Tuesday, April 10, 2007

New Formula or Old, Nothing Will Change

Governments, not people, benefit in the great Canadian equalization scam. That's my take and I believe it's more or less what Charles Cirtwill, acting President of the Atlantic Institute for Market Studies, writes in a Chronicle Herald op-ed today. He concludes:

The federal government met its commitment to bring equalization back to a stable, predictable formula. The problem is that the prediction inflates federal costs and expands provincial demands, with little in the way of evidence that either of those things will deliver the "reasonably comparable levels of service" promised in the constitutional guarantee of equalization.

One thing is certain: Both sides are wrong.

The old approach of special accords and side deals had to go. But non-renewable natural resources will never slingshot a province, any province, off of equalization as long as those resources are included in the equalization formula. Worst of all, the new formula is sufficiently attractive that few provinces will resist it for long; and that means we better get used to "have-not" status around here, just beggars along for the ride.

What does he mean? Well, Nova Scotia doesn't want its resource non-renewable revenues included in equalization. No province would. Fortunately, the province has a good excuse: it's a have-not province that needs to use the revenues to become self sufficient.

Too bad the province has shown weak resolve in moving towards self sufficiency. The 2007-2008 Nova Scotia budget included an unsustainable spending increase of more than +6%. It was balanced only because Nova Scotia had more federal transfers.

If the government really wanted to turn Nova Scotia around, it would use equalization as a buffer for taxes, not spending. We ought to take the trade of a few years of sub comparable services for sub comparable taxes. Give reason for the economy to grow. Give reason for businesses to start or move here.

But Nova Scotians don't want to go the hard way. So who is Premier Rodney MacDonald to lead the other way? Spending more money may help governments stay in power, but it doesn't help the province out of poverty. And so, we trade a few piddling social services for our entire future.