Monday, February 21, 2005

McGuinty has a Point

Ontario Premier Dalton McGuinty has been complaining about the Offshore Energy deal for weeks. In his mind, the Prime Minister’s side deal with Newfoundland and Nova Scotia is only the tip of the iceberg in a series of inequalities. The media hasn’t been giving him to much credence, but the fact of the matter is that he’s got a point – Ontario is getting a raw deal.

The Premier has made a big deal of the fact that Ontario receives $23B less in transfer payments than the province pays out without making an impact in the media. Perhaps if he used other numbers his case would be better received.

Ontario is second to last in per capita transfer payments, getting $1,322/resident. Quebec receives $1,757, Manitoba $2,428, Nova Scotia $2,445, Newfoundland $2,449, PEI $2,930. Only Alberta receives less (by $1) and they’re constantly livid with Ottawa and the birth place of the new Western separatist movement. On top of that, part of the transfer payments are specifically earmarked for post-secondary education; Ontario has eighteen major universities, Alberta has three. Even worse, Alberta posted a $4.1B surplus in 2003-’04 while Ontario ran up a $5.4B deficit.

The situation is replicated when it comes to immigrants. Ontario receives $864 per immigrant who comes to the province, while Quebec gets $3,252. The national average is $1,200 and 60% of all immigrants end up in Ontario.

The citizens of Ontario have no problem with helping out the other provinces, but there is a line between generosity and being taken advantage of. Giving money to PEI so that they can get 39% of their provincial budget from transfer payments because they have a tiny population and no industry is crossing the line. There’s no problem with giving money to a province so that they won’t be impoverished. It’s quite another to continue to give money to provinces that have abundant natural energy reserves and great potential for future growth.

Ontario accounts for 39% of the country’s population and 41% of the GDP. The province’s GDP of $494B makes Ontario’s economy roughly equal to those of nations like Sweden, Belgium and Switzerland. If our economy goes in the tank the entire country goes down with us. If we do well, the country does well.

So why is Ontario getting screwed?

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