The Equalization Scam: Ontario the “Have” Province Gets $963M

The School for Public Policy published a useful review of the 2018-2019 equalization payments.

Let’s take a look.

graph-4-1024x579

Looks pretty typical in a lot of ways. West (+Newfoundland) pays East.

Also, while Quebec gets a lot of flak for getting the biggest payment, they are far from the biggest recipient on a per capita basis.

table1-1024x174

But wait a second, didn’t Ontario just become a “have” province? Why are they getting a big cheque?

And that leads to the most interesting part of this year’s equalization:

This brings us to Ontario. The $963 million it will receive in equalization is entirely composed of adjustment payments. Absent these payments, the total equalization program would cost $17.2 billion and Ontario would receive nothing. But at $70 per person for receiving provinces, the adjustment payments add $1.76 billion, which brings the total cost of the program to the $18.96 billion dollars paid in 2018/19.

A Costly Quirk?

Why should adjustment payments be made at all? And why should they be paid to Ontario, a “have” province prior to this stage of the formula? The limit was put in place by the previous government in 2009 to keep costs under control and limit uncertainty. But why does it also act as a floor? And… must it? The Fiscal-Arrangements Act is somewhat ambiguous on this point.

Nope, this doesn’t appear to be a redistributive scam at all. It’s not like Canada already has the federal health and social transfers, or that the federal government already spends money in provinces at different rates.

central canada equalize

 

Advertisements

Equalization 2018

Equalization Payments 2016-2017

Presented without comment.

equalization

Is Quebec’s Valeant (VRX) a Wall Street Ponzi Scheme?

David Stockman says so.

Lessons in Secession for the Quebec Election

Separatism was a hot topic for the latest Quebec election. Quebec’s separatist party was defeated, but regardless of the outcome secession will remain one of the most important controversies underlying Canadian confederacy.

Hoppe writes:

Secession increases ethnic, linguistic, religious, and cultural diversity, while in the course of centuries of centralization hundreds of distinct cultures were stamped out.

There are also economic reasons to favor secession. Although Quebec receives transfer payments from Ottawa, these ultimately make Quebec’s economy weaker. This kind of provincial welfare creates an environment where people have stronger incentives to get money from the government (because there is more loot up for grabs), either through welfare or cronyism, rather than serving one’s fellow man in the market and truly benefiting society.

Furthermore, smaller countries have a stronger incentive to favor free trade, and reject protectionism. It is surely correct that if Quebec maintained its same economic policies post-separation, it would be a disaster for the citizens. But there would be far greater pressure to actually liberalize the economy if there was less subsidization available. Additionally, any of Quebec’s wealth that is currently sucked into the black hole of Ottawa would remain in Quebec.

It would be an advance in Canadian civilization for the country to split. But it would not be enough to stop there — there should be hundreds, or thousands of Canadas, which would create a land of amazing prosperity and happy coexistence. There can still be a “Canada” — but Canada should be a coalition of cooperating territories, not a exploitative system where some groups use Ottawa to rip off other groups.

%d bloggers like this: