Western Seperation not run by dummies

[Hamloc]

What is specifically wrong with equalization when its a federal program paid for by federal taxes which are assessed the same across Canada whether you live in Ontario, Quebec, or Alberta?
Alberta is case of a poorly managed resource sector.
What about Peter Lougheed? Was he right or wrong?

What amazes me is how everybody always celebrates Peter Lougheed. he left politics just before oil bottomed out in the mid eighties. He had created a unaffordable beauacracy and government debt started to pile up after he retired. This large buildup of debt lead to the the policies of the Ralph Klein era. So yes there were certainly some of Peter Lougheed's policy that were positive but he created a large beauacracy without setting up the tax base to properly fund it.


There is no doubt in my mind if Alberta had a 24% VAT like Norway energy royalties could be saved instead of put into general revenues.

As for equalization, the biggest problem is that the province that gets the largest total payout per year appreciates it the least, that being Quebec.

[Klause]

So what are the numbers? What would the change look like in actual dollars?

This will cause a revolt on here.

Between 2005 and 2010, Quebec received $42.4-billion in equalization. Lost revenues resulting from excessively low electricity pricing during that period was $28.6-billion (calculations are available at Fcpp.org). Since the equalization formula deducts 50% as a clawback from additional resource proceeds, an extra $14.3-billion (half of $28.6-billion) should have been deducted from Quebec’s equalization if its hydro revenues were treated the same as Alberta’s oil revenues under the rules. That would yield total equalization payments of $28.1-billion instead of $42.4-billion for the 2005-2010 period.

[LEP]

Equalization hasn't changed in a long time because the changes have to be agreed to by the feds and 70% of the provinces, I believe. It doesn't allow for much change if the biggest beneficiary has a sizable say in the change going ahead.

It has been written several times that the equalization formula is fully understood by very few academics let alone politicians.

There are no simple answers to complex questions.

[chuckChuck]

http://publications.gc.ca/collections/Collection/F2-176-2006-1E.pdf
Here is the 2006 Expert Panel on Equalization Executive Summary. It is my understanding that Harper adopted many of the expert panels recommendations. They did discuss hydro electricity inclusion in the formula but there was no mention of it in the Executive Summary.

Below is an Ontario Chamber of Commerce response to the report:

TORONTO, June 5 2006 – Today’s report by the federal group examining equalization put forward many well-thought out recommendations that would improve the program, but seriously underestimated the impact of natural resource revenue on contributing provinces – particularly Ontario.

The Expert Panel on Equalization and Territorial Funding Formula Financing’s report recommended to the government that 50 per cent of revenue from natural resources be included in the Equalization formula.

“Ontario is proud of the role it has played in helping “have-not” provinces for the past 50 years,” said Len Crispino, President and CEO of the Ontario Chamber of Commerce. “However, the addition of resource revenue in the formula, combined with the proposed 10-province average, will make this program unsustainable for Ontario taxpayers.”

Many of the recommendations in the report reflect the views of the Ontario Chamber’s studies, including the emphasis on a new measurement system, transparency and accountability of the program. The Chamber is also pleased that the panel recognized the inherent unfairness of equalizing outside of equalization – and that non-equalization program spending should be on a per capita basis.

However, the Expert panel admitted a problem would result from the adoption of the 10-province standard and inclusion of natural resource revenue when it reported, “In the case of non-receiving provinces with no resources (i.e., Ontario), if resource revenues are included, combined with a 10-province standard, then its taxpayers, already hit by higher oil and gas prices, are asked to pay even more to assist receiving provinces. The greater the percentage of resource revenues included in Equalization, the greater the burden could be on Ontario taxpayers,” (page 55).

A recent analysis by the Ontario Chamber of Commerce suggested that Ontario’s per capita Gross Domestic Product is accelerating in its decline – from 112 per cent of the national average in 1990 to just 101 per cent in 2005. GDP per capita is a broad economic measure that is used by the Ontario Chamber and others to compare the relative economic health of one jurisdiction with another.

“This province’s economy is declining compared to the other provinces – and yet this report suggests Ontario taxpayers dig deeper and pay more into a program that already funds higher level of services in other provinces,” said Crispino. “Serious consideration must be given to Ontario’s economic position and how a weaker Ontario will affect the whole country.”

The Ontario Chamber of Commerce has published two reports on the fiscal imbalance,
available here. It has put forward several recommendations, including increased
accountability and transparency; a new system to measure program comparability
across provinces; a performance audit by the Canadian Auditor General on the
equalization program; and, an end to the practice of equalizing regions through
non-equalization programs like employment insurance.

