Calming the furor over equalization


mentalfloss
No Party Affiliation
#1
Calming the furor over equalization

In the last decade, equalization has attracted significant attention from politicians, commentators and think tanks. Federal and provincial government commissions have shed considerable political light on the program. And elected officials across the country have been quick to voice their concerns about the impact of equalization on their respective provinces. In doing so, they have ratcheted up the conflict surrounding the program.

Equalization became highly politicized in the mid-2000s and it has subsequently proven difficult to tone down the rhetoric and bickering. Although vigorous national debates on equalization are necessary from a policy standpoint, the political showdowns that took place during the Martin and Harper minority governments only exacerbated regional tensions.

These quarrels stymie attempts at calm, neutral discussions of the future of equalization. Claims and counter-claims abound — often backed by little or misleading evidence. Thankfully, there is way the discord can be mitigated. Other federations have made concerted efforts to de-politicize their equalization programs through arm’s length governance agencies, and they seem to work.

In Australia, for example, an arm’s length body called the Commonwealth Grants Commission (CGC) administers equalization. The CGC is comprised of respected, non-partisan experts; operates under broad terms of reference set by the Commonwealth government; and makes recommendations for the appropriate redistribution of wealth. The Commonwealth government retains final decision-making power but the CGC’s recommendations are generally adopted because they come with a seal of neutral fiscal expertise.

As a direct consequence of this institutional setting, the Commonwealth government plays a minimal role in equalization. In other words, equalization in Australia is as de-politicized a program of territorial redistribution as can be found in any federation. As a result, conflict over equalization is rare and, when it occurs at all, generates little political traction.

The Australian model served as the template for the development of both the South African and Indian approaches to equalization, though in practice, the differences of these countries’ federal systems influence the operation of their arms-length governance agencies.

These experiences are instructive for Canada. It would be naive to assume we could replicate the effects exactly. Because Canadian provinces have more politically salient identities than Australian states, we have to be realistic about how this model would translate to the Canadian context. Given the level of existing regional tension, keeping provincial perspectives out of the arm’s length agency’s work would be tricky.

But as it happens, Canada has a history of using the arm’s length agency model with considerable success. For example, the CPP Investment Board was established during the last major reform of the Canada Pension Plan in the mid- to late-1990s. It has since invested over $140-billion on behalf of Canadian pensioners with little political interference. The Canadian Institute for Health Information (CIHI) has similarly been providing expert and neutral health-care information and guidance to Canadian governments since 1994. Arm’s length governance is compatible with the Canadian policy context.

Trusting expert, independent third parties with information gathering and governance responsibilities could improve the current program in a number of ways. It could provide expert legitimacy to policy decisions, reduce territorial conflict, increase the transparency of equalization and clarify accountability.

Equalization plays a unique role in redistributing wealth across the country. Each and every province has a vested interest in the outcomes of the program — precisely the reason why a neutral arbiter could help cut through the conflicts and the politics that make the program so confusing and misunderstood. Although we can’t take the politics out of equalization entirely, we can do a better job reducing the level of territorial conflict surrounding it.

Daniel Béland & André Lecours: Calming the furor over equalization | National Post
 
mentalfloss
No Party Affiliation
#2
Neutral body could end 'bickering' over equalization formula - Politics - CBC News
 
Niflmir
Free Thinker
#3
Makes sense to me, but I think a person who is dead set against equalization doesn't really care who is the one making the decisions. The idea of taxes being spent to improve society seems to have somehow morphed into the idea of someone eating someone else's lunch these days.

Germany also has an equalization system, and they have ever since the reunification. For Germans, Berlin is the logical capital, but the USSR left East Germany in such a mess that the equalizations were completely necessary. These things always create friction, in both directions. But if national unity means anything, one wants the state of things here to be the state of things there.

If I'm from Alberta, I don't want to die just because I had my heart attack during a business trip to Saskatchewan and their health coverage is too different.
 
taxslave
No Party Affiliation
+1
#4
Well there is no doubt the system can be improved upon. But there also has to be better control over what the free money is spent on. The $7 day daycare in Quebec courtesy of the west does not go over very well when it is our money that pays for it.
 
Niflmir
Free Thinker
#5
Quote: Originally Posted by taxslaveView Post

Well there is no doubt the system can be improved upon. But there also has to be better control over what the free money is spent on. The $7 day daycare in Quebec courtesy of the west does not go over very well when it is our money that pays for it.

Yeah, but seeing as the equalization payments are there so that the total tax pool the government has to draw on per capita is equal... what is the Albertan government spending your taxes on?

Don't worry either, I'm in the Netherlands. The government here spends all my money to pump water out of the half of the country that is below sea level.
 
SLM
No Party Affiliation
+3
#6  Top Rated Post
Where's Durry? Isn't putting the word equalization in the thread title like ringing the dinner bell?
 
Tonington
+1
#7
Quote: Originally Posted by NiflmirView Post

Don't worry either, I'm in the Netherlands. The government here spends all my money to pump water out of the half of the country that is below sea level.

