Equalization: The helping hand that holds us down
Author:
David Maclean
2005/11/15
The Saskatchewan government is spending $300,000 of our money on an advertising campaign calling for increased welfare handouts from Ontario and Alberta. The campaign includes a web site, television spots and ads in national newspapers calling on people to "raise a flag for a Saskatchewan energy accord."
The campaign is designed to pressure the federal government to modify the equalization program so that Saskatchewan may keep revenues from record-high oil and gas prices while still receiving equalization payments from the federal government. The purpose of equalization is to enable less prosperous provinces to provide public services at a reasonably comparable level as those in other provinces at a reasonably comparable tax rate. The program distributes around $10.9 billion a year to qualifying provinces.
Since 1993 Saskatchewan has received $3.6 billion in equalization money from Ottawa. For most of those years, the only provinces that did not qualify for funding were Alberta and Ontario.
Nonetheless, the argument goes that Saskatchewan is somehow being abused by the constitutionally-enshrined program. The program reduces payments to provinces that are enjoying high revenues. As the Saskatchewan government benefits from record-high oil and gas prices, our equalization entitlement has been correspondingly scaled back.
The equalization program by its very existence poses a number of problems but one glaring problem that is clear to everyone is that the feds reduce our payments by more than we take in every year in "bonus" oil and gas revenue. Last year (an election year) the federal government acknowledged the problem and wrote a check for nearly $500 million for the unnecessary claw-backs.
The "raise a flag" campaign contends that we should get the same deal as Atlantic Canadians, who struck a deal with Ottawa to keep their equalization payments even though Nova Scotia and Newfoundland are experiencing revenue windfalls from their new oil developments.
The premier is right to talk about how different regions are treated differently. The premier is correct to criticize the billions of tax dollars being funneled into Atlantic Canada at the expense of so-called "have" provinces.
Where he is wrong is demanding that Saskatchewan be given the same deal as the Atlantic provinces instead of vowing to build an economy that does not rely on welfare. He is wrong in not calling for the equalization program to be abolished. The equalization program's "helping hand" is also the hand that holds "have not" provinces under water.
Is this really how far we have fallen in Saskatchewan Is it really necessary for Saskatchewan to be begging for handouts from other provinces when we're so rich with natural resources that we are the envy of Atlantic Canada
It's also worth noting that the only two provinces that are net contributors to the equalization program are provinces with low taxes - a policy derided by the Saskatchewan government.
Like all welfare programs equalization is trap. It rewards provinces that fail to develop their own economies and punishes those that dare to lower taxes and cut regulations. Our Premier should not be demanding more handouts. He should be saying that Saskatchewan will never again be the recipient of federal subsidies and implementing policies that help make that commitment a reality.
The rest of Canada doesn't owe us anything.