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There is a Liberal conspiracy to rob Alberta of its precious fluids.
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People in Newfoundland and Labrador got a taste of
lunacy a few weeks ago when Albertans – including people originally from
Newfoundland and Labrador – blasted them for returning six Liberal members of parliament
in the general election. Albertans took
it personally since they believe there is a plot by the Liberals to rob the province of its precious fluids.
Albertans believe lots of crazy things. Premier Jason Kenney shares the view of a
raft of people in Alberta and other parts of Canada. They think the rest of us across Canada are
welfare bums. They claim that provinces that collect Equalization and other
transfers from the federal government deliberately don’t develop their
resources so they can sponge off Alberta and Ontario. The money for Equalization, so this argument
goes, comes from Alberta and Ontario.
Jason Kenney said it in a speech recently. You can find examples of the same view from
the Fraser Institute and the Atlantic Institute for Market Studies. They use
other words for it – perverse
incentives, Equalization discourages
development - but basically the message
is the same. Slash the federal handouts
and the welfare bums will be forced to develop resources like Alberta did.
Thinks tanks that don’t involve actual thought
For all the veneer of credibility these think-tanks
can put on the welfare bums theory just by being called a “think tank”, there’s
not a shred of evidence to support the idea that provinces that receive
Equalization deliberately forgo resource development and bloat their public
service because they get federal handouts.
Nova Scotia, Saskatchewan, and Newfoundland and
Labrador are three good examples that show the basic theory of the welfare bums
argument – espoused must recently by
AIMS in a 2018 paper - is bunkum. All
three provinces developed their natural resources with the express intention of
getting off the Equalization program. Two succeeded and one didn’t.
There are three reasons why the five easternmost
provinces in Canada aren’t developing their natural gas resources. The main one should be obvious to researchers
who are supposed to support markets and market-driven explanations for things.
American natural gas is so cheap and plentiful that it
is displacing Canadian natural gas not only in American markets but in Canadian
ones as well. As a result, eastern
Canadian natural gas isn’t worth developing at this point, with the promise
that it would only depress gas prices even further.
The second reason is political. Most of the natural gas is in the Gulf of St.
Lawrence. To develop it would require an
agreement among six governments: the
federal government that actually controls it under the constitution and the
five provincial governments adjacent to the resource. With no economic pressure to develop the
resources, there’s no point in expending the huge amount of political and bureaucratic
energy needed to resolve the issue of the resource management.
The third reason is also political. Truth is that eastern Canadians are considerably
more sensitive to the environmental consequences of natural gas development to
make it politically worthwhile for governments to challenge it. And if you think about it, given that two of
the provinces have already developed offshore petroleum, the notion that some
ephemeral concept like Equalization makes avoid resource development is just a
load of foolishness. The public
distinguishes between one set of resources and another. They are willing to develop one and not
another.
And the other part of the welfare bums argument – that
the recipient provinces bloat their public services on the gravy that pours
from their richer cousins - is just a conflation of two unrelated things. They connect things that aren’t connected at
all.
Incomes not outcomes
There’s another part of the welfare bums argument that
you don’t hear much in Alberta, but it still pops up. Opponents of federal transfer for other
provinces point to things like the size of the health care system in a place
like Nova Scotia compared to Ontario.
More doctors per capita, more hospitals and so one. Or they look at Quebec – a perennial favourite target –
and note the province gets huge amounts of Equalization and then has programs
like publicly-funded childcare that the provinces that supposedly fund
Equalization cannot get as well.
People who make that argument forget two things.
First of all, Equalization comes from federal revenues
generally, not from any one province.
Second of all, Equalization and other federal
transfers are about incomes. What these
people are griping about are outcomes and those are entirely the responsibility
of the provincial government. If someone in Ontario or Alberta is upset that
Nova Scotia has more doctors per capita than they do in their province or have childcare,
they need to complaint to their own *provincial* government.
After all, provinces that don’t get Equalization have
more income person than the others. And
since the 2007 Equalization reforms there is a limit on how much a province
that gets Equalization can receive. So even in its current hard spot, Alberta
and Ontario have more money to spend on public services than the provinces that
don’t get Equalization. They could
spend their money differently and get a different outcome.
Quebec opts to tax more heavily while Alberta thinks
it is great to tax less than any other Canadian province. Those are legitimate decisions by provincial
governments based on what the public wants to do in each case.
