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Monday, May 05, 2008

Equalization - A Made in Ontario Solution

As odd as it may seem, the solution to Ontario's fiscal and public image problems rests in doing what Ottawa, at the request of Ontario itself, refused to do more than a year ago.

Remove all non-renewable resource revenues (100% of them) from the equalization calculation.

Today the entire nation, or at least politicians and the media, are in a tizzy over the pending fate of Ontario. It's been that way ever since a report last week indicated that Ontario will qualify for equalization support in a year or two.

The news media (in what has to be the oddest twist of all) now appears to be blaming Newfoundland & Labrador for Ontario's woes.

It seems someone got the bright idea that since Ontario is heading toward "Have Not" status while Newfoundland and Labrador is moving away from it, the entire problem must be the fault of the folks down east.

Clearly Newfoundland and Labrador has nothing to do with the current situation in Ontario. The truth may actually be just the opposite. The province proposed a solution to Ontario's problem over a year ago but nobody listened then and nobody is listening today.

Ontario Premier,Dalton McGuinty, is blaming Ottawa for this insulting situation because the taxpayers of Ontario (like taxpayers across Canada) send huge sums of money to Ottawa. His complaint is that Ontario gets only a small percentage of those federal revenues back.

That's not news and it isn't Ottawa's fault, nor anyone elses.

Of course all of that money doesn't go back to Ontario. If every penny collected in federal taxes went back to the same regions it came from there would be no need for federal taxes (or for a federal government for that matter).

Welcome to the world of federalism Dalton!!!

A Higher Population + More Higher paying jobs + More Industry = Less Federal Support.

It's just that easy.

It seems Mr. McGuinty believes Ontario should be able to get more of that tax money back (which is what equalization payments would permit him to do) but he doesn't want it to be called Equalization.

That would be an embarrassment.

This leads us to the root of the Ontario problem.

The Federal and Ontario governments, in partnership, have essentially painted Ontario into a corner and they have nobody to blame for it but themselves.

One of the major sticking points Ontario had with federal provincial relations was Ottawa's penchent for entering into "one of" funding arrangements with individual provinces. As a result Stephen Harper pledged to never again enter into a side deal. Instead he said Ottawa will only implement funding transfers that are applied fairly across the entire Country.

Under those circumstances finding a way to provide special funding to Ontario without cutting a side deal or using the equalization system isn't easy. In fact it may prove to be a political hot potato for Stephen Harper should he try.

Another big problem for Ontario is the equalization system itself.

When Stephen Harper's government changed the formula there were two key "enhancements" included in the legislation. Those enhancements were at least partly facilited (or should I say "forced") by representatives of the Ontario government and Ontario MPs.

First the calculation was modified so all 10 provinces would be included in determining the average that defines who receives equalization and who doesn't. In simple terms, those below the average receive equalization, those above it do not.

The second change was the inclusion of 50% of non-renewable resource revenues in calculating the average.

Newfoundland and Labrador fought long and hard for the Conservative government to exclude 100% of those revenues from the calculation (Stephen Harper promised he would do it on multiple occassions) because including them would skew the average. By including revenues that are "temporary" in nature, resource dependent provinces are handicapped in their ability to use this one time money to build and diversify their economy.

Once the oil is gone it's gone. It's like selling your car. The money generated is one time only, not like a regular salary. As such it shouldn't be treated, or taxed, as if it were.

Ontario was dead set against the idea and thanks to the pressure it applied on the federal government Harper's promise was never kept. The 100% exclusion never happened.

Fast forward to 2008.

The government (and likely the people) of Ontario do not want to carry the stigma and public shame of having to accept equalization payments from taxpayers across Canada.

Ottawa and Ontario cannot cut a "one of" deal, allowing Ontario to skirt equalization, without both parties admitting that they were wrong for fighting such deals in other provinces. This would result in Ottawa opening a door they said was closed forever.

So, perhaps the best solution doesn't rest in finding a way to pump more taxpayer money into Ontario so much as ensuring that Ontario doesn't cross that dreaded line into "Have Not" status.

After all, isn't this really a question of perception more so than reality?

According to Dalton McGuinty himself it doesn't even make sense that Ontario is about to receive equalization when so much revenue is generated in his province. I agree. That's why the simplest solution is the best.

The reason Ontario is teetering on the brink of crossing the "Have Not" line is because the new 10 province standard (which includes oil revenues) has allowed Alberta to raise the bar so high Ontario is in jeopardy of falling under it.

If non-renwable resource revenues were removed from the calculation Alberta would have little effect on the overall numbers.

Ontario would once again resume, what it sees, as it's rightful place at the top of the Canadian heap.

