Monday, May 03, 2010

Get rid of equalization

LBJ's war on poverty accomplished nothing but to guarantee a permanent underclass. Equalization has harmed both rich and poor provinces. Poor provinces are encouraged to live beyond their means and rich ones have lowers growth rates. Equalization is a lose lose proposition

Quebec and other so-called “have not” provinces have traditionally defended the level of equalization payments on the basis of their economic situation. Yet, as shown above, there is no significant gap in real per capita income between slow-growth provinces and other regions. The level of equalization payments to each province should therefore be similar, most likely zero. Equalization simply makes explicit the transfer of the burden of lagging provinces to other regions of Canada. Absent equalization, higher growth and higher land prices would have ensued in Alberta, Ontario and B.C.

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