You can see the impact of those sorts of choices in Alberta’s
recent budget. If Alberta taxed at the same rates as
Ontario, it would have $13 billion more each year than it currently
collects. If it taxed at the same rate
as Newfoundland and Labrador, it would have $21 billion more than it does.
[graphic] Just to reinforce that point, Alberta’s deficit
in the new budget is more than Newfoundland and Labrador spends in a single
year. That deficit is actually about a billion and a bit *more* than under the
supposedly fiscally irresponsible New Democrats.
Jason Kenney could raise Alberta’s tax rate to about
half that of Ontario and practically wipe out the provincial deficit in one
shot. Instead, Kenney went the other way
and *lowered* taxation. And at the same
time, he did something else. Rather than
renew Alberta’s call for the decimation of Equalization, Kenney went look for a
federal hand-out of his own. He wants
the federal government to change the Fiscal Stabilization Fund so that the wealthiest
province in the country with the lowest rate of taxation can get a federal
handout. Billionaire welfare bums has
quite a ring to it.
A distraction
All three are heavily dependent on oil royalties and
all three are in their current financial predicaments because they opted to
boost public spending based on volatile, unpredictable commodity revenues. All
three want to change federal transfers so they can get money from the federal
government. Newfoundland and Labrador
and Saskatchewan want Equalization.
Alberta wants larger
payments from the fiscal stabilization program.
In all three cases, the provincial governments are looking
for the money to avoid having to make changes to their government budgets and
financial policies. All three rely on a typically Canadian hockey sock of
misinformation. Both Newfoundland and
Labrador and Alberta want to see non-renewable resources removed from the
Equalization calculation, even though that happened in 2007.
Alberta premier Jason Kenney talks about holding a referendum
on Equalization.
In Newfoundland and Labrador,
opposition leader Ches Crosbie thinks that’s a good idea. Former premier Brian Peckford agrees people of Newfoundland and Labrador should get to vote on whether or not they want Uncle Ottawa to send them billions of dollars each year, no strings attached.
A "think-tank" sprang up during the election. It's not a think tank, really, just a political lobby group funded by a mainland millionaire who made his money backing the province's deficit spending and Muskrat Falls. It paid an Alberta economist to recycle a popular batch of fairy tales to make a case for a federal bail-out.
The
arguments used in Newfoundland and Labrador are like the ones in Alberta.
They have no connection to reality. There's a conspiracy involved and
Quebec figures prominently in both provinces’ delusional tales of conspiracy.
The fairy
tales are tremendously popular in both places. They are popular because people
will do anything to avoid having to change.
Having lived so long with money that seemed to come from out of nowhere,
people see no connection between their labour and the money their government
spends. It’s the same in Newfoundland
and Labrador where Equalization – a form of magical money – disappeared to be
replaced by oil, another form of magical money. Not surprisingly, people in both provinces
look for magical solutions to their problems from the imgainary money bags of
Ottawa,
Living in
British Columbia these days, Peckford is far removed from the realities of the
province he helped build. His successors and the people they lead have
abandoned the dream of self-reliance, of being a "have"
province. So he endorses the crazy idea of a referendum knowing full-well it will
have no impact on the federal government.
Ottawa cannot
afford it. In Newfoundland and Labrador alone,
the bailout would be $2.0 billion a year and last more than decade. Add
the eight billion from Alberta and a pile more for Saskatchewan. Then think of what happens when Ontario
starts collecting Equalization again.
The thing
would go on for more than a decade, of course.
After all, what Kenney, Scott Moe
in Saskatchewan, and Dwight Ball in
Newfoundland and Labrador are looking for is a blank cheque from Ottawa, in
perpetuity. Rather than help provinces
that simply do not make enough money on their own to meet a national
standard, the three premiers from the three
wealthiest provinces in Canada want a licence to run deficits forever. It is a recipe for financial disaster.
It is
lunacy.
But it is
lunacy that has gripped practically the whole country.
More people
might see it that way, except, of course, that lunacy is easier to spot when it is far away. When it is everywhere, the strangest things you can ever imagine are just another day in the Premier's Office.
And it doesn't get much stranger than a province with billions in the bank and billions in tax potential heading off to Ottawa looking for a welfare check, while blaming its supposedly destitute state on a phantom conspiracy and calling everyone else a welfare bum.
-srbp-