions to try and harder and make something of themselves.

But you get this sneaking feeling that, far from using that money sensibly to become self-sufficient, these problem children are just going through the motions to placate you but aren’t actually doing much. In fact their appetite for their allowance only increases with time and you worry that your money may be making the problem worse.

What to do?

You could tell them to cut their expenses by moving in together, paying only one rent instead of several, sharing the phone and light bill and groceries.

But what if the problem isn’t the inefficiency in how they spend the allowance, but rather the allowance itself? If the allowance is what encourages the children to live large, because they can do it at your expense, wouldn’t it be more effective to cut the allowance and make them decide how to make the most of the income that’s left, and perhaps even earn more of their own money to make up the shortfall?

These thoughts came to me when I learned recently that several good friends in the Senate have been trying to revive the idea of Maritime Union as the solution to that region’s perennial economic underperformance. Surely people like the good senators reason, the region is over-governed when the 1.7 million people in Nova Scotia, New Brunswick and P.E.I. have three premiers, cabinets, court systems, legislatures, capitals and so forth and 13 million Ontarians make do with only one of each of those things.

Far be it from me to disagree that the region is over-governed. I lived there for more than 20 years, and I saw its insatiable appetite for government boondoggles up close.

The problem is that Maritime Union is a non-solution to those problems, and indeed is guaranteed to take huge effort (including a constitutional amendment whose success would be far from assured) while holding out the very real prospect of making matters worse, not better.

Consider the evidence that has been gathered over the years from study after study of the closest equivalent of Maritime Union: municipal amalgamations. The results of those studies are unequivocal. Amalgamations, far from saving money, drive up costs; this is in part due, for example, to the universal tendency in such circumstances to level costs up to the highest level among the pre-existing units. Those costs are never levelled down.

In any case, the reality is actually that the costs of the things that Unionists bang on about — extra premiers, legislatures, deputy ministers and judges — are quite small beer in the grand scheme of things. People get excited about them because of their symbolic value, but the cost of them is actually tiny relative to the size of government overall.

What really costs money is the total number of civil servants and how much you pay them, for example. And a single Maritime province would likely have just as many teachers and nurses and civil servants actually delivering services at the same pay as at present — unless we change the incentives they operate under.

Now back to the idea of cutting the allowance (i.e. transfers from Ottawa) as a way to get these provinces to change their behaviour for the better. The evidence is that this would have a far bigger impact than Union, and would be much easier to achieve. Ottawa can do it, and it doesn’t require constitutional amendments or agreement from powerful interests, like French-speaking New Brunswickers, who have zero interest in being a much smaller minority in a much larger province.

The Maritimes would no longer be able to pass along to federal taxpayers the costs of too many civil servants at too-high salaries (relative to local pay). Local taxpayers would face the real costs of the excesses of their politicians and they’d start to demand real efficiencies to get the cost of government more in line with what the local economy can bear.

Remember the economist’s golden rule: subsidize something and you’ll get more of it. Ottawa subsidizes government in the Maritimes, ergo there is more of it than is really needed.

Dear senators: Union isn’t the answer; the effort required would be gargantuan and the likely results meagre at best. You have the region’s best interests at heart, so cut their allowance, which you and your colleagues actually have the power to do. Maritimers will sort out the rest.