Equalization Revisited : Its Role and Design ∗ by Robin Boadway Queen

EQUALIZATION REVISITED: ITS ROLE AND DESIGN BY ROBIN BOADWAY QUEEN’S UNIVERSITY Introduction Equalization is very much in the news these days. The program is the last vestige of the 1970s’ federal-provincial fiscal arrangements to remain more or less intact over the period of federal retrenchment. As such, it seems to be a sitting duck, a target for potshots from think tanks, pundits, ex-politicians and wounded provinces. To some, it is seen as a gigantic welfare mechanism that recipient provinces cannot wean themselves off of, even in the face of newfound resource wealth. Even Finance Canada cannot let it be. It is embarked on a campaign with who knows what objective to consider farreaching alternatives to the existing program. Yet, alternatives seem to be in limited supply. The flavour of the moment seems to be the so-called macro approach, whereby equalization would be based on some macro indicator of provincial well-being, a fitting objective if one thinks of provinces as analogous to welfare recipients. To supporters of the existing system, and of the principle of equalization more generally, this can be distressing. It is distressing not because an important public program is under critical scrutiny. It is distressing because critiques of equalization and proposals for change seems to be based either on expediency or on a misinterpretation of what the program is all about. Given the momentum that may be developing for major changes, and the fact that the process of regular renewal is upon us, it behooves supporters of equalization to put their defenses on the table in the hope that they might be heard and not drowned out by the chorus of press releases, opinion makers and naysayers. In this talk I propose to defend equalization in principle and in its existing form. I am afraid this will involve going over old arguments with which many of you may be familiar.