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If we look at federal transfers to provincial governments, there *is* a need to change the way they work to add some benefit to provinces like Newfoundland and Labrador that are dealing with issues different from other provinces.
But…
Andrew Furey is just chewing up the already well-chewed scenery of federal-provincial drama over Equalization, and, as a result, whatever chance there was to get the changes we need is lost or postponed until someone makes a smarter argument for the right reasons. We’ve heard all of what Furey's pushing before and as tempting it might be to imagine that the courts might see things differently and whole story might work this time, in the end, whatever happens with federal transfers top provinces, the solution will be political. And what we are doing is merely the same thing over and over while hoping it might end differently. Is that the definition of insanity, stupidity, or both?
More importantly, and as with every provincial government that’s embarked on some phony war with Ottawa over transfers, we are just ignoring in the process the strategic changes the provincial government should be taking on its own to get the better services, lower costs, and so on they are supposedly looking for.
To start with, let’s get some basic things out of the way.
First, the provincial government’s legal threat involves a part of the Constitution Act, 1982 that deals with federal transfers to provinces generally.
Section 36 is titled Equalization and Regional Disparities.
The first part of section 36 commits the provincial and federal governments to “promote equal opportunities” for Canadians regardless of where in Canada they live. There is a list of three specific commitments by *all* governments:
(a) promoting equal opportunities for the well-being of Canadians,
(b) furthering economic development to reduce disparity in opportunities, and
(c) providing essential public services of reasonable quality to all Canadians.
So, right off the bat, this section is not about governments but about Canadians. It's not about one government. It's about all of them what the governments in Canada promise to do *for* Canadians.
Specifically, Canadians are supposed to get “equal opportunities”, “economic development” to support those equal opportunities, and “essential public services of reasonable quality” regardless of where in Canada they live.
The second part of Section 36 commits the “Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.”
Notice that in this section, the word “equalization” doesn’t have the initial capital letter we see when the political talk is around the specific federal transfer program called Equalization. That tells us that the section applies not just to the specific program but to other transfers from Ottawa to the provinces like the social and health transfers. Arguably, it also includes other spending for specific programs or projects like the transfer of Hibernia revenues in 2019 and 2021.
Second, let’s understand what *some* of the provincial governments are talking about. The word some gets extra weight here because right now the three provinces screaming the loudest about federal transfers have a few things in common:
due entirely to accidents of geography, they have non-renewable natural resources that are also very valuable,
they don’t get or haven’t been getting Equalization payments at all as a result of those resource revenues, and
while they have plenty of income by any reasonable measure, they’ve been hit recently by drops in the income they get for those natural resources.
Alberta, Saskatchewan, and Newfoundland and Labrador are the ones complaining. They are using a political fight with Ottawa to distract from their own policy and political weakness at home. It's the same scam Danny pulled in 2003 and it is 100% scam. They’ve all faced the political challenge of coping with less income than they used to have even though they still have - by any objective measure - plenty of money to cope in comparison to other provinces. They just don't want to make the politically risky decisions of changing policies. Any change is risky and politically weak parties in Canada always go for the easy choice of fighting an outside, imaginary enemy.
The ones not complaining are the provinces that get Equalization or that are like Ontario: demonstrably wealthy and typically not on the receiving end of the Equalization payments but who wind up on one side or another of the receiving/non-receiving line simply because of the way the math of the Equalization formula works out at any given time. Meanwhile, say what you want about Doug Ford, he is politically astute and has offered consistently leadership to his province. That's why he's not fighting ferners.
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Third, the folks complaining about Equalization transfers have some common themes underpinning the arguments:
They treat Equalization as an entitlement of all provincial governments. In other words, not getting an Equalization transfer is a sign in itself of a problem with the system.
They look at federal revenues as a give-and-get system rather than as a way to pay for federal programs and services to all Canadians. This is the idea that a given province doesn’t get a “fair share” of federal spending if it gets less than it gives, even though no province pays into Equalization specifically.
They implicitly see Canada as a money-making scheme for provincial governments that can be gamed to maximize provincial government income.
The chart made popular recently online and shared by some provincial governments shows these last two ideas very clearly. Saskatchewan Premier Scott Moe used the image below last December on X/Twitter along with the comment “As [Stephen] Guilbeault and [Justin] Trudeau commit to move away from fossil fuels, let’s have a look at the new equalization payments to provinces for 2024-25 to see how energy producing provinces help support the rest of Canada.”
Moe’s tweet hits a variation of the “give-and-get” argument that is basically the same argument used frequently against Canadian social programs fir individuals. When Margaret Wente called Newfoundland a welfare ghetto almost 20 years ago during the Equalization racket in the early Danny Williams years, she was using precisely this idea that some work hard and contribute while others laze around and leech off the hardy and productive. The same ideas apply whether to individuals or provinces and in Newfoundland and Labrador’s case, it was a double whammy of lazy, welfare bums.
Moe’s tweet also reinforces perceptions among western Canadians about the hard-working and productive Canadians versus the supposed leeches that link equalization to federal transfers to individuals for things like Employment Insurance or Old Age Security. You can see the apparent match-up in the chart above and the one below, produced by the Library of Parliament.
Andrew Furey’s argument is a non-starter in most minds across Canada because it reinforces those perceptions that Newfoundland and Labrador is a province built entirely on hand-outs to welfare bums of one kind or another. He is arguing simply that Newfoundland and and Labrador is entitled to money and us perpetually unable to look after itself. No one has that much bad luck, surely.
In a recent scrum, Furey simply noted how much money the Maritimes and Quebec have collected since 2010 while noting in the same time his own provincial government got nothing in Equalization. Scott Moe says much the same thing. Imagine what we could have done with the $3.2 billion Nova Scotia got, Furey asks rhetorically.