It's a win, win, win situation.

- Ontario regains its status and avoids a painful loss of dignity.

- Newfoundland and Labrador keeps its limited oil revenues, enabling it to pay down debt and diversify its economy, in preparation for a future without oil.

- Stephen Harper can finally make good on a promise that, as an economist, he knows to be correct. A promise that has caused a political rift between two governments and, inadvertantly though it may be, is now causing collateral damage to another.

32 comments:

Anonymous said...

Very good idea Myles.

It's funny because it's true. That's how the problem was solved in the past.

Last time Ontario teetered on the brink of equalization in the 1970s and early 1980s energy prices were soaring and Ontario’s manufacturing sector was suffering.

The only way to save the nation – and to keep Ontario off the dole – was to put equalization through a series of contortions.

The first thing the feds did was take a chunk of resource wealth – that is, oil wealth – OUT of the equalization formula. Then it took Alberta OUT of the formula altogether, just for good measure.

Its as easy as you said. If Harper had kept his promise (it's not too late) then Ontario would not be in this situation.

It sounds silly I know (not fixing the problem but changing the rules instead) but it satisfied Ontario before and it can do it again.

Like you said, Win, win, win.

Anonymous said...

It will be intersting to see how the federal governement re-acts to this.I'm sure that Mr Harper is going to have some kind of spin to put on this fastball.

In the balance hangs what he wants more then anything .A Majority Government.Ontario by rights could give Mr Harper what he wants,or it could end up crushing him.

And ,as the world turns the story continues.It's going to be entertaining no matter what happens.But,I'm starting to see why such remarks were made by Prime Minister Williams.As they say in Ontario Myles, hurry up and wait for it.

Mark said...

Umm.. this is perhaps the stupidest thing I have ever read.

EVERY one of your claims about Equalization in this article is factually incorrect, historically inaccurate and make no sense.

I'd elaborate, but I am now sufficiently convinced that you probably can't read anyway.

Patriot said...

Hi Mark,

Normally I don't post attack comments like yours but since it's only about me, what the heck.

You accuse me of getting this all wrong and not knowing the facts. Why don't you elaborate? Why don't you tell us the real facts if I'm so off base?

You can't can you?

I guess you took the old adage to heart Mark. "When you can't attack the facts attack you opponent".

The simple truth is that Ontario wanted a 10 province standard.

Ontario wanted oil revenues included in the calculation.

Ontario got what it wanted and now the system is working the way Ontario saw to it that it would.

BUT

If oil was removed from the calculation Ontario would rise back up the ranks once again.

It's simply a case of being careful what you wish for or you may get it.

Sorry if the truth hurts Mark but facts are facts.

Anonymous said...

A higher population, everything else being equal, will LOWER a province's equalization entitlement.

Anonymous said...

Patriot

Your post is right on the Mark.

Keep on posting such accurate information and the province of Newfoundland and Labrador one day rise out of the dust that was created out of this province by the Federal Government to protect provinces like Ontario, Quebec and the remainder who were the beneficiaries of our raw resources.

Thanks Patriot you have raised the level of awareness in our beautiful and kind province a few notches.

May your and your Blog have a Long Life!

Calvin said...

Well Patriot ,Mr Mark here seems to have his history down-pat.

I would love to hear his "federalist" point of view and I would love to hear his arguement's made with facts.Not ficton.

Mark,all personal attacks put aside can you or are you able to prove to us what you are saying is true.Using all and any resources you have access to.

And,try to remember Mark that not all of us have a Daddy that is capable of sending us all to Law school.I guess what I'm trying to say is " put up or shut the F%#@ up "

I am ask nothing from him Patriot or treating him any differently
then I was treated when he was playing host.

If the standards are higher on Web Talk,then thats fine.Like you have said many times " It's your SandBox "

I guess I sound so harsh and hurt because of the fact ,that it is people like this that have made the province suffer in the ways that it has.

People scream flasehoods in this manner and the rest of Canada suck's it up and see's " nothing going wrong back east " Meanwhile, the OutPorts have been destroyed ,Labrador is being raped continusely ,and Ottawa continues to be the principal beneficiary of the provinces resources.

So ,yeah ,I would love to hear your educated reason Mark.C'mon and show us what eight years of your daddy's money has taught you .

NL-ExPatriate said...

Great article Myles. Keep up the good work!

Anonymous said...

Surely Mark you aren't saying removing oil from the equation will not change the numbers.

It happened years ago. When Ontario came close to going on equalization in the past oil revenues were excluded and then Alberta itself was taken out of the equation. The result was that Ontario rose to the top.

Simple mathematics my friend. You may not like the result but it's true and it's true that excluding 100% of non-renewable resource revenues would indeed move Ontario back up the ladder.

I don't always agree with the comments on Web Talk myself but facts are facts.

Anonymous said...

Mark spewed his fallacies and ran so I have a few questions for him.

One would have thought that Mark would have tried to back up his statements, but he didn't. As far as I am concerned he has no information to back up what he said.

Mark why is Patriot's post the stupidest thing that you have ever read?

Mark you told Patriot that EVERY one of his claims about Equalization in his article is factually incorrect, historically inaccurate and make no sense.

Mark would you please elaborate and back up with reasons why you made this statement?

Mark you said that you would elaborate, but you are now sufficiently convinced that Patriot probably can't read anyway. Well Mark elaborate anyway, please do not leave us in the dark, we will understand what you write even though what you might write could very well be incorrect if you keep with your theme above.

Mark, surely you do not believe that Patriot cannot read, what in his post would make you think that? Patriot's post, as far as I am concerned, is very accurate and very well stated.

I cannot for a moment understand what you meant with what you wrote.

Anonymous said...

really - why should any of us give a tinker's toss about whether ontario receives equalization? its like worrying about which of your neigbours are getting ei at any given time. who cares? how does it help YOU?

most of the time, there are only two provinces (ontario and alberta) that don't.

and let's stop using that language of "on equalization" and "getting off equalization". it sounds too much like being "on the dole" and "getting off the dole" - and it's meant to.

let's just stop talking about and using up valuable mental energy on this ONE federal program that 80% of provinces avail of at any given time.

sheesh.

Patriot said...

Hi all,

If I can ask a favour, please don't spend your energy and time on responding to Mark's comment.

The fact that you are is probably more my fault than your own since I inadvertantly encouraged it by my posting of it and in responding. That aside, the issues facing us, Ontario and Canada as a whole, are far more important.

I don't know if it was Mark's intention, and I wouldn't want to speak for him, but generally when someone visits Web Talk and spouts that kind of BS it's because they want to "change the channel". In other words they want to side track the discussion.

Don't let them win by falling for it.

Thanks,
Myles

Anonymous said...

Patriot

You asked a favour of your blog viewers. You wrote "please don't spend your energy and time on responding to Mark's comments".

Patriot, I will not obey your plea. That is what we did in the past and we lost everything in this province as a result of ignoring things that we should not have ignored.

Had we asked a few stupid questions in the past, the mistakes that destroyed this province could have been averted.

For instance had we asked our politicians why they were overseeing the exporting of our raw natural resources, we might not have lost the Upper Churchill Hydro Electric power to Quebec or the Nickel Ore to Ontario and Manitoba. We might have a different arrangement with the 'fish quotas" which are traded away by Ottawa and all the other raw resources which were shipped out of our beautiful province, any of which could have provided vibrant economies in the province of Newfoundland and Labrador and the much needed jobs that could have kept our population at home.

We kept our mouths shut on too many issues that mattered which were going on around us, in other words we were were too complacent.

Complacency is no different than being careless or lazy. That is what got us a non-economy in the first place.

The people of our province were told by Canadians that they were welfare queens and pogey abusers, but what options did the people of our province have, since all of their resources were exported out of here for the benefit of creating economies in the provinces which ended up receiving our raw resources, and those same people coveted and demanded our resources. And not once did those name callers acknowledge that we were exporting our resources to their neck of the woods for their benefit. Not a word was uttered by Canadians on why the province of Newfoundland and Labrador had to accept equalization. They stripped the province of its resources and abused us with insults.


Had we asked a few stupid questions over the years and demanded answers, no doubt, we would have faired much better. We must ask questions in the future.

We elected our politicians and we immediately put them on 'auto pilot' and as a result they became complacent and also lazy, and that is the reason they were not mindful of our resources and neither did they fight for this province's fair share of Federal infrastructure which was handed out by Ottawa.

The politicians knew that the electorate never put any demands on them or sought any answers and they just became indolent and as a result ran this province to the ground. But, of course, they never forgot their own interests. Most of our politicians are the richest citizens of the land.


Patriot you said "don't let them win by falling for it".

Patriot I say we are letting them win if we do not fall for it. They want to shut us up and keep the status quo. The overlords would rather have the complacent Newfoundlanders and Labradorians of the past than the observant people whom we are shaping up to be for the future. Everyone who benefitted from that genetic disorder we suffered from in the past are sore about it and they are letting us know. Why are they pitting us against Ontario in the National Media. I heard one Journalist last week ask Premier Williams the question on whether he was willing to give up some of our provinces Oil Royalties, now that we are going into "Have" status,to keep Ontario's economy going? They are always trying to belittle us and I am sick of it.