Lazy western bastards.
 
Niflmir
Free Thinker
+2
#8
Quote: Originally Posted by ToningtonView Post

Lazy western bastards.

Today I learned that they spent millions so some guy could research the economic possibilities of building a 2km high mountain here.
 
Tonington
#9
Quote: Originally Posted by NiflmirView Post

Today I learned that they spent millions so some guy could research the economic possibilities of building a 2km high mountain here.

That's a lot of mass for a place that's sinking! Reminds me of trying to build large mounds from wet sand on the beach!
 
Niflmir
Free Thinker
+2
#10
Quote: Originally Posted by ToningtonView Post

That's a lot of mass for a place that's sinking! Reminds me of trying to build large mounds from wet sand on the beach!

I suggested that if they built it out of garbage, other countries might pay them to build it.
 
Tonington
#11
Quote: Originally Posted by NiflmirView Post

I suggested that if they built it out of garbage, other countries might pay them to build it.

Hmm, I drove past a mountain of garbage, outside of Augusta, ME, along I-95. It was huge!
 
Niflmir
Free Thinker
+1
#12
Quote: Originally Posted by ToningtonView Post

Hmm, I drove past a mountain of garbage, outside of Augusta, ME, along I-95. It was huge!

See, slap some dirt on it, grow some grass, and in time people will forget it's Garbage Mountain, and just call it the mountain. That's what the Dutch people did with the sea. They should do that in PEI with any equalization payments they get: make more PEI.
 
captain morgan
Bloc Québécois
#13
Quote: Originally Posted by taxslaveView Post

Well there is no doubt the system can be improved upon. But there also has to be better control over what the free money is spent on. The $7 day daycare in Quebec courtesy of the west does not go over very well when it is our money that pays for it.


... And herein lies the problem with the equalization formula; there is no stipulations against using the proceeds (directly or indirectly) on programs that are outside the intent of the program. One would think that the $7/day childcare in Que would be standard across the nation, but as we know, it isn't.

That said, what exactly is the money being spent on?
 
Tonington
+1
#14
Quote: Originally Posted by NiflmirView Post

See, slap some dirt on it, grow some grass, and in time people will forget it's Garbage Mountain, and just call it the mountain. That's what the Dutch people did with the sea. They should do that in PEI with any equalization payments they get: make more PEI.

Lol, too much nimby for that here, probably not good for the fish either

Quote: Originally Posted by captain morganView Post

... And herein lies the problem with the equalization formula; there is no stipulations against using the proceeds (directly or indirectly) on programs that are outside the intent of the program.

What is the intent of the program, that cheap child care is outside of?
 
Niflmir
Free Thinker
#15
Quote: Originally Posted by captain morganView Post

... And herein lies the problem with the equalization formula; there is no stipulations against using the proceeds (directly or indirectly) on programs that are outside the intent of the program. One would think that the $7/day childcare in Que would be standard across the nation, but as we know, it isn't.

That said, what exactly is the money being spent on?

It usually doesn't make any sense to attach strings to this kind of thing.

"Oh, I can't spend this money on guns? Ok, well I will pull the money I was going to spend on healthcare out and spend that on guns and spend all your money on healthcare."

Which is what seems to happen in Africa.

I also really want to know what they are spending the money on.
 
taxslave
No Party Affiliation
#16
Quote: Originally Posted by NiflmirView Post

Yeah, but seeing as the equalization payments are there so that the total tax pool the government has to draw on per capita is equal... what is the Albertan government spending your taxes on?

Don't worry either, I'm in the Netherlands. The government here spends all my money to pump water out of the half of the country that is below sea level.

Alberta is not a have not province. Therefore they do not get any of my money.
 
captain morgan
Bloc Québécois
#17
Quote: Originally Posted by ToningtonView Post

What is the intent of the program, that cheap child care is outside of?

.. To provide a level playing field for access to, and the provision of services.

The key word in the program is equalization... How is Que's gvt sponsored $7/day childcare program equal to Manitoba's $20-30/day program?

Quote: Originally Posted by NiflmirView Post

It usually doesn't make any sense to attach strings to this kind of thing.

"Oh, I can't spend this money on guns? Ok, well I will pull the money I was going to spend on healthcare out and spend that on guns and spend all your money on healthcare."

Which is what seems to happen in Africa.

I also really want to know what they are spending the money on.

Knowing what the books look like is very important, and not just for the equalization program.

In part, I see one of the issues is that some provinces treat the equalization payments as a form of revenue rather than as a supplement... It's easier to live (and budget) beyond your means when you know that there will be a cheque in the mail.
 
Tonington
#18
Quote: Originally Posted by captain morganView Post

.. To provide a level playing field for access to, and the provision of services.

The key word in the program is equalization... How is Que's gvt sponsored $7/day childcare program equal to Manitoba's $20-30/day program?

