The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
There is a very interesting story buried in the recent TD Bank report on equalization payments, but itÕs not the one that generated most of the heat. The headlines are all screaming what seems to be a sorry story for Ontario Ð a result of TD BankÕs forecast that Ontario may be collecting equalization payments two or three years from now. But the report was not quite so hard on Ontario as you might think. In relative terms, Ontario is slipping; in absolute terms, the picture is not nearly so clear. As the TD Report illustrates, growth rates in Ontario in the past two or three years, and those predicted for the next two or three years, are actually closer to the national average than they traditionally have been. And OntarioÕs absolute economic performance has been coming closer to the national average. Further, current and forecast economic growth rates in Ontario have been quite stable since 2002. In short, Ontario is doing just fine in absolute terms. So whatÕs going on? The real story, buried in the TD report, is that four provinces have experienced exceptional growth in the past few years: out west in B.C., Alberta, Saskatchewan, and out east in Newfoundland. So why all the focus on Ontario, when the real story is the exceptional performance of the West? Is it really such a bad thing that Ontario is stable while other parts of the country are growing quickly? Ontario is relatively worse off, sure, but does that really matter when it is, in absolute terms, no worse off? The policy question the TD report raises is this: How much equalization is enough? Should a province receive equalization payments not just when it gets worse off, but also when other provinces get better off? There are two answers to that question. The first is to say that equalization is a relative program, and that Ontario should get equalization when it qualifies for equalization. Then thereÕs the question of whether we really need to bring recipient provinces up to the average of all provinces. Equalization payments have gotten more generous in recent years, not so much because some provinces are falling behind, but because others are jumping ahead. Maybe the right standard is something less than the average. Whatever the answer to that question, it is probably, for most, a rather mundane debate. Ontario is doing absolutely fine. The West is doing absolutely great. Perhaps we should do a little more celebration of the latter, rather than bemoaning the former.