Please keep up the great work Patriot and again Long May Your Great Blog Roll.

Anonymous said...

And don't let them win, by not posting messages that disagree or which point out errors, hey Miles?

Calvin said...

May 07, 2008 12:22 AM

Here ,Here .This is what we need Myles.We need enough noise coming from all across the Province (and,I use the word province ,regrettably ) to make the hairs on the back of thier necks stand up.
To make them relise that we as a nation will no longer tolerate thier ignorance and thier lack of respect for our culture and our way of life.

In a way I see why Prime Minister Williams said what he did.To taunt Ontario and make them relise how truely insignifagant they are without the rest of the so called federation backing them.

Alot of Newfoundlander's and Labradorian's are truely sick of this.The rest of canada does not relise how much we really give to this federation.What other province ,per ratio of people, give half as much as we do.

Its not time to stop responding to thease comments,its time to start ripping down the propaganda machine that starts thease lie's.Its time for us to stand up and be counted.Then maybe they will relise who and what we are.And,that we are simply not going to take thier dirty end of the whip anymore.

CALLING ALL NEWFOUNDLANDER"S AND LABRADORIAN"S ,ITS TIME TO STAND UP !!! VOTE WWW.NLFIRST.CA

Patriot said...

Someone publishing under anonymous left a post that makes a specific accusation about a public figure.

I have not posted it but it is being held. I will not post it until that person provides evidence to back up their accusation.

If they are correct I'll post it but only when if they can provide that evidence.

Thanks,
Myles

D.B. Cooper said...

Hey Myles, Greast post.

Your solution is to get Newfoundland back on on Equalization. Way to go, there buddy.

Anonymous said...

Why are the views that are so well expressed on this site not finding their way into the provincial media? It is not getting out to the people. Radio, tv and newsprint are not expressing these views.

Patriot said...

To DB, I realize you are being sarcastic when you say, "way to go" but I'll take it as a compliment none the less.

yes, the solution would likely put NL back on equalization but what of it? This place has been raped and plundered since 1949 and if the solution to Ontario's problem means NL can access additional revenues (that we all pay for, including me) then go for it.

Those additional funds could help speed up the process of getting out of debt, re-building neglected infrastructure, diversifying the economy and preparing for the time when the oil is gone.

Doesn't sound all bad to me.

I personally don't have any problem with it.

If we are going to remain a part of Canada then why not use every tool at our disposal to ensure a good future for the people here and why not take every possible advantage it can offer. Lord knows every advantage has been taken of NL.

Anonymous said...

With the 'have" status for the province of Newfoundland and Labrador comes the IRONY of having one of the provinces of Canada with absolutely no industry and inadequate infrastructure. That in itself tells the story of neglect and abuse by Canada of our resources. How come nobody noticed what was going on?

I see the News Media as having had the perfect pulpit to have espoused the views of which many Newfoundlanders and Labradorians held and to have told the world what happened to Newfoundland and Labrador to be so poor in economy and infrastructure.


Yes, while the Local News Media, no doubt, hold the same views on things as do Myles and his commentators, but because, you see, if they speak up they will be jeopardizing their chances of getting to go on excursions to far off places accompanying politicians on some of their jaunts. The desirable out of province trips is a 'patronage' tool that both levels of governments hold in their patronage tool kit which keeps the news media in their respectful place. If they don't talk about the ills of the province of Newfoundland and Labrador, then they will be in the good graces of governments and will be rewarded.

And many of the media people in this province are either tied up in some political sphere of politics or once were or are looking for cushy political appointments, so they have to espouse the view points of the Media Bureau for which are they working, that is if they want to get ahead themselves. I will add not all of them, but most of them are suffering from the "me syndrome".

To recap: to speak the truth will probably extinguish the chance of the News Reporters getting political appointments, trips from governments to accompany politicians to some far off place in the world which saves them the cost of an exotic vacation, and as in the case of the News Media Bureau, itself, for whom the News Reporters work, a loss of government advertising monies if their employees tell the truth of what really goes on.

But yes The Newfoundland and Labrador News Media did a lot of damage in the past by concealing what they knew and not expounding on it; and now that they know that the ordinary person in the electorate is aware, by not commenting on the evils which went on and which caused so much chaos in the province of Newfoundland and Labrador, and by not reporting on the truth of what is happening, they are committing more atrocities on the province.