Yes, but Equalization payments are unconditional. Provinces are free to spend their money however they see fit, according to their own priorities. Manitoba could offer $7 per day childcare. They obviously have other priorities.
 
mentalfloss
No Party Affiliation
#19
Quote: Originally Posted by NiflmirView Post

Makes sense to me, but I think a person who is dead set against equalization doesn't really care who is the one making the decisions. The idea of taxes being spent to improve society seems to have somehow morphed into the idea of someone eating someone else's lunch these days.

Exactly.

It makes complete sense.

Harper will never do it.
 
petros
+2
#20
What is the incentive for a "have not" Province to get off equalization payments?
 
captain morgan
Bloc Québécois
+1
#21
Quote: Originally Posted by ToningtonView Post

Yes, but Equalization payments are unconditional. Provinces are free to spend their money however they see fit, according to their own priorities. Manitoba could offer $7 per day childcare. They obviously have other priorities.

The payments are intended to supplement the base level of services common among the provinces to bring them to a min standard.. That said, they are conditional.

Quote: Originally Posted by petrosView Post

What is the incentive for a "have not" Province to get off equalization payments?

The incentive is to ride a fine line between the definition of qualifying as a have-not, yet still being able to collect... Nfld is/was in that position and Danny Williams insisted that he need the payments to build the infrastructure to service the offshore oil/gas... I can actually appreciate that logic as it will speed-up the process of moving forward.
 
petros
#22
NFLD has something to offer in return but there are other Provinces who have nothing to offer in return.
 
captain morgan
Bloc Québécois
+1
#23
I have little problem with the program in principle. However, I think it needs to be revamped to reflect today's realities.

A question came up on the radio the other day (CBC?) that considered the merits in perpetually subsidizing those areas (communities) that are chronically depressed... Basically, does it make sense to keep them alive with never ending subsidies?

It's a tough question to ask, but it still needs to be asked.
 
mentalfloss
No Party Affiliation
#24
Quote: Originally Posted by petrosView Post

What is the incentive for a "have not" Province to get off equalization payments?

Well the fact that equalization is not in their favour for one.


Equalization hurts Ontario, study finds

The formula is based on the Trudeau-era constitutional amendment requiring that Canadians get "reasonably comparable levels of public services" funded by "reasonably comparable levels" of provincial taxation.

But the report from Peter Gusen, former director of federal-provincial relations at the federal Department of Finance, said the current system is flawed because it considers only a province's "fiscal capacity" to raise revenues.

That means factors that have a huge influence on funding services - like wage costs or the relative age of a population - aren't considered.

Gusen said the formula isn't consistent with the 1982 Constitution Act, which enshrined the equalization principle.

"If equalization continues to ignore differences in expenditure need, it will not be treating provinces fairly and it will not be fulfilling its constitutional mandate," Gusen wrote.

"We all know it's (more) expensive to hire doctors and nurses in Vancouver and Toronto than it is in Saint John or other parts of the country."
 
Tonington
#25
Quote: Originally Posted by captain morganView Post

That said, they are conditional.

Department of Finance says otherwise:
Equalization payments are unconditional – receiving provinces are free to spend the funds according to their own priorities.
Quote: Originally Posted by captain morganView Post

The incentive is to ride a fine line between the definition of qualifying as a have-not, yet still being able to collect...

How is that an incentive? The equalization payments are the result of a formula. Straddling close to being a have province means less payments from the equalization program. If someone were gaming that system, how would being close to the line be a preferable position to being farther below the cut-off value?

To use your example of Danny Williams in Newoundland and Labrador, there is no incentive to be close to the line. The farther away from a have province, the more funds from equalization, which would have allowed Newfoundland to make even larger investments in off-shore infrastructure.

Perhaps there is an incentive there, but it's not clear that straddling a line is the preferred position.
 
damngrumpy
No Party Affiliation
#26
Different regions of the country have different priorities of importance across the country.
In some areas there is minerals and other quests and in Quebec they are much bigger on
7 dollar a day daycare, because they are into social programs more than the rest of Canada.
If we are going to apply equalization that money goes to a specific region and their priorities
are their priorities.
Its like giving someone money to buy a car and then dictating what kind of car they have to buy.
It will not fly.
 
petros
#27
Equalization should be going to invest in the economies of have not provinces so they can have.

Not daycare.
 
mentalfloss
No Party Affiliation
#28
Is equalization covering Quebec's tuition? If it is, should it?

Even with university tuition increase, Quebec’s fees still lowest in country - The Globe and Mail
 
Goober
Free Thinker
#29
Quote: Originally Posted by mentalflossView Post

Is equalization covering Quebec's tuition? If it is, should it?

Even with university tuition increase, Quebec’s fees still lowest in country - The Globe and Mail

The Prov receives the majority of the money - No strings attached from what I understand. In the 2nd last election Harper gave Charest around 2 Billion - He used about 35 % to lower taxes during an election.

They have the highest tax rates, lowest costs for day care etc. Highest debt. They are on the Road to Greece.
 
mentalfloss
No Party Affiliation
#30
Quote: Originally Posted by GooberView Post

They have the highest tax rates, lowest costs for day care etc. Highest debt. They are on the Road to Greece.

How long will it take for the end of that road to reach Greece?
 

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