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National fiscal transfers hurt all regions of Canada Print E-mail
Written by Link Byfield   
Monday, 26 April 2004

If someone reasonably well-dressed comes up to you on the street and asks, "Say, can you spare $1,000?" what's your answer?

Okay, suppose you resist the impulse to laugh in his face. Suppose you ask what he needs it for, and he says, "Well, you have more money than I do, so you owe it to me."

You might think this little scenario could never happen, but it's how Ottawa's been running the country for the last 40 years.

Ottawa takes over $9 billion a year ($1 million an hour) more out of Alberta than it returns in federal spending. The only other net contributor to national coffers is Ontario. B.C. is break-even. Everyone else takes more from Ottawa than they pay in.

This federal siphoning is usually referred to as "equalization," which is not completely accurate. The federal program known as "fiscal equalization" is actually just one federal transfer system among many. The EI program, the Canada Pension Plan, the Canada Health and Social Transfer, and others are all deliberately skewed to shift federal money from the "have" regions that produce it to the "have-not" regions that want it.

Now the Alberta Residents League has released a poll showing what Albertans think of "equalization." Surprise, surprise, they don't like it.

If you sit 10 Albertans down at random, seven of them think Albertans pay too much, and would either cut the amount in half or eliminate it entirely.

There are two things wrong with national wealth transfers. They diminish the two regions that have to pay them, obviously. But they're also bad--if not worse--for the regions that receive them, because they entrench a permanent welfare mentality.

Saskatchewan, for instance, has pretty much shut down its oil patch, because any surplus flowing to the provincial government comes off its equalization welfare cheque from Ottawa.

Brian Crowley, president of the Halifax-based Atlantic Institute for Market Studies, told a business audience in Regina a year ago that if the billions given to the maritime provinces in the past 30 years had been put in a bank it would now exceed $1 trillion. The transfers have not done a trillion dollars worth of good.

Overall they do economic harm. Some transfers subsidize new business activity, while others subsidize worker inactivity. This is blatantly self-defeating.

Another think-tanker, Peter Holle of Winnipeg's Frontier Centre for Public Policy, was in Calgary two weeks ago chiding his Alberta audience for wrecking the economy of Manitoba by being so generous.

He talked about the "fly-paper effect" of government transfers. Ottawa taxes the money out of businesses and consumers in Alberta and Ontario, and transfers it to the government of Manitoba. Almost none gets beyond the public sector and its immediate clients. The result is that voters and politicians alike always look to governments for solutions to problems.

Albertans will find that the only argument that can possibly succeed against this entrenched welfarism is to point out how bad it is for the whole country, and how far we are falling behind the U.S., Europe and Asia.

This is one area where the Alberta government really could take a leadership role, and start a national discussion.

As the ARL poll shows, the message would go down well at home. And it might start waking up other Canadians, too.

- Link Byfield

Link Byfield is chairman of the Edmonton-based Citizens Centre for Freedom and Democracy, and an Alberta senator-elect.
"Just Between Us" is a feature service of the Citizens Centre for Freedom and Democracy. The purpose of the Citizens Centre is to enhance freedom and democracy by enabling ordinary citizens to become active and effective on important issues outside the normal processes of party politics.

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