The Local and National News Media were complicit with both levels of government in causing a province like the province of Newfoundland and Labrador, which was endowed with such a great geographic location and a great endowment of natural resources to be the poorest in the country.

A Sample of what I am talking about: I will never forget the lobbyists in the form of columnists from the National News Media who lobbied away the Voisey's Bay Nickel Resource to keep smelters in Sudbury, Ontario and Thompson, Manitoba percolating. That is one of the types of abuse that I am talking about.

Anonymous said...

May 08, 2008 1:46 PM ,well anon ,I would think that you would have used a far better excample of Canada's "Plundering Nature."

(ie,)what province is getting another re-finery." ONTARIO.Yes ,Sarnia Ontario is getting a refinery to refine Newfoundland and Labrador crude.Now how sweet of a deal is that.Over1,200 jobs created for Ontario by Newfoundland and Labrador ,all paying over 20.00 bucks an hour.

My stupid question is this.How is this going to help Ontario's ailing housing market.How is this going to help Ontario's car industry.How is this going to help Ontario's provincail governement regarding "TAXES".

See Patriot ,unlike what is mostly written on your Blog ,I too can ask stupid questions ,and point out falsehoods as well.

Thease Canadain Federal type's just crack me up.As long as we continue to say " YIP B'ye ,Yip B'ye " they love us.As soon as we speak the truth and point out the obvoise they hate us for it.Gee, aren't we happy to be apart of Canada . ;)

Anonymous said...

Pardon me Patriot ,I know I should have given a URL to back up my claim .I don't want all thease people thinking that I'm just "Barking " right.

http://findarticles.com/p/articles/mi_hb5630/is_200612/ai_n23646403

and ,there we go.This is really hard to chew on. ;)

Anonymous said...

Thanks Anon of May 08, 2008 3:51 PM

YOU DID IT FOR ME!

Afterall Anon I was talking about the News Media. Thanks anyway for stepping in with a better example overhaul.

Anonymous said...

Thank you anon. for the detailed response on the local media not reporting the absolute truth. I guess until grassroots, independent media like this site reach the majority of the population nothing will change.

Anonymous said...

May 08, 2008 7:07 PM,I try to be helpfull whenever I can :)

Anonymous said...

Here is where Fred Wilcox discusses his resignation from NL-first

http://virginwaters.blogspot.com/2007/11/nlfirst-3rd-anniversary.html

Where is where he mentions his impending out migration:

http://virginwaters.blogspot.com/2008/04/new-adventure.html

Patriot said...

To the Anon who sent me some supposed evidence about a specific political figure. I didn't post any of what you said because it has no current importance. The political figure you spoke of left the party years ago, as political leaders do with all parties. No scandal, nothing new under the sun, no importance.

Anonymous said...

To: Anon of May 09, 2008 10:05 PM.

Thanks for being helpful! One day we will Overcome and justice will prevail, albeit it will be more than 500 years late!

We need more voices like your Anon.

Anonymous said...

To Patriot, Fred Wilcox himself posted the information so it's hardly "supposed" evidence.

The "current importance" is that, if the founder of the party quits it, and is planning to leave the province entirely, why should anyone else support NL-first? So much for the cause, huh?

Patriot said...

To Anon 2:56,

Although, as I expressed to you earlier, I still don't see the connection between supporting a party (or not) simply because one of its former leaders has left, or is planning to leave the province, but since you feel it is important I've posted your comment as requested.

I find your position a bit defeatist to be honest. Just because one individual decides to leave NL, for whatever reason he may have, is that a reason for everyone to throw up their hands and give up?

I'm sure if you looked at the former leaders of the Liberal, PC or NDP parties you would find many other examples of party leaders who have done the same.

You seem to be saying that since the former leader of NL-First is leaving there is no reason to continue or to stand up for NL in other ways. Very confusing concept.

Anonymous said...

Allow me to comment on the media once again. If the media is going to be completely ignorant toward the truth then perhaps it is time for our artists and performers to speak up on issues. Surely God their is at least one of them who holds similar views as those expressed on this site. To quote Alexander Pushkin, "A poet is much more than a poet." To paraphrase Alexander Solzhenitsyn, a good writer is as powerful as a second government.

Anonymous said...

I concur with you Patriot.

It is a defeatist attitude. It would be no different for any party, if one of its adherents or politicians gave up and left the province, would you expect to see everyone throw down the gauntlet and let the party?

The opinion to which you are responding Patriot is the most defeatist statement that I have ever heard.

People leave political parties all the time, and if everyone else left and abandoned the party because of some inept reason, there would be no political parties. Now in the meantime it might not be a bad idea if there were some other method of government, over the Conservatives and Liberals.