-30-

[chuckChuck]

https://mowatcentre.ca/wp-content/uploads/publications/149_ontario_oil_and_unreliable_data.pdf

Ontario, Oil &
Unreliable Data
The Complex Problems Confronting
Equalization and Simple Solutions
to Address Them

Conclusion
Looking ahead to the next decade, the issues of Ontario, oil and unreliable data are likely to be as
problematic for the Equalization program as they were in the decade that preceded it. Attempting to
address them by allowing the current design of the program to persist, however, will not work. The
federal government will be confronted by a fresh set of trade-offs and choices in the face of these
problems.
The cost-certainty for the federal government that came with a fixed envelope could instead lead
to over-equalization. Conversely, under-equalization with respect to natural resources could erode
comparability of services across provinces. An undue emphasis on responsiveness could bring
increased volatility and unpredictability for provinces and the federal government alike, and comes at
the cost of accuracy.
Accurate measurement of the differences in fiscal capacity that the Equalization program is meant
to narrow, however, will take on additional importance in the context of a tight federal fiscal situation.
An increased focus on predictability for both the federal government and the provinces would help
both with cost-certainty for budgeting purposes, and can be achieved without sacrificing the goal of
the program. Overall, the primary focus of the program should be on the explicit goal of the program,
namely to ensure reasonably comparable levels of service are available at reasonably comparable levels
of taxation to all Canadians, regardless of one’s province of residence.


There are numerous papers on the Equalization and it takes a degree in Economics to wade through all of it.

[sumdumguy]

Canada's GDP is dependent on a lot of factors. Lower oil prices cause a lower dollar which makes canadian exports more competitive. Oil is in a a slump but is still relatively high especially with an 80 cent dollar. Even with a major drop in oil prices our growth is still relatively good and is the best in G7. We still have a triple AAA credit rating. So all this doom and gloom is more politics than reality.

The federal taxes that the Government of Canada collects do not belong to Alberta or any individual. Alberta is responsible for their own revenue and spending.

What specific principles in the equalization program need to change?

If Alberta is responsible gor their own revenue and spending, then so is Quebec responsible for its own. They don't need us or our "equalization payments" that aren't equal at all, just look at the map in prior post.

[chuckChuck]

It seems that almost every province has some gripe about equalization. I guess we have to leave it up to all 10 provinces and the federal government to sort it out. That's their job.

[chuckChuck]

If Alberta is responsible gor their own revenue and spending, then so is Quebec responsible for its own. They don't need us or our "equalization payments" that aren't equal at all, just look at the map in prior post.

Equalization is in the constitution so its not going to go away. We are not the only country to use equalization programs.

[Klause]

Equalization is in the constitution so its not going to go away. We are not the only country to use equalization programs.

Go read articles 106 and 107 of the German constitution.


How come an economy the size of Germany only has a 9 billion euro equalization program...


For the entire country.

Keep on ignoring facts that don't agree with you Chuck.


By the way how's Norway's equalization work? You love using Norway as an example

[ajl]

Canada's GDP is dependent on a lot of factors. Lower oil prices cause a lower dollar which makes canadian exports more competitive. Oil is in a a slump but is still relatively high especially with an 80 cent dollar. Even with a major drop in oil prices our growth is still relatively good and is the best in G7. We still have a triple AAA credit rating. So all this doom and gloom is more politics than reality.

The federal taxes that the Government of Canada collects do not belong to Alberta or any individual. Alberta is responsible for their own revenue and spending.

What specific principles in the equalization program need to change?

There is no real growth in Canuckistan today at all. Our real economy is actually shrinking. Our economy functions like the China's today. The government borrows money to get a certain growth rate. All the Stat Can picked up was the effect of Ottawa, Alberta, and Ontario stimulus spending which happened to show up in H1 this year. Q3 looks like we are back in recession once the data revisions are finished. If only bureaucracy had a market.

[westernvicki]

http://edmontonjournal.com/opinion/columnists/frank-atkins-canadas-equalization-formula-needs-to-change-heres-why
"Under the current funding arrangements, the equalization formula does not count the market value of hydroelectric power produced in Quebec, but rather the highly subsidized price at which hydroelectric power is sold in local markets. This anomaly creates a perverse set of incentives. Power is sold in Quebec in local markets at a highly subsided price, and this reduces the amount of revenue that gets counted in the equalization formula, thus artificially increasing the amount of transfer payments received by Quebec.

The Frontier Centre for Public Policy estimates that, over the period 2005-10, if the funding formula were corrected for this anomaly, Quebec’s equalization payments would have decreased from $42.4 billion to $28.1 billion. Given that a large portion of the equalization payments have traditionally come from Alberta, which is a large producer of oil, the conclusion here is that Alberta’s transfer payments to Quebec are actually subsidizing cheap hydroelectric power in Quebec (this is also true of Manitoba’s hydroelectric power).

Here is one estimate for you Chuck Chuck, but I am sure you are aware of this.

What if the formula accounted for the underground economy Chuck?
http://www.cbc.ca/news/canada/montreal/quebec-disposable-income-1.3409683

[westernvicki]

http://www.hydroquebec.com/residential/customer-space/account-and-billing/understanding-bill/comparison-electricity-prices.html