Tuesday, November 04, 2008

Have not no more (update)

The big news nationally is not that NL will not be receiving Equalization for the next two years, it's that Ontario will be. Although this is the first time in 51 years that Ontario will be a recipient, it came close about 20 years ago when oil prices surged and Alberta's revenues soared. Then the formula used to allocate equalization payments was changed to exclude that possibility. As the Globe notes:
It's important to note, however, that the economy of Canada's most-populous province has varied strengths – natural resources, high-tech, biotech, financial services, a highly skilled work force and, yes, even manufacturing – that are the envy of many jurisdictions. Ontario is poor only in comparison with those provinces wallowing in higher natural-resource revenues.
A further explanation of what this all means comes from one of the national giants of influence and thought on the subject of fiscal federalism Thomas Courchene, professor of economic and financial policy at the Queen's University School of Policy Studies. You can find it at the Globe and Mail. The upshot is that:
If we are serious about living up to the principles embedded in the equalization section of the Constitution, then it seems inevitable to me that we have to contemplate bringing the federal-provincial transfers for health, welfare and post-secondary education into the ambit of equalization. Since we are now income testing many key programs – old age security, guaranteed income supplements, child tax benefits, etc. – why not consider “revenue-testing” federal-provincial
cash transfers to the provinces?

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