What these simplistic arguments ignore is the explanation of why Saskatchewan or Newfoundland and Labrador received no money. That’s because under the Equalization program specifically, both provinces made enough money on their own to meet or exceed the threshold for getting money. They didn't need more cash to provide reasonably comparable services at similar tax efforts. They only needed more cash because successive governments chronically spend $2 billion more than they have.
The Equalization change provinces also ignore in the process the first part of Section 36, which applies not just to the federal government but to the provincial governments as well. The federal bit and the focus of the complaints is about income but much of the complaining is really about outcomes. That’s the “imagine what we could do” line Andrew Furey uses.
But that's also really the front end of Section 36, the bit that obliges the *provincial* governments to:
promote equal opportunity for Canadians,
foster economic development, and
provide essential public services of comparable quality to all Canadians.
Newfoundland and Labrador has a potentially strong argument for some minor adjustments to some federal programs to help with the cost of an aging population. It's an argument that is well-documented by people like Richard Saillant and it’s a subject we’ve talked about before at Bond Papers. It applies to Quebec and the Atlantic provinces equally. Populations in eastern Canada tend to be older on average and that means there are some increased costs to go with that compared to places with younger populations.
To make this work, we’d need to remember that the issue is *all* federal transfers, not just Equalization. We’d want some allowance in the Canada Health Transfer and the Canada Social Transfer as well as some other funds to add more money for provinces with added costs driven by an older population. That’s a definable problem and it targets specific types of transfers in measurable ways.
And we’d recognize our natural allies in such an argument in Quebec and the Maritimes. We’d most definitely *not* attack them, even if implicitly, with comments like the one Andrew Furey’s been making about how much money Quebec gets and the Maritimes get - implicitly unfairly - in comparison to Newfoundland and Labrador. We’d also not bring up geography since Newfoundland and Labrador has exactly the same population density - population over territory - and yet Newfoundland and Labrador chronically spends much more than most other provinces, including Saskatchewan when it comes to most services including health.
It’s okay for Scott Moe to dogwhistle the racist anti-Quebec arguments because he’s not really interested in fixing problems with federal transfers. He’s just playing a domestic political game. And the sort of weak arguments Furey offers allows his friend Seamus O’Reagan to stumble and fumble his way through a scrum but hit on the simple rebuttal to Furey, namely the feds have given the province all the cash it’s asked for to help with economic development, get the place out of a jam of its own making on Muskrat Falls and so on and so on. Cheap arguments are cheaply defeated.
Of course, what we are talking about here is a few extra millions not billions a year. And if we drove economic development and attracted scores of new immigrants we would find health and social transfers climbing anyway as a higher population automatically adds more transfers that are handed out based on population.
In other words, sny provincial politician seriously interested in changing the system of federal transfers would also have to recognize - as Newfoundland and Labrador did before 2003 - that Section 36 of the Constitution Act, 1982 and the constitution as a whole give provincial governments responsibility for outcomes. The provincial government has an obligation as well for how it spends whatever money it gets from anywhere. It already has the tools for change. They just to have leadership. Bold leadership would just be a bonus.
Chronic overspending since 2003 - separate from the lunacy and stupidity of Muskrat Falls - doesn’t bolster Newfoundland and Labrador’s case. The massive cost of debt-servicing, example, is a direct result of chronic provincial mismanagement and robs the provincial government of cash it could better spend on schools, roads, hospitals, and other essential services.
Someone from outside Newfoundland and Labrador might well ask what the province has done in its policies to address the well-known impacts of an aging population. They’d go back to the 1990s and see the strategic recognition of two conclusions related to demographics:
We couldn’t continue to spend a n ever greater share of our health budget on the bricks and mortar of government-controlled health care, and
We would spend proportionately less on education.
In both cases, we’ve gone in the opposite direction since 2003 and the growth in health spending has actually picked up speed since 2020. In education, we spend huge sums and in both education and health our outcomes are not keeping pace by any measure. Likewise, government has failed to promote economic development and has arguably discouraged economic development and diversification all at the cost of both income that won’t happen and, what’s worse, the waste of subsidies to all sorts of sketchy things government ought not to be involved with anyway.
The fact that provincial administration after administration, regardless of political stripe, continues to do the opposite of what’s politically smart and strategically in the province’s best interest, tells everyone pretty clearly that what they are up to with arguments about equalization is really about provincial politics and not about actually fixing serious and long-standing problems in Newfoundland and Labrador.
The structural problems, as Andrew Furey puts it, are almost all provincial in origin and the provincial government alone could fix them. The same tired arguments about the same tired subjects are not bold and courageous. They merely remind everyone how superficial the whole business is.
Of anyone doubts how political desperate Andrew Furey’s government is, right now, understand that 41% of respondents to the most recent Narrative poll on provincial politics would not vote, would not say who they’d vote for, or were undecided about who to vote for. Only half that many picked either one of the two parties in the province and Furey's lot is in second place. The Dippers remain a figment of everyone’s political imagination.
Twenty-four (24) percent picked the Pea Seas compared to 22 percent who picked Furey’s Liberals despite all his rebranding and spending. The farther west you go in the province, support for the Pea Seas increases as does the lead they have over Furey’s crowd. That’s a radical change from less than a decade ago and none of it is Justin Trudeau’s fault. It’s also an existential threat to the Liberals hold on government offices.
If Andrew Furey were serious about staying on as Premier after the next election, if he really wanted to take bold and transformative action to deal with the shark of federal transfers to provinces, then he’s gonna need a bigger boat, a way bigger boat than the dingy he’s paddling around in.